CytoDyn Inc Annual Report 2008

Plain-text annual report

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2008 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission File Number 000-49908 CYTODYN, INC. (Exact name of registrant as specified in its charter) Colorado 75-3056237 (State or other jurisdiction of (I.R.S. Employer or incorporation or organization) Identification No.) 1511 Third Street Santa Fe, NM 87505 -------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, including area code: 505-988-5520 Securities Registered pursuant to Section 12(b) of the Act: None Securities Registered pursuant to Section 12(g) of the Act: Title of class Common Stock, no par value Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No Indicate by check mark whether the registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act). [ ] Yes [X] No State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. $ 3,686,926 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of March 12, 2010 the registrant had 18,950,796 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. - -------------------------------------------------------------------------------- CYTODYN, INC FORM 10-K FOR THE YEAR ENDED MAY 31, 2008 TABLE OF CONTENTS PART I Item 1. Business......................................................... 2 Item 2. Properties....................................................... 13 Item 3. Legal Proceedings................................................ 13 Item 4. Submission of Matters to a Vote of Security Holders.............. 13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.............. 13 Item 6. Selected Financial Data.......................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 16 Item 8. Financial Statements and Supplementary Data...................... 23 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........................................... 47 Item 9A. Controls and Procedures.......................................... 47 Item 9B. Other Information................................................ 48 PART III Item 10. Directors, Executive Officers and Corporate Governance........... 48 Item 11. Executive Compensation........................................... 51 Item 12. Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters................................ 53 Item 13. Certain Relationships and Related Transactions and Director Independence.......................................... 53 Item 14. Principal Accounting Fees and Services........................... 55 Item 15. Exhibits, Financial Statement Schedules.......................... 56 1 Item 1. Business The Company CytoDyn, Inc. is a Colorado corporation, with its principal business office at 1511 Third Street, Santa Fe, New Mexico, 87505; telephone: (505) 988-5520, facsimile: (800) 417-7252, and website address: www.cytodyn.com. Originally incorporated as Rexray Corporation on May 2, 2002, the Company was renamed CytoDyn, Inc. when Rexray acquired, in October 2003, all of the intellectual property of CytoDyn of New Mexico, Inc. in exchange for 5,362,640 shares of no par value common stock. We discovered and are developing a class of therapeutic monoclonal antibodies to address significant unmet medical needs in the area of HIV/AIDS. In October 2003 we entered into an Acquisition Agreement with CytoDyn of New Mexico, Inc., pursuant to which we effected a one for two reverse split of our common stock, and amended our articles of incorporation to change our name from Rexray Corporation to CytoDyn, Inc. The acquisition was accounted for as a reverse merger and recapitalization of the Company. Pursuant to the acquisition agreement, we were assigned the patent license agreement dated July 1, 1994 between CytoDyn of New Mexico 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. The license acquired gives us the worldwide, exclusive right to develop, market and sell the HIV therapies from the patents, technology and know-how invented by Mr. Allen. The term of the license agreement is for the life of the patents of which the first will expire in 2013. The term of the license agreement is for the life of the patents. The original expiration dates on the issued patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. As consideration for the intellectual property and trademarks we paid CytoDyn of New Mexico $10,000 in cash and issued 5,362,640 post-split shares of common stock to CytoDyn of New Mexico. CytoDyn, Inc. is a traditional biotechnology company (concept company) that develops pharmaceutical products to be marketed by one or more pharmaceutical marketing companies. Typically, the biotechnology company does not realize income from the sale of product sold directly by the biotechnology company. Rather, the biotechnology company develops a pharmaceutical product using funds provided by investors until the development of the product has progressed to the point where the biotechnology company can enter into a strategic alliance with a pharmaceutical marketing company. While there is no guarantee as to if or when CytoDyn will enter into such a strategic alliance, or what its terms might be, the pharmaceutical marketing company typically acquires a significant stake in the biotechnology company, thereafter providing the funds for completion of drug development, obtaining a right of first-refusal to market the drug if approved, along with an option to buy out the biotechnology company in stages, the last stage usually being after the drug has been marketed for a number of years. A maximum Return on Investment for those investing in the biotechnology company is usually achieved when the strategic alliance is in place or has been for a number of years, and before the product actually enters the marketplace. 2 Subsidiaries Advanced Genetic Technologies, Inc. On January 30, 2007, the Company acquired the exclusive right to develop an improved version of Cytolin(R) using two antibodies invented at Harvard University Medical School's CBR Institute for Biomedical Research pursuant to an acquisition agreement. The Company issued 100,000 preferred shares of unregistered stock to Utek Corp in exchange for 1,000 shares or 100% of Advanced Genetic Technologies, Inc. common stock. On July 2009, the preferred shares were converted into 2,356,000 common shares of the Company's stock. Advanced Influenza Technologies, Inc. ("AITI") was incorporated under the laws of Florida on June 9, 2006. This subsidiary was abandoned as the Company terminated the license agreement acquired by AITI for a DNA plasmid vaccine from the University of Massachusetts. Business Treatment for HIV/AIDS Cytolin(R) CytoDyn, Inc. discovered and is developing a class of therapeutic monoclonal antibodies to address significant unmet medical needs in the areas of HIV & AIDS. Cytolin(R) treats HIV/AIDS by preventing killer T cells from destroying the CD4 T cells in humans infected with HIV which results in an impaired immune system and the illness known as Acquired Immune Deficiency Syndrome or AIDS. 3 How it Was Discovered Just over a decade ago, three scientists who were working independently of each other discovered why HIV does not cause disease in the other mammals it can infect. There are, of course, other viruses that are similar to HIV and that can cause AIDS-like diseases in animals, such as simian immunodeficiency virus (SIV) and feline immunodeficiency virus (FIV). However, the human immunodeficiency virus (HIV) only causes disease in humans and not in the other mammals it can infect, such as chimpanzees. In discovering why this is the case, researchers also demonstrated why humans infected with HIV lose all of their CD4 T cells even though only a minority of those cells become infected with HIV. This was demonstrated by Joyce Zarling[1] at the Yerkes Primate Research Center, Leonard Adelman[2] at the University of Southern California, and Allen D. Allen[3-4] then at Olive View-UCLA Medical Center. The seminal paper, published in the Journal of Immunology in 1990, was by Zarling. She and her colleagues conducted a cross-species study. It proved to a scientific certainty that the reason only humans develop AIDS in response to HIV infection is that only humans respond to the infection with a proliferation of cytotoxic T lymphocytes (CTL) that indiscriminately kill human CD4 T cells, including healthy, uninfected CD4 T cells. The question that Zarling and Adelman did not answer is why this should be the case. In terms of understanding the mechanisms involved in HIV disease, one should ask what particular mechanism the anti-self, anti-CD4 CTL use to indiscriminately destroy human CD4 T cells. Because of the huge volume of HIV-literature that was focused on many diverse issues, the key was to know where to look. As a consequence, Allen was able to ascertain the cytotoxic mechanism because he had a model to start with. Hepatitis, when associated with hepatitis B and C virus, has been known for years to be a disease that is triggered by an infection and that results in the destruction of the liver by CTL.[5-6] The destruction of the liver occurs because its surface becomes coated with intercellular adhesion molecules (ICAM). The co-receptor to ICAM is LFA-1. What makes a CD8 T cell a cytotoxic cell rather than a suppressor cell is the overproduction of LFA-1.[7] When the CTL circulate through the liver, the LFA-1 binds to the ICAM killing the hepatocytes or liver cells. Interferon-alpha is the gold standard for treating serum hepatitis because it down regulates the ICAM molecules on the liver so that the CTL do not harm that organ.[8] Not surprisingly, then, Bofill, et al[9] have shown that increased numbers of CTL predict the decline of CD4 T cells in HIV patients. By knowing the mechanism of action, Allen[10] was able to identify a class of monoclonal antibodies that could prevent the indiscriminate destruction of CD4 T cells by CTL. Cytolin(R) is one such antibody and is our lead product. Why Cytolin(R) is a Unique Treatment for Early HIV Infection During the past decade, significant improvements in the antiviral "cocktails" used to treat HIV/AIDS have transformed this once fatal disease into a chronic, manageable condition. These drugs are the ingredients of Highly Active Antiretroviral Therapy (HAART), which has saved countless lives and is well tolerated by most patients, although all drugs have side effects. 4 The current standard of treatment recommends withholding antiviral drugs until the disease has progressed to the point where the drugs are required to maintain a patient's health, typically a period of about five years from initial infection. A chief reason for withholding treatment during the early years of HIV infection is that antiviral drugs attack the virus directly. As a result, natural selection promotes the evolution of HIV into species that are resistant to those drugs. If antiviral drugs were prescribed too early, then the virus might become resistant to those drugs, rendering them ineffective, by the time they were necessary to maintain a patient's health. Cytolin(R) is a monoclonal antibody administered by intravenous infusion and might expand the standard of treatment. In preliminary clinical trials, and in compassionate use involving hundreds of patients treated for about two years, Cytolin(R) produced encouraging results in delaying or reversing disease progression while acquiring a good safety record. Significantly, Cytolin(R) is not an antiviral drug although it has a significant, albeit indirect, antiviral effect (log reduction in viral burden). A first-in-class drug, Cytolin(R) is designed to prevent the wholesale destruction of helpful CD4 T cells by a person's own killer T cells. The killer T cells are made by the human body in response to HIV infection as part of the natural defense against the virus. As first shown by Zarling, et al in 1990 (Journal of Immunology, vol. 144, page 2992), the ability of these killer T cells to indiscriminately destroy CD4 T cells is a trait unique to humans, explaining why HIV infection does not cause disease in the other species the virus can infect. It has been known since the beginning of the AIDS pandemic that a wholesale loss of CD4 T cells is the reason why individuals infected with HIV become susceptible to the opportunistic infections and cancers that characterize AIDS. Up until the 1990s when three independent studies identified the killer T cells as the cause of the problem, the reason for the wholesale loss of CD4 cells remained a mystery because the virus infects relatively few CD4 T cells. The fact that Cytolin(R) has no direct effect on the life-cycle of the virus precludes the emergence of Cytolin(R)-resistant virus due to the long-term use of Cytolin(R). This is in contrast to the antiviral drugs whose use promotes the evolution of drug-resistant virus. Consequently, a potential indication for Cytolin(R) would be to administer it early in the infection in order to delay the natural progression of the disease and, therefore, the time when antiviral drugs become necessary. If so, healthcare providers could treat individuals infected with HIV more quickly, rather than spending years just watching and waiting. Monoclonal Antibodies Genetically engineered monoclonal antibodies are man-made antibodies that target specific antigens on a cell or compound. Advances in antibody production technologies, such as high productivity cell culture has enabled manufacturers to produce antibody products more cost-effectively. Many monoclonal antibodies have been approved for marketing as therapeutics by the FDA, and a large number of monoclonal antibodies are currently under investigation in clinical trials. Other companies have monoclonal antibodies in clinical research to treat HIV/AIDS however their approach is completely different than ours. Our monoclonal antibody treats HIV disease by preventing killer T cells from destroying the CD4 T cells in humans infected with HIV. It is the wholesale loss of CD4 T cells in humans infected with HIV that results in a suppression of the immune system, leading to the illness known as Acquired Immune Deficiency Syndrome or AIDS. 5 Cytolin(R) Research Experience Our President and CEO, Allen D. Allen, has been researching treatments for HIV and AIDS since 1987. He received three U.S. patents and additional foreign counterpart patents, now licensed to us, covering the use of these antibodies for treating patients with HIV. Our leading drug candidate, Cytolin(R), is based on a monoclonal antibody that protects CD4 cells from CD8 cells, thus preventing the weakening of the immune system. In 1993, a small group of scientists and doctors treated six HIV-infected patients with Cytolin(R). Blood and skin tests of these patients demonstrated that the antibody was producing improvements in the immune function of each patient. In 1995, subacute and acute toxicology studies found Cytolin(R) safe to administer to humans. A relatively small number of physicians in the United States administered Cytolin(R) to their HIV-infected patients over two years. As results from this initial use became available, other physicians obtained and administered Cytolin(R) to their patients as well. Four of the doctors using Cytolin(R) allowed CytoDyn's predecessor to send in an independent Institutional Review Board to inspect the medical records of 188 patients treated with Cytolin(R) once or twice a month over 18 months. Data were recorded and summarized and formed part of the material presented to the FDA as an early indication of the safety and potential efficacy of Cytolin(R). In 1996, the FDA approved a drug master file, designated BB-DMF#6836, for the manufacture of Cytolin(R) at Vista Biologicals Corporation. CytoDyn of New Mexico and Vista Biologicals Corporation worked cooperatively to develop the drug master file. In accordance with the practice of the FDA, the drug master file was issued to and became the property of the entity with the capacity to manufacture the drug, in this case Vista Biologicals Corporation. By contract with Vista Biologicals Corporation, CytoDyn of New Mexico had the exclusive right to reference the drug master file, that is, to authorize Vista Biologicals Corporation to manufacture Cytolin(R) in accordance with the terms of the drug master file. In 1996, the FDA also designated our investigational new drug application for Cytolin(R) as BB-IND #6845, and subsequently approved a clinical trial. In 2002, Symbion Research International, a contract research organization, completed a Phase I a/b clinical trial of Cytolin(R). The trial was sponsored by Amerimmune, Inc., the previous licensee of CytoDyn of New Mexico but Symbion was never paid for its work. As a result, its work product became Symbion's. We entered into a buy-sell agreement with Symbion to purchase the Phase Ia study data in 2004. The Phase Ia study, conducted in 13 subjects suffering from HIV/AIDS, found Cytolin(R) to be safe and well tolerated. The initial safety study affirmed the safety and tolerability of the drug in these dose groups, as 6 well as preliminary efficacy in lowering the concentration of HIV by up to one log (measurement of efficacy) and increasing T-cell counts in the study's patient population with no severe adverse events reported. Some of the data were presented as an abstract and poster session, entitled "Phase I Study of Anti-LFA-1 Monoclonal Antibody (Cytolin(R) in Adults with HIV Infection" at the 9th Conference on Retroviruses and Opportunistic Infections held in Seattle, Washington on February 24-28 2002 as well as the 16th International AIDS Conference held August 2006 in Toronto, Canada. The Company went through a period of years where legal issues delayed the progress of this treatment. Also, at the time Cytolin(R) was discovered, the medical community was just beginning to develop antivirals as the protocol for treating HIV patients. Cytolin(R) is an immune based therapy that does not directly attack the virus and thus is not an antiviral. Cytolin(R) is part of a class of drugs called monoclonal antibodies or "targeted therapies". These targeted therapies did not exist when the Company was first formed. Today there are many that treat other serious diseases such as Cancer and Autoimmune diseases. Our Company's approach to HIV disease was unique but not off base. No other company is or has developed a targeted therapy that works like Cytolin(R) for HIV disease. Current Clinical Trials CytoDyn has agreed to provide a research grant and GMP product to Massachusetts General Hospital for the purpose of conducting an ex-vivo study of Cytolin(R). The study will enroll 10 adults with early HIV infection and 10 healthy controls, each of whom will be required to participate for six months. This study is intended as a prelude to an in-vivo study and will take advantage of the facilities available at Massachusetts General Hospital to confirm, and perhaps sharpen, the role of killer T cells in causing the wholesale loss of CD4 T cells, as well as the mechanisms of action responsible for the clinical benefits observed in patients treated with Cytolin(R), including the roles played by various cytokines and cluster determinants (the "CD" used to categorize lymphocytes, such as "CD4 T cells"). The Principal Investigator is Eric S. Rosenberg, MD, an Associate Professor of Medicine in the Infectious Diseases Division of Massachusetts General Hospital and a prominent researcher specializing in HIV/AIDS. More than the Principal Investigator, Dr. Rosenberg designed the protocol for the study after an extensive review of the relevant literature and human experience related to Cytolin(R). 7 Risks of Academic Research Massachusetts General Hospital is a nonprofit, tax-exempt facility with the mission of improving the public health by engaging in research for the purpose of discovering and making available to the public new and improved medical treatments and information. As a consequence, Massachusetts General Hospital does not conduct studies unless its researchers are free to publish the study results as, how, and when they see fit, provided only that the trade secrets of CytoDyn may not be disclosed. When researchers have such unrestricted freedom to publish, it can pose a risk to the company developing a drug. This is because the outcome of clinical research is uncertain and the results may differ significantly from the expectations of the company and the researchers. However, CytoDyn's management believes this risk is minimal inasmuch as Cytolin(R) has already been used to treat hundreds of patients over extended periods of time. Consequently, the study is unlikely to produce unexpected or surprising results that would call the safety and efficacy of Cytolin(R) into question. Nonetheless, the study may fail to meet its objectives for any number of reasons. These include but are not limited to the failure of in-vivo events to manifest in vitro, enrollment of patients whose HIV infection is still too early, and the failure of a sufficient number of human subjects to complete the study. The Company's Approach to New Drug Development is Combining Elements From The Public and Private Sectors New Drug Development in The Public Sector The federal government obtains tax dollars from individuals and corporations and redistributes those dollars to public teaching hospitals for the purpose of funding basic medical research. Faculty members at most public teaching hospitals are expected to publish original research papers in the peer-review journals. Since these published papers constitute a contribution to medical knowledge, this knowledge provides society with an intangible benefit in return for the tax dollars expended. A significant portion of the basic science that underlies Cytolin(R), i.e., the "prior art," was funded by the National Institute of Allergies and Infectious Diseases. New Drug Development in The Private Sector Individual and institutional investors voluntarily place their money at risk to provide operating capital for use by the drug companies. These companies conduct their own clinical trials. The new drugs that were successful generated such large earnings that the drug companies have historically offered investors a substantial return on investment. The Company's Model of New Drug Development The study CytoDyn is funding at Massachusetts General Hospital is science-intensive, and is intended as a prelude to a follow-on clinical trial at the same Institution. Over and above conducting the study, Massachusetts General Hospital, not CytoDyn, designed the study and serves as its sponsor, all as part 8 of its mission of "improving the public health by engaging in research for the purpose of discovering and making available to the public new and improved medical drugs and information," to quote the recitals of the agreement between Massachusetts General Hospital and CytoDyn, Inc. In other words, CytoDyn is funding research of a type that is usually funded by the government, except that the funds represent money voluntarily placed at risk by investors rather than tax dollars. In particular, while CytoDyn will retain its intellectual property rights and will have access to the study data, it will not own the data, which will be owned by Massachusetts General Hospital. The research provides Massachusetts General Hospital the opportunity to pursue its mission of conducting basic and potentially seminal research using funds from a non-governmental source that belongs to a deep-pocket segment of the economy and is generally more flexible than the government. The advantage for the Company is in avoiding the high costs arising from the FDA's regulation of clinical trials, especially when the trials are sponsored by a drug company. The Company will also benefit from a prestigious teaching hospital confirming the Company's research. The FDA licenses medicinal products for sale in interstate commerce under a particular label only if they receive data supporting that label and only if some company asks them to do so. CytoDyn may or may not be the company that requests a license to market Cytolin(R) under a label. Under our current thinking we hope to enter into a strategic alliance after the next two studies under which a larger pharmaceutical marketing company will seek a license from the FDA to market Cytolin(R) and under a license from us to use our intellectual property in that manner. However there is no guarantee that we will wind up pursuing this strategy. Timing and anticipated completion dates for research and development. - --------------------------------------------------------------------- We estimate that the initial clinical trial to be conducted by Massachusetts General Hospital will take one year to complete. The study enrollment began January 13, 2010. We cannot estimate when enrollment will be completed. Subsequently, CytoDyn, Inc. may fund a follow-up clinical trial at Massachusetts General Hospital using venture capital or, at that time, may enter into a strategic alliance for completion of research and the subsequent marketing of Cytolin(R) if approved. In the former case, CytoDyn, Inc. will need to provide a new batch of humanized product, which we estimate will cost on the order of another half million dollars. We cannot estimate what the hospital's research grant will be until the hospital has provided those estimates. 9 Traditional Clinical Trials Process Phase I Phase I includes the initial introduction of an investigational new drug or biologic into humans. These studies are closely monitored and may be conducted in patients, but are usually conducted in a small number of healthy volunteer subjects. These studies are designed to determine the metabolic and pharmacologic actions of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. During Phase I, sufficient information about the investigational product's pharmacokinetics and pharmacological effects are obtained to permit the design of well-controlled, scientifically valid, Phase II studies. Phase II Phase II includes the early controlled clinical studies conducted to obtain some preliminary data on the effectiveness of the drug for a particular indication or indications in patients with the disease or condition. This phase of testing also helps determine the common short-term side effects and risks associated with the drug. Phase II studies are typically well-controlled, closely monitored, and conducted in a relatively small number of patients, usually involving several hundred people. In some cases, depending upon the need for a new drug, it may be licensed for sale in interstate commerce after a "pivotal" Phase II trial. Phase III Phase III studies are expanded controlled clinical studies. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained in Phase II, and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit/risk relationship of the drug. Phase III studies also provide an adequate basis for extrapolating the results to the general population and transmitting that information in the physician labeling. Phase III studies usually include several hundred to several thousand people. CytoDyn may enter into a strategic alliance with a pharmaceutical marketing company after completion of the current clinical trial or after completion of the second clinical trial. There is no guarantee that a strategic alliance would be achieved after either of those trials. Competition The pharmaceutical and biotechnology industries are characterized by rapidly evolving technology and intense competition. CytoDyn will compete with other more established biotechnology companies with greater financial resources. 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 10 from cell cultures, genetically engineered drugs and natural and chemically synthesized drugs. Almost all of these potential competitors have substantially 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. 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. Manufacturing and Source for Raw Materials In May 2008, we negotiated with a contract manufacturer Vista Biologicals Corporation to manufacture GMP product for the next clinical trial of Cytolin(R) at a cost of $600,000, all of which was paid by September 2008. The initial clinical trial to be conducted by Massachusetts General Hospital will cost the Company approximately $363,000 of which $172,000 was paid by December 2009. The product has been tested by WUXI for use in human subjects. The product's expected expiration date is two years from the date WUXI completed its product testing which is July 2011. Subsequent manufacturing may or may not be done by CytoDyn depending on whether the Company enters into a strategic alliance with a pharmaceutical marketing company before or after the second clinical trial anticipated to be conducted by Dr. Rosenberg. The product may or may not be humanized. Raw materials and manufacturing will be provided by a CMO (Contract Manufacturing Organization) if manufactured by CytoDyn. Patents and Trademarks We have a License Agreement with Allen D. Allen, our President and CEO that gives us the exclusive right to develop, market and profit from his technology worldwide. This includes issued U.S. patents 5,424,066; 5,651,970 and 6,534,057, foreign counterparts, as well as European Patents No. 94 912826.8 and 04101437.4. Hong Kong, Australian and Canadian patents have been obtained as well. The original expiration dates of the U.S. patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. We estimate the costs associated with these issued patents to be approximately $100,000 per year. We may file additional patents during the current fiscal year if our research and development efforts warrant them, but we do not have any such potential patents identified at this time. CytoDyn(R) and Cytolin(R) are our registered trademarks. Our service trademark mark symbol is: [GRAPHIC OMITTED] 11 Government Regulation Our research and development activities and the manufacture and marketing of our products are subject to rigorous regulations relating to product safety and efficacy by numerous governmental authorities in the United States and other countries. The Federal Food, Drug and Cosmetic Act and other federal and state statutes and regulations govern, among other things, the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products in the U.S. The lengthy process of seeking drug approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Failure to comply with applicable regulations can result in refusal by the FDA to approve product license applications. The FDA also has the authority to revoke previously granted product approvals. We are subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation applying to our business that might result from any legislative or administrative action cannot be accurately predicted. Research and Development Costs Company sponsored research and development expenses were $164,147 and $424,739 in 2008 and 2007, respectively. We expect that research and development expenses will continue to increase as we seek to expand development of our current and future product pipeline. Employees We have three full time employees, one part time employee and several consultants engaged in management and product development. CytoDyn is severely understaffed and will expand its employee force if we complete further financings estimated to be $5 million to $15 million. There can be no assurance we will be able to locate or secure suitable employees upon acceptable terms in the future. Item 1A. Risk Factors This item is not required for smaller reporting companies 12 Item 2. Properties Our principal offices are located at 1511 Third Street, Santa Fe, New Mexico 87505. We have leased approximately 1,200 square feet of office space for two years beginning September 1, 2008 until August 31, 2010 at $1,750 per month. Item 3. Legal Proceedings Maya LLC v. CytoDyn, et al Superior Court of Los Angeles Glendale Case #EC041590 - -------------------------------------------------------------------------------- CytoDyn, Inc. and Allen D. Allen v. Amerimmune, Inc. and Amerimmune - ------------------------------------------------------------------- Pharmaceuticals, Inc. v. Biovest International, Inc., Commonwealth of - --------------------------------------------------------------------- Massachusetts, Superior Court, Worcester County, Civil Action No. 05-0452-C. - ---------------------------------------------------------------------------- The Company and some of its officers and directors have entered into a Settlement Agreement with the all parties involved in the above legal matters including CytoDyn, Inc., Allen D. Allen, Corinne Allen, Maya LLC, AIDS Research LLC and Rex Lewis. All of the cases have been settled pursuant to this agreement. The liability incurred by the Company was a payment to Maya LLC of $50,000 paid on January 14, 2009 and an additional $25,000 was paid by January 14, 2010. We have dismissed all claims to the 1995 FDA drug application and the original cell bank as defined in the agreement and Rex Lewis and his parties agree to dismiss all claims against the Company, any of its predecessors and any of its officers and directors. Related to the above settlement the Company accrued $75,000 as of May 31, 2008. The property rights given in exchange for the dismissed claims are not part of the Company's current product research and development plan. Item 4. Submission of Matters to a Vote of Security Holders None for Fiscal Year Ended May 31, 2008. Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Trading Information CytoDyn, Inc. trades on the Pink Sheets under the ticker symbol CYDY. As of the date of this filing we had approximately 204 holders of our common stock, plus what is held in street name which we cannot determine as of the date of this filing. 13 Dividends. - ---------- Holders of our common stock are entitled to receive dividends as may be declared from time to time by our Board of Directors. We have not paid any cash dividends on our common stock and do not anticipate paying any in the foreseeable future. Management's current policy is to retain earnings, if any, for use in CytoDyn's operations and for expansion of the business. The table below provides the high and low sales prices of our common stock for the periods indicated, as reported by the Pink Sheets quotations system: Price Range of Outstanding Common Stock - --------------------------------------------------------------------- Year Ended May 31, 2008 - --------------------------------------------------------------------- High Low - --------------------------------------------------- -------- -------- First Quarter Ended August 31, 2007 .80 .55 - --------------------------------------------------- -------- -------- Second Quarter Ended November 30, 2007 .65 .11 - --------------------------------------------------- -------- -------- Third Quarter Ended February 28, 2008 .35 .11 - --------------------------------------------------- -------- -------- Fourth Quarter Ended May 31, 2008 .96 .13 - --------------------------------------------------------------------- - --------------------------------------------------------------------- Year Ended May 31, 2007 - --------------------------------------------------------------------- High Low - --------------------------------------------------- -------- -------- First Quarter Ended August 31, 2006 2.78 1.75 - --------------------------------------------------- -------- -------- Second Quarter Ended November 30, 2006 1.65 .80 - --------------------------------------------------- -------- -------- Third Quarter Ended February 28, 2007 1.00 .51 - --------------------------------------------------- -------- -------- Fourth Quarter Ended May 31, 2007 .85 .51 - --------------------------------------------------------------------- Securities Authorized for Issuance under Equity Compensation Plans. 14

___________ (1) In May 2004 Mr. Wellington Ewen, the Company's previous Chief Financial Officer was granted 150,000 options as his only compensation for being our Chief Financial Officer. The options vested 50,000 as of May 2005 with exercise price of $.50 per share, 50,000 as of May 2006 with an exercise price of $1.00 per share and 50,000 May 2007 with exercise price of $1.50 per share. To date no options have been exercised. 426,000 warrants were issued to a prior financial representative. 94,500 have been exercised 331,500 remain unexercised. The exercise price is $.30 per share and the warrants expire in 2011. 469,600 warrants were issued to certain friends and family as part of an incentive to participate in our bridge loan financing. The warrants exercise price are $2.50 and they expire in 2011. To date none have been exercised. In October 2007 the Company granted 9,000 warrants to the Gould Educational Fund, the exercise price is $.30 per share they expire in 2011. From April 2008 until May 31, 2008 the Company issued 321,000 in warrants to investors purchasing common shares in the Company's Private Placement to raise $2,000,000. The exercise price is $1.00 per warrant and the warrants expire in 2013. (2) As of May 31, 2008 we had: 12,546,407 shares of common stock issued and outstanding; 653,878 shares currently reserved and available for future option grants. Recent Sales of Unregistered Securities In April 2008 our Board of Directors approved a Private Placement Memorandum to sell up to 6 million shares of common stock, no par value, through a Placement Agent, a company offering. This offering was only available to accredited investors as defined under the 1933 Securities Act ("The Act"). The offering commenced on or about April 4, 2008 and ended June 2009. The Company sold 3,876,509 restricted common shares and 1,938,254 warrants. These securities were sold pursuant to an exemption from registration under Regulation D under "The Act" and will not be registered with the Securities and Exchange Commission. The Company used the proceeds to manufacture our primary product Cytolin(R) for use in clinical trials. The remaining amount of the proceeds will be used for Company operating expenses, patent fees and legal fees. 15 Item 6. Selected Financial Data This item is not required for Smaller Reporting Companies Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED," "BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL," "COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS. The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements. Background of our Company CytoDyn, Inc. discovered and is developing a class of therapeutic monoclonal antibodies to address significant unmet medical needs in the area of HIV/AIDS. CytoDyn, Inc. has sponsored a research grant to Massachusetts General Hospital in Boston, Massachusetts, to design and sponsor clinical trials in addition to conducting those trials on our lead product Cytolin(R), an immune therapy intended to treat early HIV infection. Although CytoDyn, Inc. will retain all of its intellectual property rights and will have access to the study data, the data will be owned by Massachusetts General Hospital (MGH). A chief benefit for CytoDyn, Inc. is that the Company will not have to deal directly with the FDA. Moreover, the high costs and long delays associated with the FDA's oversight of clinical trials may be significantly reduced in the case of clinical trials designed and sponsored by a leading teaching hospital. 16 The FDA licenses medicinal products for sale in interstate commerce under a particular label. Only if they receive data supporting that label and only if some company asks them to do so. CytoDyn may or may not be the company that requests a license to market Cytolin(R) under a label. Under our current thinking we hope to enter into a strategic alliance after the next two studies under which a larger pharmaceutical marketing company will seek a license from the FDA to market Cytolin(R) and under a license from us to use our intellectual property in that manner. However there is no guarantee that we will wind up pursuing this strategy. In May 2008 we negotiated with a contract manufacturer Vista Biologicals Corporation to manufacture GMP product for the next clinical trial of Cytolin(R) at a cost of $600,000, all of which was paid by September 2008. The initial clinical trial to be conducted by Massachusetts General Hospital will cost the Company approximately $363,000 of which $172,000 was paid by December 2009. Human subjects are now being recruited for the initial study conducted by Massachusetts General Hospital from the clinic of the Principal Investigator, Dr. Eric Rosenberg. The study protocol calls for 10 adults with early HIV infection and 10 healthy control subjects. According to the study protocol, it could take up to one year to fill these 20 slots. Although the Company expects enrollment to be completed in a shorter period of time, there can be no guarantee that enrollment will be completed in less time than is permitted by the study protocol. We registered a clinical trial of Cytolin(R) with the government's website at www.clinicaltrials.gov, ID NCT01048372. The public has online access to this federal database, which describes the key elements of clinical trials and their status. To peruse the continually updated public record for the study of Cytolin(R) on the government's website, enter "HIV AND Boston AND Cytolin" as search terms (case sensitive). Subsequently, CytoDyn, Inc. may fund a follow-up clinical trial at Massachusetts General Hospital using venture capital or, at that time, may enter into a strategic alliance for completion of research and the subsequent marketing of Cytolin(R) if approved. In the former case, CytoDyn, Inc. will need to provide a new batch of humanized product, which we estimate will cost on the order of another half million dollars. The Company is conducting a private placement of preferred shares to secure the capital needed for the follow-up study. We cannot estimate what the hospital's research grant will be at this time until the hospital has provided those estimates. There are many factors that can delay clinical trial benchmarks. However, the Company hopes to receive the results and analysis of the upcoming clinical trial during 2010. 17 ============================================================================= Benchmark Some Factors That Can Cause Delays+ ============================================================================= Manufacturing Delays Documentation Delays Patient Outreach IRB Delays Delays in Regulatory Review or Approval Force Majeure ============================================================================= Fill and Finish Delays Dose First Patient Slower Than Expected Patient Enrollment Force Majeure ============================================================================= Slower Than Expected Patient Enrollment Lock Database - Begin Clinical Hold Statistical Analysis Laboratory Error Protocol Deviation Force Majeure ============================================================================= Additional Stratification Required Release Final Report Computer Hardware or Software Malfunction Force Majeure ============================================================================= +There are other factors, known and unknown, such as unexpected financial hardships, that can cause delays. Clinical Trials Process - Described below is the traditional drug development track. Under the Company's current business plan, much of this initial work will be sponsored and conducted by MGH, eliminating the need for CytoDyn to deal directly with the FDA. Traditionally, the Company would enter into a strategic alliance with a larger pharmaceutical company after development has progressed to a certain point. While there can be no guarantee that this will occur in our case, if it does, then our larger partner would usually be responsible for dealing with the FDA. Phase I - ------- Phase I includes the initial introduction of an investigational new drug or biologic into humans. These studies are closely monitored and may be conducted in patients, but are usually conducted in a small number of healthy volunteer subjects. These studies are designed to determine the metabolic and pharmacologic actions of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. During Phase I, sufficient information about the investigational product's pharmacokinetics and pharmacological effects are obtained to permit the design of well-controlled, scientifically valid, Phase II studies. Phase II - -------- Phase II includes the early controlled clinical studies conducted to obtain some preliminary data on the effectiveness of the drug for a particular indication or indications in patients with the disease or condition. This phase of testing also helps determine the common short-term side effects and risks associated with the drug. Phase II studies are typically well-controlled, closely monitored, and conducted in a relatively small number of patients, usually involving several hundred people. Depending upon need, a new drug may be licensed for interstate marketing after Phase II if it is a "pivotal" study. 18 Phase III - --------- Phase III studies are expanded controlled clinical studies. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained in Phase II, and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit/risk relationship of the drug. Phase III studies also provide an adequate basis for extrapolating the results to the general population and transmitting that information in the physician labeling. Phase III studies usually include several hundred to several thousand people. Patents - ------- We have a License Agreement with Allen D. Allen, our President and CEO that gives us the exclusive right to develop, market and profit from, his technology worldwide. This includes issued U.S. patents 5,424,066; 5,651,970 and 6,534,057, foreign counterparts, as well as European Patents No. 94 912826.8 and 04101437.4. Hong Kong, Australian and Canadian patents have been obtained as well. The original expiration dates of the U.S. patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. We estimate the costs associated with these issued patents to be approximately $100,000 per year. We may file additional patents during the current fiscal year if our research and development efforts warrant them, but we do not have any such potential patents identified at this time. 19 Going Concern We will require additional funding in order to continue with research and development efforts. 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 currently in the development stage with losses for all periods presented. As of March 12, 2010 these factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. 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 obtain additional operating capital, complete development of its medical treatments, obtain FDA approval, outsource manufacturing of the treatments, and ultimately to attain profitability. The Company intends to seek additional funding through equity offerings or licensing agreements to fund its business plan. There is no assurance that the Company will be successful in these endeavors. Results of Operations Results of operations for the year ended May 31, 2008 compared to May 31, 2007 are as follows: For the years ended May 31, 2008 and 2007 the Company had no activities that produced revenues from operations. For the year ended May 31, 2008, the Company had a net loss of approximately $(1,194,000) compared to a net loss of approximately $(2,610,000) for the corresponding period in 2007. For the year ended May 31, 2008 and 2007, the Company incurred operating expenses consisting primarily of stock-based compensation, legal fees, salaries, research and development, and amortization. The operating expenses for the years ended May 31, 2008 and 2007 are as follows: 2008 2007 -------------- -------------- Stock-based compensation $ 468,000 $ 905,000 Legal 272,000 253,000 Salaries 71,000 309,000 Research and development 164,000 425,000 Amortization 1,000 167,000 Other 103,000 406,000 -------------- -------------- Total $ 1,079,000 $ 2,465,000 ============== ============== 20 Stock-based compensation decreased approximately $437,000 primarily due to a decrease in the amortization related to prepaid stock services, as well decreases in amortization related to common stock options and warrants. Salary expense decreased in 2008 relative to 2007, as the Company's operations were significantly limited during the second and third quarters of 2008 due to limited financing during that time. The research and development expense, as well as all other operating expenses decreased during this time due to the limited funds available to pay these operating expenses. The decrease in amortization is directly related to the completion and full amortization of a research contract with a consulting firm during 2007. There was no such amortization during 2008 related to this project. The decrease in interest expense from 2007 to 2008 is related to decreases in amortization of the Company's original issue discount from warrants issued with debt. During 2006 and 2007, the Company issued more warrants with debt relative to 2008. Liquidity and Capital Resources As shown in the accompanying Financial Statements, for the year ended May 31, 2008 and 2007, and since October 28, 2003 through May 31, 2008 the Company has had net losses of approximately $(1,194,000) and $(2,610,000) and $(6,973,000), respectively. As of May 31, 2008, the Company has not emerged from the development stage. In view of these matters, the Company's ability to continue as a going concern is dependent upon the Company's ability to begin operations and to achieve a level of profitability. Since inception, the Company has financed its activities principally from the sale of public equity securities and proceeds from notes payable. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources. 21 As previously mentioned, since October 28, 2003, we have financed our operations largely from the sale of common stock and proceeds from notes payable. From October 28, 2003 through May 31, 2008 we raised cash of approximately $997,000 (net of offering costs) through private placements of common stock financings and $1,534,000 through the issuance related party notes payable and convertible notes. Additionally, the Company has raised approximately $612,000 from the issuance of common stock and preferred stock in conjunction with certain acquisitions described in Note 7 of the financial statements. In April 2008, the Company's Board of Directors approved a Private Placement Memorandum to sell up to 6 million shares of common stock, no par value, a company offering. This offering was only available to accredited investors as defined under the 1933 Securities Act ("The Act"). The offering commenced on or about May 1, 2008 and ended June 15, 2009, the Company has sold 3,876,509 restricted common shares and 1,938,254 warrants for proceeds totaling $1,938,254. These securities were sold pursuant to an exemption from registration under Regulation D under The Act and will not be registered with the Securities and Exchange Commission. The warrants have an exercise price of $1.00 per share, immediate vesting rights, and expire in 2013 and 2014. Since October 28, 2003 through May 31, 2008, we have incurred approximately $951,000 of research and development costs and approximately $6,242,000 in operating expenses. We have incurred significant net losses and negative cash flows from operations since our inception. As of May 31, 2008, we had an accumulated deficit of approximately $8,575,000 and a working capital deficit of $371,000. We anticipate that cash used in product development and operations, especially in the marketing, production and sale of our products will increase significantly in the future. As described above, our only material commitments are related clinical trials of our product. Subsequent to May 31, 2008, the Company raised $1,696,500 through a Private Placement Offering of preferred shares. The Company amended its articles and designated 400,000 preferred shares Series B to be sold at $5.00 share. The preferred shares are convertible into common shares at $.50 per share or 10 shares of common for every preferred share issued. Subsequent to May 31, 2008, the Company raised $561,500 through a Private Placement offering to sell common shares $.50 per share. Subsequent to May 31, 2008, the Company paid approximately $600,000 in cash for the manufacturing of our product, Cytolin(R), to be used in human clinical trials. In September 2009 the Company entered into an agreement with Massachusetts General Hospital to provide financial support for the purpose of conducting an ex-vivo study of the Company's lead drug, Cytolin(R). This study is intended as a prelude to an in-vivo study. Costs are estimated at approximately $363,000 of which 50%, or $172,000, was paid to Massachusetts General Hospital by CytoDyn by September 2009. 22 Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements. We use the Black-Scholes option pricing model to estimate the fair value of stock-based awards on the date of grant utilizing certain assumptions that require judgments and estimates. These assumptions include estimates for volatility, expected term, and risk-free interest rates in determining the fair value of the stock-based awards. We issue common stock to consultants for various services. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more readily measurable. This determination requires judgment in terms of the consideration being measured. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable for smaller reporting companies Item 8. Financial Statements and Supplementary Data CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) CONTENTS PAGE ---- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 24 CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2008 AND MAY 31, 2007 25 CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED MAY 31, 2008 AND 2007, AND FOR THE PERIOD FROM OCTOBER 28, 2003 TO MAY 31, 2008 26 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE PERIOD FROM OCTOBER 28, 2003 TO MAY 31, 2008 27 - 28 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MAY 31, 2008 AND 2007 AND FOR THE PERIOD FROM OCTOBER 28, 2003 TO MAY 31, 2008 29 - 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31 - 46 23 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders CytoDyn, Inc. (A Development Stage Company) Santa Fe, New Mexico We have audited the accompanying consolidated balance sheet of CytoDyn, Inc. (a development stage company) as of May 31, 2008 and 2007 and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the years then ended and the period from October 28,2003 through May 31, 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CytoDyn, Inc. as of May 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended and the period from October 28, 2003 through May 31, 2008 in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company incurred a net loss of $1,193,684 for the year ended May 31, 2008 and has an accumulated deficit of $6,972,825 for the period October 28, 2003 through May 31, 2008, respectively. As of May 31, 2008, the Company had $371,157 of negative working capital and $85,435 of cash with which to satisfy any future cash requirements, which raises a substantial doubt about its ability to continue as a going concern. Management's plans in regards to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Pender Newkirk & Company LLP - -------------------------------- Pender Newkirk & Company LLP Certified Public Accountants Tampa, Florida March 12, 2010 24 CytoDyn, Inc. (A Development Stage Company) Consolidated Balance Sheets May 31, -------------------------- 2008 2007 ----------- ----------- Assets Current assets: Cash $ 85,435 $ 16,604 Prepaid insurance 43,978 43,254 Prepaid license fees 7,500 50,000 ----------- ----------- Total current assets 136,913 109,858 Furniture and equipment, net 1,422 2,611 Intangible assets, net 647 1,294 Other assets 37,240 495 ----------- ----------- $ 176,222 $ 114,258 =========== =========== Liabilities and Shareholders' Deficit Current liabilities: Accounts payable $ 388,459 $ 239,572 Accrued liabilities 25,274 193,600 Short-term portion of legal accrual 50,000 -- Accrued interest payable 44,337 10,216 Short-term portion of notes payable -- 125,000 ----------- ----------- Total current liabilities 508,070 568,388 ----------- ----------- Other liabilities: Accrued salaries - related party 229,500 -- Notes payable 145,000 -- Convertible notes payable, net 20,927 14,385 Indebtedness to related parties 572,840 455,701 Legal accrual 25,000 150,000 ----------- ----------- Total liabilities 1,501,337 1,188,474 ----------- ----------- Shareholders' deficit: Preferred stock; no par value; 5,000,000 shares authorized; 100,000 shares issued and outstanding 167,500 167,500 Common stock; no par value; 25,000,000 shares authorized; 12,546,407 and 11,297,264 shares issued and outstanding at May 31, 2008 and 2007, respectively 4,468,865 4,172,865 Stock for services -- (106,521) Additional paid-in capital 2,613,257 2,072,993 Accumulated deficit on unrelated dormant operations (1,601,912) (1,601,912) Deficit accumulated during development stage (6,972,825) (5,779,141) ----------- ----------- Total shareholders' deficit (1,325,115) (1,074,216) ----------- ----------- $ 176,222 $ 114,258 =========== =========== See accompanying notes to consolidated financial statements. 25 CytoDyn, Inc. (A Development Stage Company) Consolidated Statements of Operations October 28, Year Ended May 31, 2003 ---------------------------- through 2008 2007 May 31, 2008 ------------ ------------ ------------ Operating expenses: General and administrative $ 790,871 $ 1,619,462 $ 4,525,549 Amortization / depreciation 1,836 168,184 173,996 Research and development 164,147 424,739 951,228 Legal fees 271,894 252,745 591,389 Commitments and contingencies (150,000) -- -- ------------ ------------ ------------ Total operating expenses 1,078,748 2,465,130 6,242,162 ------------ ------------ ------------ Operating loss (1,078,748) (2,465,130) (6,242,162) Interest income -- 949 1,627 Interest expense: Interest on convertible debt (78,905) (145,889) (696,259) Interest on notes payable (36,031) -- (36,031) ------------ ------------ ------------ Loss before income taxes (1,193,684) (2,610,070) (6,972,825) Income tax provision -- -- -- ------------ ------------ ------------ Net loss $ (1,193,684) $ (2,610,070) $ (6,972,825) ============ ============ ============ Basic and diluted loss per share $ (0.10) $ (0.24) $ (0.74) ============ ============ ============ Basic and diluted weighted average common shares outstanding 11,391,844 10,997,063 9,391,643 ============ ============ ============ See accompanying notes to consolidated financial statements. 26

See accompanying notes to consolidated financial statements. 27

See accompanying notes to consolidated financial statements. 28

See accompanying notes to consolidated financial statements 29

On July 18, 2006 the Company issued 2,000,000 shares of unregistered restricted common stock for 1,000 shares of AITI common stock. The acquisition was accounted for as an asset purchase (See Note 7). The Company acquired a prepaid sponsored research project for $162,800, a license agreement for $150,000, and acquired $109,399 in expenses associated with the license agreement and cash of $512,200. The license agreement and associated expenses have been recorded as in process research and development expenses on the accompanying consolidated financial statements. On January 30, 2007, the Company issued 100,000 preferred shares of unregistered stock for 1,000 shares of AGTI common stock. The Company acquired a prepaid license fee for seven years for $52,500 and $15,000 in expense associated with the license agreement. On July 16, 2007, the Company cancelled the issuance of 142,857 shares of restricted common stock previously issued to a consultation firm. In conjunction with the cancellation, the Company reduced stock compensation expense and common stock by $100,000, which was the value of the shares on the date of cancellation. See accompanying notes to consolidated financial statements. 30 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 - Organization CytoDyn, Inc. (the "Company") was incorporated under the laws of Colorado on May 2, 2002 under the name Rexray Corporation ("Rexray"). In October 2003 we entered into an Acquisition Agreement with CytoDyn of New Mexico, Inc., pursuant to which we effected a one for two reverse split of our common stock, and amended our articles of incorporation to change our name from Rexray Corporation to CytoDyn, Inc. The acquisition was a accounted for as a reverse merger and recapitalization of the Company. Pursuant to the acquisition agreement, we were assigned the patent license agreement dated July 1, 1994 between CytoDyn of New Mexico 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. The license acquired gives us the worldwide, exclusive right to develop, market and sell the HIV therapies from the patents, technology and know-how invented by Mr. Allen. The term of the license agreement is for the life of the patents. The original expiration dates on the issued patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. As consideration for the intellectual property and trademarks we paid CytoDyn of New Mexico $10,000 in cash and issued 5,362,640 post-split shares of common stock to CytoDyn of New Mexico. The Company entered the development stage effective October 28, 2003 upon the reverse merger and recapitalization of the Company and follows Statements of Financial Accounting Standards No. 7, "Accounting and Reporting by Development Stage Enterprises" (SFAS No. 7). Advanced Influenza Technologies, Inc. ("AITI") was incorporated under the laws of Florida on June 9, 2006. Advanced Genetic Technologies, Inc. ("AGTI") was incorporated under the laws of Florida on December 18, 2006. CytoDyn, Inc. discovered and is developing a class of therapeutic monoclonal antibodies to address significant unmet medical needs in the areas of HIV and AIDS. 2 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financials statements include the accounts of CytoDyn, Inc. and its wholly owned subsidiaries; AITI and AIGI. All intercompany transactions and balances are eliminated in consolidation. Going Concern 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 consolidated financial statements, the Company is currently in the development stage with losses for all periods presented. As of March 12, 2010 these factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. 31 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete development of its medical treatment, obtain FDA approval, outsource manufacturing of the treatment, 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 these endeavors. Use of Estimates The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP) 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 consolidated 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 as of May 31, 2008 or May 31, 2007. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Furniture and Equipment Furniture and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally three to seven years. Maintenance and repairs are charged to expense as incurred and major improvements or betterments are capitalized. Gains or losses on sales or retirements are included in the consolidated statements of operations in the year of disposition. Impairment of Long-Lived Assets The Company evaluates the carrying value of long-lived assets under U.S. GAAP, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets' carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell. There were no impairment charges for years ended May 31, 2008 and 2007, and for the period October 28, 2003 to May 31, 2008. Research and Development Research and development costs are expensed as incurred. 32 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Advertising Expense Advertising expenses are expensed as incurred. There were no advertising expenses for any periods presented. Financial Instruments At May 31, 2008 and May 31, 2007, the carrying value of the Company's financial instruments approximate fair value due to the short-term maturity of the instruments. The Company's notes payable have market rates of interest, and accordingly, the carrying values of the notes approximates the fair value. The Company's related party notes have no stated interest rates. The inputted market rates of interest on these notes result in carrying value that approximates fair value. Stock-Based Compensation U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award (requisite service period). U.S. GAAP provides for two transition methods. The "modified prospective" method requires that share-based compensation expense be recorded for any employee options granted after the adoption date and for the unvested portion of any employee options outstanding as of the adoption date. The "modified retrospective" method requires that, beginning upon adoption, all prior periods presented be restated to reflect the impact of share-based compensation expense consistent with the pro forma disclosures previously required under U.S. GAAP. The Company adopted the modified prospective method, and as a result, was not required to restate its financial results for prior periods. Prior to June 1, 2006, the Company recognized compensation expense to the extent of employee or director services rendered based on the intrinsic value of stock options granted under the plan. The Company accounts for common stock options, and common stock warrants granted based on the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions such as expected stock price volatility, term of the options and warrants, risk-free interest rates, and expected dividend yield at the grant date. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock options. The expected volatility is based on the historical volatility of the Company's common stock at consistent intervals. The Company has not paid any dividends on its common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. The computation of the expected option term is based on the "simplified method" as the Company's stock options are "plain vanilla" options and the Company has a limited history of exercise data. For common stock options and warrants with graded vesting, the Company recognizes the related compensation costs associated with these options and warrants on a straight-line basis over the requisite service period. 33 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. GAAP requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested option forfeitures at 0% as of May 31, 2008 and May 31, 2007. Stock for Services The Company issues common stock and common stock options to consultants for various services. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (i) the date at which the counterparty's performance is complete. (Loss) Per Common Share Basic (loss) per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted (loss) per share is computed by dividing net (loss) by the weighted average common shares and potentially dilutive common share equivalents. The effects of potential common stock equivalents are not included in computations when their effect is anti-dilutive. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share calculation. Common stock option and warrants to purchase 3,227,222, 2,047,222 and 3,227,222 shares of common stock were not included in the computation of diluted weighted average common shares outstanding for the periods ended May 31, 2008, 2007, and for the period October 28, 2003 to May 31, 2008 respectively, as inclusion would be anti-dilutive for these periods. Additionally, in July 2009, 100,000 shares of convertible preferred stock converted into 2,356,142 shares of common stock (see Notes 7 and 13). Income Taxes Deferred taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Future tax benefits for net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Reclassification Certain prior period amounts have been reclassified to comply with current period presentation. Subsequent Events The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through the date on which the financial statements were issued on March 12, 2010 (see Note 13). 34 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 - Stock Options and Warrants The Company has one stock-based equity plan at May 31, 2008. The 2005 Stock Incentive Plan as amended (the "Plan") was authorized to issue options and warrants to purchase up to 2,800,000 shares of the Company's common stock. As of May 31, 2008 the Company had 653,878 shares available for future stock option grants under the plan. The estimated fair value of options and warrants is determined using the Black-Scholes option valuation model with the following weighted-average assumptions for the periods ended May 31, 2008 and 2007: 2008 2007 ---------- ----------- Risk free rate 3.0% 4.56 - 5.2% Dividend yield - - Volatility 70.0% 153 - 161% Expected term 5.5 years 5.0 years Net cash proceeds from the exercise of stock options and warrants were $0 for the years ended May 31, 2008 and May 31, 2007, respectively and approximately $28,000 for the period October 28, 2003 to May 31, 2008. Compensation expense related to stock options and warrants was approximately $462,000, $536,000 and $1,784,000 and for the years ended May 31, 2008 and 2007 and for the period October 28, 2003 through May 31, 2008, respectively. During 2008, the Company granted 859,000 options to employees and directors, which were valued and recorded as compensation expense. Additionally, the Company granted 321,000 of warrants in conjunction with the issuance of common stock (see note 12). The grant date fair value of options vested during the years ended May 31, 2008 and 2007 was approximately $432,000 and $638,000, respectively. The weighed average grant date fair value of options and warrants granted during the years ended May 31, 2008 and 2007 was $.42 and $1.21 respectively. As of May 31, 2008, there was approximately $602,000 of unrecognized compensation costs related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.85 years. 35 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table represents stock option and warrants activity for the periods ended May 31, 2008 and 2007: Weighted Average Weighted Remaining Aggregate Number of Average Contractual Intrinsic Shares Exercise Price Life Value --------- -------------- ----------- --------- Options and warrants outstanding - May 31, 2007 1,532,222 1.71 6.69 1,212,260 Granted 515,000 1.25 - - Exercised - - - - Forfeited/expired/cancelled - - - - --------- -------------- ----------- --------- Options and warrants outstanding - May 31, 2007 2,047,222 1.61 6.69 204,200 Granted 1,180,000 .77 - - Exercised - - - - Forfeited/expired/cancelled - - - - --------- -------------- ----------- --------- Options and warrants outstanding May 31, 2008 3,227,222 1.30 6.52 143,000 ========= ============== =========== ========= Exercisable - May 31, 2008 2,586,035 1.36 5.93 141,130 ========= ============== =========== ========= 4 - Stock issued for services During the year ended May 31, 2006, the Company issued 142,857 restricted shares to a public relations company in accordance with an agreement to perform services over the following year. The Company valued the shares at the market price of the Company's common stock on the date the agreement was executed in the amount of $250,000. On July 16, 2007, the Company cancelled the 142,857 shares of restricted common stock for non-performance. The expense associated with the original issuance had previously been amortized as compensation expense over the requisite life of the agreement. In conjunction with the cancellation, the Company reduced compensation expense by $100,000 at the date of cancellation for non-performance under the contract, which represented the fair market value of the common stock on the date of cancellation. 36 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the year ended May 31, 2006, the Company issued 40,000 restricted common shares to a consulting company in accordance with an agreement to perform services over the following year. The Company valued the shares at the market price of the Company's common stock on the date the agreement was executed in the amount of $120,000. For the years ended May 31, 2008 and 2007, the Company recognized approximately $107,000 and $7,000 of compensation expense related to this agreement. For the years May 31, 2008 and 2007 and for the period October 28, 2003 (inception date) through May 31, 2008, the Company recognized approximately $6,000, $280,000, and $391,000, respectively, in compensation expense, related to various consulting agreements. 5 - Recent Accounting Pronouncements In June 2009, the FASB issued ASC 105 Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles. The FASB Accounting Standards Codification TM (the "Codification") has become the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with Generally Accepted Accounting Principles ("GAAP"). All existing accounting standard documents are superseded by the Codification and any accounting literature not included in the Codification will not be authoritative. Rules and interpretive releases of the SEC issued under the authority of federal securities laws, however, will continue to be the source of authoritative generally accepted accounting principles for SEC registrants. Effective September 30, 2009, all references made to GAAP in our consolidated financial statements will include references to the new Codification. The Codification does not change or alter existing GAAP and, therefore, will not have an impact on our financial position, results of operations or cash flows. In June 2009, the FASB issued changes to the consolidation guidance applicable to a variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity's economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009. This will not have an impact on the Company's financial position, results of operations or cash flows. 37 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In June 2009, the FASB issued Financial Accounting Standards Codification No. 860 - Transfers and Servicing. FASB ASC No. 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. FASB ASC No. 860 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of FASB ASC No. 860 will have on its financial statements. 6 - Income Taxes Deferred taxes are recorded for all existing temporary differences in the Company's assets and liabilities for income tax and financial reporting purposes. Due to the valuation allowance for deferred tax assets, as noted below, there was no net deferred tax benefit or expense for the periods ended May 31, 2008 and 2007, and for the period ended October 28, 2003 through May 31, 2008. Reconciliation of the federal statutory income tax rate of 34 percent to the effective income tax rate is as follows for all periods presented: Income tax provision at statutory rate 34.0% State income taxes, net 3.5 Valuation allowance (37.5) ------ 0.0% ====== 38 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net deferred tax assets and liabilities are comprised of the following as of May 31, 2008 and 2007: Deferred tax asset (liability) current: Accrued salary $ 111,000 $ 72,000 Warrant amortization 28,000 -- Valuation allowance (139,000) (72,000) ----------- ----------- $ 0 $ 0 =========== =========== Deferred tax asset (liability) non-current Net operating loss $ 1,629,000 $ 1,423,000 Expense on non-qualified stock options and OID amortization 243,000 130,000 Valuation allowance $(1,872,000) $(1,553,000) ----------- ----------- $ 0 $ 0 =========== =========== The tax benefit for the period presented is offset by a valuation allowance established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related tax deferred assets will be recognized when management considers realization of such amounts to be more likely than not. At May 31, 2007, the Company had available net operating loss carryforwards of approximately $4,366,000, which expire beginning in 2022. 7 - Acquisitions On July 18, 2006, CytoDyn, Inc. entered into an acquisition agreement with a consulting company to purchase all 1,000 issued and outstanding shares of Advanced Influenza Technologies, Inc. (AITI), a Florida Corporation, in exchange for 2,000,000 unregistered restricted common shares of CytoDyn, Inc. stock. The transaction was accounted for as an asset purchase and not an acquisition of a business as AITI had no employees, operations, or customers, and was essentially a shell corporation that was incorporated to consummate the purchase. Pursuant to the agreement, the Company acquired $512,200 in cash and a prepaid sponsored research project of $162,800 from the University of Massachusetts to further the technology 39 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS associated with certain acquired licenses. The $162,800 is being amortized into research and development expense as the services are provided. The Company valued the assets acquired based on the consideration received rather than the fair market value of the shares issued as the Company believes this was more indicative of the value of the assets acquired. In addition to the cash and the prepaid sponsored research project, the Company acquired the worldwide nonexclusive and exclusive license agreements from the University of Massachusetts for certain technologies. The license agreements were recorded as research and development expense as the patent rights or license agreements are being used in a particular research project and have no alternative future use outside of this project. Including the license agreements, a total of $259,399 of in-process research and development was acquired related to the acquisition, which is included as a component of research and development expense for the period ended May 31, 2007. The license agreement granted the Company the exclusive right to develop and commercialize the licensed products associated with certain existing patents. Milestone fees are payable to the University per licensed product and due within 30 days of the event of certain occurrences required. The University would have also received 4.0% royalties on net sales of the licensed products. AITI agreed to fund a two-year ($325,600) unrestricted project ($162,800 per year) under the Sponsored Research Agreement, with the primary objective during the first year to conduct lab work to provide well documented research studies. If after one year the desired outcome is not achieved, the agreement can be cancelled and the second year's payment is not required. Included in the consolidated statements of operations is $162,800 of amortization expense for the period ended May 31, 2007 as all services related to the initial project were completed. The Company did not make the second payment and, consequently, as of May 31, 2008, the Company has no right to the above license agreement. Additionally, the milestone fee payable and royalties discussed above are no longer in force as of May 31, 2008. On January 30, 2007, CytoDyn, Inc. entered into an acquisition agreement with a consulting company, to acquire 100% of the outstanding stock of Advanced Genetic Technologies, Inc. (AGTI), a Florida Corporation, in exchange for 100,000 preferred no par value stock convertible into $1,300,000 worth of common unregistered restricted shares of CytoDyn, Inc. stock. The option to convert is any time after twelve (12) months and before thirty six (36) months from the date of closing of the agreement. The conversion option has a floor price of $.30 per share, which limited the maximum number of shares that the Company may issue upon conversion to 4,333,333 shares of common stock. There was no derivative liability or beneficial conversion feature associated with the conversion option at the commitment date. In July 2009, the consulting company converted all their preferred stock into 2,356,142 shares of common stock (see Note 13). 40 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AGTI holds the worldwide exclusive and nonexclusive license agreements from the CBR Institute for Biomedical Research affiliated with Harvard Medical School for certain biological materials. The term of the licensing agreement is until the later of 20 years or the date the last patent expires that is owned or controlled by the Licensee. Milestone fees are payable to the University per licensed product and due within 30 days of the event of certain occurrences required. The University shall also receive 2.0% royalties of net sales of the licensed products up to $200 million and 3.0% royalties of net sales in excess of $200 million. In the case of a sublicense, the University would get 25% of non-royalty sublicense income. The transaction was accounted for as an asset purchase and not an acquisition of a business as AGTI had no employees, operations, or customers, and was essentially a shell corporation that was incorporated to consummate the purchase. Pursuant to the agreement, the Company acquired $100,000 in cash and seven years of prepaid license fees to the Center for Biological Research at Harvard Medical School. $52,500 was recorded as prepaid license fees and $15,000 was expensed as research and development. The Company valued the assets acquired based on the consideration received rather than the fair market value of the shares issued as the Company believes this was more indicative of the value of the assets acquired. In addition to the cash and the prepaid license fees, the Company acquired the worldwide nonexclusive and exclusive license agreements from the Center for Biological Research at Harvard Medical School for certain biological materials. The license agreement grants the Company the exclusive right to develop and commercialize the licensed products associated with certain biological materials. 8 - Convertible Notes During the year ended May 31, 2006, the Company issued convertible promissory notes with a fixed conversion price of $1.25 and a stated interest rate of 5.0% with 407,600 detachable warrants to purchase common stock to individuals in exchange for proceeds totaling $509,500. The exercise price of the warrants was $2.50 and expire in 2011. As of May 31, 2008, all notes have been converted into common stock. The original issue discount associated with the warrants and beneficial conversion option were recorded as a discount to the convertible notes, and an increase to additional paid-in capital, respectively. For the periods ended May 31, 2008, 2007, and for the period October 28, 2003 to May 31, 2008 the Company amortized $0, $48,000, and $509,500, respectively of the discounts, which was included as a component of interest expense in the statement of operations. The Company accelerated the above discount into interest expense for any conversions that occurred in the respective periods presented. 41 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the year ended May 31, 2007, the Company issued convertible notes with a fixed conversion price of $1.25 and a stated interest rate of 5.0% with 74,000 detachable common stock warrants to purchase common stock in exchange for proceeds of $92,500. Principal and accrued interest are payable in any combination of cash and common stock at the option of the Company. As of May 31, 2008, the balance in the convertible notes is $15,000. The warrants to purchase common stock which accompanied the convertible promissory notes are exercisable at $2.50 per share, vest immediately, and expire in 2011. Additionally, the Company recorded an original issue discount based on the fair value of the warrants. To recognize the original issue discount, the Company discounted the notes and increased additional paid-in capital by $92,500. The Company did not record the intrinsic value for conversion into the Company's common stock, as the discount was limited to the debt proceeds of $92,500, which was fully discounted by the fair value of the warrants. The discount was amortized over the life of the debt. For the periods ended May 31, 2008, 2007, and for the period October 28, 2003 to May 31, 2008 the Company amortized $616, $91,884, and $92,500, respectively of the discounts, which was included as a component of interest expense in the statement of operations. The Company accelerated the above discount into interest expense for any conversions that occurred in the respective periods presented. During the year ended May 31, 2008, the Company issued two convertible notes each in the amount of $37,500. As of May 31, 2008, $75,000 of the convertible notes were converted into 750,000 shares of common stock at the fixed conversion price of $.10 per share. The notes were due in 12 months and bear interest at 14.0%. At the commitment date, the Company recorded a beneficial conversion feature of $75,000, which represented the intrinsic value of the conversion option, and was limited to the proceeds received. The conversion price was fixed at $.10. The beneficial conversion feature was recorded as a discount to the convertible notes and an increase in additional paid in capital. For the period May 31, 2008 the Company amortized into interest expense $75,000 of the discount. During the year ended May 31, 2008, the Company issued a $9,000 promissory note with 9,000 detachable warrants to purchase common stock at an exercise price of $.30 in exchange for proceeds totaling $9,000. The note bears interest at 14.0%. The warrants to purchase common stock vest immediately and expire in 2011. The Company valued the warrants utilizing the Black-Scholes option valuation model, and the resulting fair value was recorded as a debt discount of $3,662. For the period ended May 31, 2008, the Company recognized $589 of interest expense related to the discount amortization. 42 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9 - Promissory Notes During the year ended May 31, 2007, the Company issued $125,000 in unsecured promissory notes to third parties. The principal and interest on the notes were originally due in six months and pay interest at 14.0% per annum. During the year ended May 31, 2008 the Company issued an additional $20,000 in promissory notes to third parties. The notes were all due in six months and pay interest of 14.0% per annum. The parties have agreed to extend the due date in six month increments while continuing to accrue interest. As of May 31, 2008, approximately $44,337 of interest has been accrued. Additionally, subsequent to May 31, 2008, the notes were amended to become convertible into common stock (see Note 13). As a result of the extension of terms, and the conversion of some of the promissory notes to common stock, the Company has classified all the notes as long-term as of May 31, 2008. 10 - Commitments and Contingencies In 2001, the Company sued its previous licensee, Amerimmune Pharmaceuticals, Inc. ("API"), and its directors. The Company was ordered by the court to pay $150,000 in attorney fees to the insurance company of API. and recorded a contingent liability for the amount. Prior to issuance of the financial statements, the Company appealed the Court's decision and, in December 2007, the Court's decision was reversed based on the appeal. Based on these facts and circumstances, the Company reversed the recording of the contingent liability as of August 31, 2007. Related to certain litigation whereby the Company was both a defendant and a plaintiff, the Company entered into a settlement agreement in December 2008. As part of the settlement agreement, the Company agreed to pay $50,000 in January 2009 and $25,000 on or before January 14, 2010 to the plaintiff. The Company paid the $50,000 in January 2009. The remaining $25,000 was unsecured and accrued interest at 10.0% per annum. The Company paid $27,500 in January 2010. The Company accrued $75,000 related to this settlement agreement as of May 31, 2008 for the past litigation. The associated expense for the year ended May 31, 2008 is included in legal fees in the statement of operations. 11 - Related Party Transactions As of May 31, 2008, the Company owes two officers promissory notes totaling of $44,513. The notes are due on demand and carry no interest rate. Management plans to repay the notes through cash payments, issuance of the Company's common stock, or a combination thereof. The balance due of $44,513 remained unpaid at May 31, 2008 and is included in the accompanying consolidated financial statements as "indebtedness to related parties." A director provided legal services to the Company over the past several years. As of May 31, 2008, the Company owed the director $40,985 and it is included in the accompanying consolidated financial statements as "indebtedness to related parties" as of May 31, 2008. As of May 31, 2008, no arrangements had been made for the Company to repay the balance of this obligation. The Company anticipates that the director will continue to provide legal services in the future. 43 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A former director of the Company is owed $337,342 related to certain clinical research data that was obtained by the former director and later purchased by the Company. As of May 31, 2008, the liability has no payment terms and no stated interest rate, and is included in the accompanying consolidated financial statements as "indebtedness to related parties." In May and July 2007, the Company issued $150,000 in promissory notes with a stated interest rate of 14%, and a maturity date of six months from the issuance date. The notes were originally issued to an unrelated third party, who subsequently became a director of the Company during 2008. Accordingly, the notes are classified as related party notes as of May 31, 2008, and have been designated as long-term as the notes have been extended multiple times and have no stated maturity date. Patents The Company has a License Agreement with Allen D. Allen the Company's President and CEO that gives the exclusive right to develop market and sell his technology worldwide. This includes issued U.S. patents 5,424,066; 5.651,970 and 6,534,057, foreign counterparts, as well as European Patents No. 94 912826.8 and 04101437.4. Hong Kong, Australian, and Canadian patents have been obtained as well. The term of the license agreement is for the life of the patents. The original expiration dates on the issued patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. The Company estimates the costs associated with these issued patents to be approximately $100,000 per year. The Company may file additional patents during the current fiscal year if the research and development efforts warrant them, but the Company does not have any such potential patents identified at this time. Included in accrued salaries related party and accrued liabilities as of May 31, 2008 and 2007, are approximately $230,000 and $193,000, respectively in accrued salaries for two executives of the Company. Subsequent to May 31, 2008 the executives forgave all accrued salary. Accordingly, as of May 31, 2008, the accrued salaries are classified as a long-term liability. 12 - Equity Related to the acquisition in January 2007 (see Note 7), the Company issued 100,000 shares of Series A Convertible preferred stock (Series A), with 5,000,000 shares authorized for issuance. The conversion price is based on the previous ten-day average closing stock price on the day of conversion. However, the conversion price has a fixed floor of $.30 per share, which effectively limits the number of shares that could be converted to less than the authorized shares. In July 2009, all 100,000 outstanding shares of preferred stock converted into 2,356,142 shares of common stock. The Series A has no mandatory conversion feature or voting rights. The Series A holders rank senior to the common share holders in liquidation preference. During 2008, the Company issued 642,000 shares of common stock at $.50 per share and received $321,000 in cash proceeds. The common stock was issued to third-party investors as part of a private placement. Additionally, the investors received one warrant for each dollar of cash proceeds of common stock invested. Accordingly, the Company issued 321,000 warrants to the investors. 44 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13 - Subsequent Events In April 2008, the Company's Board of Directors approved a Private Placement Memorandum to sell up to 6 million shares of common stock, no par value, a company offering. This offering was only available to accredited investors as defined under the 1933 Securities Act ("The Act"). The offering commenced on or about May 1, 2008 and ended June 15, 2009, the Company has sold 3,876,508 restricted common shares and 1,938,254 warrants for proceeds totaling $1,938,254. These securities were sold pursuant to an exemption from registration under Regulation D under The Act and will not be registered with the Securities and Exchange Commission. The warrants have an exercise price of $1.00 per share, immediate vesting rights, and expire in April 2013. Subsequent to May 2008, the Company paid approximately $600,000 in cash for the manufacturing of our product, Cytolin(R), to be used in human clinical trials. In June 2009, the Company amended the promissory note agreements relating to $295,000 in unsecured promissory notes ($150,000 of the notes are to a related party). The original terms had no conversion feature, a stated interest rate of 14% per annum, and had an original maturity of six months. Related to this amendment, the holders of the promissory notes were given the right to convert the face amount of the notes and accrued interest into shares of common stock at a fixed conversion price of $0.45 per share. At the commitment date, the date the notes were amended, the Company incurred a beneficial conversion feature of $50,000. The amendment to the unsecured promissory notes, limited the amount of promissory notes and accrued interest that could be converted to $225,000, effectively capping the number of common shares that could be converted to 500,000. As of the date of this filing, $146,456 of promissory notes converted into 325,459 shares of common stock. In September 2009, the Company entered into an agreement with Massachusetts General Hospital to provide financial support for the purpose of conducting an ex-vivo study of the Company's lead drug, Cytolin(R). This study is intended as a prelude to an in-vivo study. Costs are estimated at approximately $363,000 of which 50%, or $172,000, was paid to Massachusetts General Hospital by CytoDyn by December 2009. 45 CYTODYN, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In July 2009, the Company received a request from a shareholder to convert 100,000 preferred shares into 2,356,142 restricted common shares pursuant to an Agreement dated January 2007. The common shares were to be converted at the average price per share over the last 10 days of trading prior to the conversion date which calculated to $.62 per share. The Agreement contained a floor price of $.30 per share, which effectively limited the maximum number of the common shares issued to an amount that was less than the Company's authorized shares. These shares have not been registered with the SEC and are subject to the restrictions under Rule 144 of the Securities Act. In January 2010, the Company granted 2,155,000 stock options to employees and consultants. The options have an exercise price of $1.95 per share, expire ten years from grant, and vest between zero and three years. The approximate fair value of the options was $3,225,000 at the January 11, 2010 grant date. The fair value of these options will be recognized over the three year requisite service period. Subsequent to May 31, 2008, the Company raised $1,696,500 through a Private Placement Offering of preferred shares. The Company amended its articles and designated up to 400,000 preferred shares Series B to be sold at $5.00 share. The preferred shares are convertible into common shares at $.50 per share or 10 shares of common for every preferred share issued. Subsequent to May 31, 2008, the Company raised $561,500 through a Private Placement offering to sell common shares $.50 per share. 46 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A(T). Other Information (a) Disclosure Controls and Procedures Disclosure Controls and Procedures - ---------------------------------- As of May 31, 2008, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operations of the Company's disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of May 31, 2008 as a result of the material weakness in internal control over financial reporting discussed below. (b) Changes in Internal Control over Financial Reporting Changes in Control Over Financial Reporting - ------------------------------------------- No change in the Company's internal control over financial reporting occurred during the year ended May 31, 2008, that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the Company's transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements and that receipts and expenditures of the Company's assets are made in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company's financial statements would be prevented or detected. 47 Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 31, 2008 using the criteria set forth in the Internal Control over Financial Reporting - Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation, our management concluded that our internal control over financial reporting was not effective as of May 31, 2008 because of material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency that results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by employees in the normal course of their assigned functions. Our management concluded that we have several material weaknesses in our internal control over financial reporting because of inadequate segregation of duties over authorization, review and recording of transactions as well as the financial reporting of such transactions. Due to the Company's limited resources, management has not developed as plan to mitigate the above material weaknesses. Despite the existence of these material weaknesses, we believe the financial information presented herein is materially correct and in accordance with the generally accepted accounting principles. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report. Item 9B. Other Information Not applicable PART III Item 10. Directors, Executive Officers and Corporate Governance Allen D. Allen 73 Chairman of the Board, President, Chief Executive Officer Corinne Allen, CPA 42 Chief Financial Officer, Vice President, Nader Pourhassan, PhD. 46 Chief Operating Officer Ronald J. Tropp, Esq. 67 Director Gregory Gould, CPA 43 Director George F. Dembow 77 Director Allen D. Allen. Mr. Allen has been 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 original research on HIV, dermatology and general immunology and was the co-investigator on an autologous vaccine study. From 1986 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 48 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 Chief Financial Officer. Corinne Allen, CPA. Ms. Allen has been an officer and/or director of the Company since October 2003.Ms. Allen has been our Chief Financial Officer from October 28, 2003 through May 2004. From 2004 until July 2009 Ms. Allen served as Vice President of Business Development at which time she was appointed Chief Financial Officer. Ms. Allen 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 in San Francisco, and, from 1992 to 1998 was a CPA at Hallquist Jones P.C. She has over 24 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, our Chairman and CEO. Ms. Allen is a member of the American Institute of Certified Public Accountants (AICPA). Nader Pourhassan, PhD. Dr. Pourhassan became the Company's Chief Operating Officer in May 2008. Born in Tehran, Iran in 1963, Dr. Pourhassan immigrated to the United States in 1977 and became a U.S. citizen in 1991. He received his Bachelor of Science from Utah State University in 1985, his Masters of Science from Brigham Young University in 1990 and his PhD from the University of Utah in 1998. Before joining the company Dr. Pourhassan was an instructor in engineering and a successful self made business man. Gregory A. Gould, CPA. Mr. Gould has been a Director since March 20, 2006 and a member of our Audit Committee and Compensation Committee since May 15, 2006. Mr. Gould has been the Chief Financial Officer and Treasurer of SeraCare Life Sciences, Inc., since August 2006 and the Secretary of the Company since November 2006. From August 2005 to August 2006, Mr. Gould provided financial and accounting consulting services through his consulting company, Gould LLC. From April 2005 to August 2005, Mr. Gould served as the Chief Financial Officer and Senior Vice President of Integrated BioPharma, Inc., a life sciences company serving the pharmaceutical, biotechnology and nutraceutical markets. Prior to that, from February 2004 through January 2005, Mr. Gould served as the Chief Financial Officer, Treasurer and Secretary of Atrix Laboratories, Inc., an emerging specialty pharmaceutical company focused on advanced drug delivery. From 1996 through October 2003, Mr. Gould served as Director of Finance and then as the Chief Financial Officer and Treasurer of Colorado MEDtech, a high tech software development, product design and manufacturing company. Mr. Gould holds a B.S. in Business Administration from the University of Colorado, Boulder and is a Certified Public Accountant in the State of Colorado. 49 Ronald J. Tropp, Esq. Mr. Tropp was a Director of the Company from October, 2003 to January 31, 2006 and was reappointed in January 2007. He served as Director for CytoDyn of New Mexico, Inc. Mr. Tropp received his Bachelor of Arts degree from Swarthmore College 1965, and a Juris Doctorate from the University of Wisconsin - Madison in 1968. He is admitted to the practice of law in New York and California. He has practiced entertainment and transactional law for over 25 years and has been representing CytoDyn and 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. George F. Dembow. Mr. Dembow has been a Director since February 2008. From 1972 to today, he started and built Arizona Natural Resources, Inc., a manufacturer and contractor of cosmetics, toiletries and candles Mr. Dembow attended Cornell University in Ithaca, NY 1950 to 1954 and graduated with a BS with an additional year credit toward an MBA. Mr. Dembow was a Fighter pilot in the USAF 1954 - 1957. He was Employed by Fischbach and Moore, Inc., a world-wide electrical contractor traded on the New York Stock Exchange from 1958 to 1966, becoming a Vice-President in Washington, DC in 1963. Mr. Dembow was President and Co-Owner of Apache Airlines, Inc., a commuter airline operating from Phoenix, Arizona with scheduled service in Arizona, Nevada, Montana and North Dakota from 1966 to 1971. 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. Code of Ethics. We have adopted a Code of Ethics for our Senior Executive Officers as well as a Code of Business Conduct and an Insider Trading Policy for the Company. These can all be found on our website at www.cytodyn.com under the Management tab. Audit Committee The Board of Directors has resolved to establish an audit committee composed of our Chief Financial Officer Corinne Allen, CPA and Board members, Gregory A. Gould, CPA, Ronald J. Tropp, Esq and George F. Dembow. Two of the members of the audit committee are "financial experts" as defined in Regulation S-B Item 401(e)(1)(ii)(2). Mr. Gould, Mr. Tropp and Mr. Dembow are the independent members of the Audit Committee at this time. An Audit Committee Charter was adopted by the Board of Directors and became effective on June 1, 2007. 50

1. As of February 2006, Mr. Allen's salary was approved by Board of Directors for $150,000. Ms. Allen was approved for salary of $100,000 in February 2006 by the Board of Directors. 2. Dr. Pourhassan entered into a personal services agreement with the Company in May 2008. His annual base salary per his personal services agreement is $200,000 beginning June 1, 2008. Compensation of Directors Our Directors receive 25,000 stock options each year for their services as Directors. The Directors receive no cash compensation. 51 Outstanding Equity Awards at Fiscal Year-End The following table sets forth the number of shares of common stock covered by outstanding stock option awards that are exercisable and unexercisable for each of our named executive officers as of May 31, 2008. (a) (b) (c) (d) (e) # of Securities Underlying Unexercised Options at FYE May 31, 2008 (#) Options Exercise Unexercised Options Options Price Expiration Name Exercisable/Unexercisable ($) Date - ------------------- ------------------------- ------------- --------- Allen D. Allen, CEO 154,142 220,858 2.68/1.10/.65 2016/2017 Corinne Allen, CFO 154,142 220,858 2.68/1.10/.65 2016/2017 (1) Unless otherwise indicated, the business address of each Shareholder is c/o CytoDyn, Inc., 1511 Third Street, Santa Fe, NM 87505. (2) (3)Includes options that have been granted and vested: Mr. Allen has options to purchase 375,000 Shares of common stock. 154,142 have vested. None have been exercised to date. 50,000 were Granted in FYE 2006 and 25,000 were Granted in FYE 2007, 300,000 were Granted in FYE 2008. Ms. Allen has options to purchase 375,000 Shares of common stock. 154,142 have vested. None have been exercised to date. 50,000 were Granted in FYE 2006, 25,000 were Granted in FYE 2007, 300,000 were Granted in FYE 2008. We know of no arrangements concerning anyone's ownership of stock, which may, at a subsequent date, result in a change of control. 52 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth the beneficial ownership of our common stock as of May 31, 2008, 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 Amount And Nature of Beneficial Approximate Name And Address of Beneficial Owner (1) Ownership (2)(3) Percent Owned - ---------------------------------------- ---------------- ------------- Utek Corp (not officers or directors) 3,083,170 23% Allen D. Allen, CEO 1,786,415 13% Corinne Allen, CFO 1,510,921 11% Nader Pourhassan, COO 220,000 2% Gregory A. Gould, Director 80,000 1% Ronald J. Tropp, Director 110,000 1% George F. Dembow, Director 367,000 3% TOTAL OFFICERS AND DIRECTORS AS A GROUP 4,074,336 30% (1) Unless otherwise indicated, the business address of each Shareholder is c/o CytoDyn, Inc., 1511 Third Street, Santa Fe, New Mexico 87505. (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 May 31, 2008, 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) Includes options that have been granted and vested: Item 13. Certain Relationships and Related Transactions and Director Independence 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 $120,000, 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. Services Provided by Ronald J. Tropp. Director, Ronald J. Tropp, Esq., has provided legal services to us and to CytoDyn of New Mexico, Inc. for a number of years. Currently, we owe him the sum of $40,985 for these services. Mr. Tropp received 60,000 options as partial payment of his services. We anticipate that Mr. Tropp will provide additional legal services to us in the future. 53 Note Given and Debt Owed to Allen D. Allen. In January 2004 we issued to Allen D. Allen, our President, Chief Executive Officer and the Chairman of our Board of Directors, 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. The sum owed does not bear interest and is payable on demand. As of May 31, 2008 the debt owed to Allen D. Allen was $16,492. Notes Given to Corinne Allen. In January 2004, we issued to Corinne E. Allen, our Vice President of Business Development, Treasurer and Director, two non interest bearing promissory notes, each payable on demand, in the original principal amounts of $50,000 and $38,906. The $50,000 note was paid in full in February, 2004. As of May 31, 2008, the debt owed to Corinne Allen was $28,021. Patents The Company has a License Agreement with Allen D. Allen the Company's President and CEO that gives the exclusive right to develop, market and sell his technology worldwide. This includes issued U.S. patents 5,424,066; 5.651,970 and 6,534,057, foreign counterparts, as well as European Patents No. 94 912826.8 and 04101437.4. Hong Kong, Australian, and Canadian patents have been obtained as well. The term of the license agreement is for the life of the patents. The original expiration dates on the issued patents are 2013 to 2016. There is an automatic extension of the expiration date on U.S. patents equal to the number of years the drug under the patent is being studied in clinical trials. Typically this provides another four to five years on the earliest claims. CytoDyn's counsel expects its patents to be extended until 2017 to 2020 depending upon the original date of the issued patents. The Company estimates the costs associated with these issued patents to be approximately $100,000 per year. The Company may file additional patents during the current fiscal year if the research and development efforts warrant them, but the Company does not have any such potential patents identified at this time. Our independent Directors include Ronald J. Tropp, Esq, Gregory Gould, CPA, and George F. Dembow. 54 Item 14. Principal Accounting Fees and Services Approval of Services The Board of Directors has resolved to establish an audit committee composed of our Chief Financial Officer, Corinne Allen and Board members Gregory A. Gould, CPA, Ronald J. Tropp and George F. Dembow. 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, Pender Newkirk and Company Audit Fees The aggregate fees billed during the fiscal years ended May 31, 2008 and 2007 for professional services rendered by our principal accounting firm, Pender Newkirk and Company, for the audit of the financial services included in Form 10-K, and for the review of the interim condensed financial statements included in Form 10-Q, were approximately $89,000 and $67,211, respectively. Audit Related Fees The aggregate fees billed during the fiscal years ended May 31, 2008 for assurance and related services rendered by our current principal accounting firm, Pender Newkirk & Co., were approximately $0. Tax Compliance/Preparation Fees The aggregate fees billed during the fiscal years ended May 31, 2008 and 2007 for professional services rendered by our principal accounting firm, Pender Newkirk & Co. for tax compliance, tax advice, and tax planning were approximately $0 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, 2008 and 2007 for all other professional services rendered by our principal accounting firm Pender Newkirk & Co. were approximately $0 and $0, respectively. Other services consisted of assistance with the interpretation of new accounting standards and other related services. 55 Board of Directors Pre-Approval Process, Policies and Procedures - ---------------------------------------------------------------- Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our Board of Directors. Our principal auditors have informed our Board of Directors of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our Board of Directors prior to commencing such services. PART IV Item 15. Exhibits and Financial Statement Schedules The following documents are filed as part of this Annual Report on Form 10-K: 1. Consolidated Financial Statements See the Consolidated Financial Statements starting on page 23. 2. Exhibits The exhibits listed in the Exhibit Index, which appears immediately following the signature page and is incorporated herein by reference, and filed as part of this Annual Report on Form 10-K. 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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: March 12, 2010 By: /s/ Allen D. Allen ----------------------------- Name: Allen D. Allen Title: President and CEO Date: March 12, 2010 By: /s/ Corinne Allen ----------------------------- Name: Corinne Allen Title: Chief Financial Officer, Principal Financial and Accounting Officer Pursuant to the requirements of the Securities Act of 1934 this Annual Report on Form 10-K was signed by the following persons on behalf of the Registrant and in the capacities and on the dates stated: Name Title Date ---- ----- ---- /s/ Gregory Gould Director March 12, 2010 - ------------------------ Gregory Gould /s/ Ronald Tropp Director March 12, 2010 - ------------------------ Ronald Tropp /s/ George Dembow Director March 12, 2010 - ------------------------ George Dembow /s/ Jordan Naydenov Director March 12, 2010 - ------------------------ Jordan Naydenov 57 EXHIBITS INDEX Exhibit Number Description - ------ ----------- Articles of Incorporation and Bylaws ------------------------------------ 3.1 Rexray Articles of Incorporation shell company (incorporated herein by reference to Exhibit 3.1 on Form 10SB12G Registration of Securities for Small Business Issuers filed July 11, 2002) 3.2 Bylaws of Corporation (incorporated by reference herein to Exhibit 3.2 filed with Form 10SB12G, Registration of Securities for Small Business Issuer filed July 11, 2002) 3.3 Amendment to the Articles of Incorporation changing company name from Rexray to CytoDyn, Inc and effective a one for two reverse split of its common shares (incorporated herein by reference to filed Exhibit 3.3 on Current Form 8K filed November 12, 2003). 3.4 Amendment to Articles of Incorporation dated September 2009 designating CytoDyn's preferred Series B non-voting shares sold in a private placement. Material Contracts ------------------ 10.1 Acquisition Agreement for reverse merger acquisition of shell company by CytoDyn of New Mexico Inc. (incorporated herein by reference to Exhibit 10.1 with Current Form 8KA filed January 12, 2004) 10.2 Patent License Agreement that was assigned under the Acquisition Agreement (incorporated herein by reference to Exhibit 10.2 with Form 10KSB, Annual Report for Small Business Issuers filed June September 14, 2004) 10.3 Buy Sell Agreement with Symbion Research International (incorporated herein by reference to Exhibit 10.5.2 with Form 10QSB, Quarterly Report for Small Business Issuers filed January 12, 2005) 10.4 Amendment to Patent License Agreement (incorporated herein by reference to Exhibit 10.6.1 filed with Form SB-2 Registration of Securities for Small Business Issuer filed March 21, 2005) 10.5 Agreement and Plan of Acquisition for subsidiary Advanced Genetic Technologies Inc (incorporated herein by reference to Exhibit 10.2 with Current Form 8K filed February 5, 2007) 10.6 Legal Settlement between CytoDyn of New Mexico Inc, Officers Allen D. Allen and Corinne Allen and CytoDyn, Inc on the one hand and Maya LLC, Rex Lewis, and AIDS Research LLC on the other hand entered into December 2008. 10.7 Statement of Work for Vista Biologicals Inc to manufacture Cytolin(R), CytoDyn Inc.'s lead product to be used in human clinical trials entered into May 2008. 10.8 Sponsored Research Agreement between Massachusetts General Hospital and CytoDyn, Inc e entered into September 28, 2009 for conducting clinical trials on Cytolin (incorporated herein by reference to Exhibit 10.1 of CytoDyn Inc. Current report on Form 8-K dated September 29, 2009) 58 Consents of Experts and Counsel ------------------------------- 23.1 Consent of Pender Newkirk and Company LLP (incorporated herein by reference to Exhibit 23.1 with Current Form 8K filed October 23, 2006) Certifications -------------- 31.1 Certification by CEO 31.2 Certification by CFO 31.2 Certification of CEO pursuant to 18. U.S.C. Section 1350 as adopted, pursuant to Section 906 of Sarbanes-Oxley Act of 2002 32.2 Certification of CFO pursuant to 18. U.S.C. Section 1350 as adopted, pursuant to Section 906 of Sarbanes-Oxley Act of 2002 Additional Exhibits ------------------- 99.1 Audit Committee Charter by the Board of Directors (incorporated herein by reference to Exhibit 99.1 with Form 10KSB Annual Report for Small Business Issuers filed August 30, 2007) 59 Exhibit 3.4 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF CYTODYN, INC (SERIES B CONVERTIBLE PREFERRED STOCK) Pursuant to the requirements of Section 7-106-102 of the Colorado Business Corporation Act, the undersigned Corporation submits the following Articles of Amendment to Articles of Incorporation. FIRST: The name of the Corporation is CYTODYN, INC. SECOND: The Articles of Incorporation of the Corporation are hereby amended as follows: "There is hereby established a series of Preferred Stock of the Corporation designated "Series B Convertible Preferred Stock." The number of shares of this series of Preferred Stock shall be 400,000 shares. The powers, designations, preferences and relative, participating, optional or other special rights of the shares of this series of Preferred Stock and the qualifications, limitations and restrictions of such preferences and rights shall be as follows: 1. Dividend Provisions. (a) The holders of record of the outstanding shares of Series B Convertible Preferred Stock shall be entitled to receive, out of any assets at the time legally available therefore and when and as declared by the Board of Directors, dividends at the rate of $.25 per share per annum from the date of issuance of the Series B Convertible Preferred Stock. Dividends on the Series B Convertible Preferred Stock shall be cumulative, shall accrue, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Corporation legally available therefore, and, at the Corporation's option, at the time the shares of Series B Convertible Preferred Stock are converted into shares of the Corporation's common stock shall either (i) be paid in cash, or (ii) be paid with restricted shares of the Corporation's common stock. In the event the Corporation shall declare a distribution (other than any distribution described above) payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case the holders of the Series B Convertible Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Series B Convertible Preferred Stock were the holders of the number of shares of Common Stock of the Corporation into which their respective shares of Series B Convertible Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution. (b) In the event that the Corporation elects to pay any dividends with shares of the Corporation's common stock, the shares being issued for the interest will be valued at $.50 per share. 2. Liquidation Preference. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holder of each share of Series B Convertible Preferred Stock shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock, an amount per share equal to $5.00 plus any accrued and unpaid dividends. If the assets and funds to be distributed among the holders of the Series B Convertible Preferred Stock shall be insufficient to permit the payment of the full aforesaid preferential amount to such holders, then the entire assets and funds of the Corporation legally available for the distribution shall be distributed among the holders of the Series B Convertible Preferred Stock in proportion to the aggregate preferential amount of all shares of Series B Convertible Preferred Stock held by them. 3. Conversion. The Series B Convertible Preferred Stock may be converted into shares of the Corporation's Common Stock on the following terms and conditions (the "Conversion Rights"): (a) Option to Convert. Commencing as soon as the Corporation has sufficient authorized and unissued shares of its Common Stock available for all outstanding shares of Series B Convertible Preferred Stock to be converted, holders of the Series B Convertible Preferred Stock shall have the right to convert all or a portion of their shares into shares of Common Stock at any time or from time to time upon notice to the Corporation on the terms and conditions set forth herein. (b) Mechanics of Conversion. Upon the election of a holder of the Series B Convertible Preferred Stock to convert shares of such Preferred Stock, the holder of the shares of Series B Convertible Preferred Stock which are converted shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or any authorized transfer agent for such stock together with a written statement that he elects to convert his preferred stock to common stock. The Corporation or the transfer agent shall promptly issue and deliver at such office to such holder of Series B Convertible Preferred Stock a certificate or certificates for the number of shares of Common Stock to which such holder is thereby entitled. The effective date of such conversion shall be a date not later than 30 days after the date upon which the holder provides written notice of his election to convert to the Corporation or transfer agent. 2 (c) Conversion Ratio. Each share of Series B Convertible Preferred Stock may be converted into ten (10) fully paid restricted shares of Common Stock (except as adjusted pursuant to paragraph 3(d) below). In the event that upon conversion of shares of Series B Convertible Preferred Stock a holder shall be entitled to a fraction of a share of Common Stock, no fractional share shall be issued and in lieu thereof the Corporation shall pay to the holder cash equal to the fair value of such fraction of a share. (d) Adjustment of Conversion Rate. If the Corporation shall at any time, or from time to time, after the effective date hereof effect a reverse stock split of the outstanding Common Stock, or if the Corporation at any time or from time to time after the effective date hereof shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the number of shares of Common Stock issuable upon conversion of the Series B Convertible Preferred Stock shall be proportionately adjusted as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date. (e) Adjustment for Merger or Reorganization. If at any time after the issuance date there shall occur any reorganization, recapitalization, consolidation, merger or other reorganization event involving the Corporation, then following any such reorganization each share of Series B Convertible preferred Stock shall thereafter be convertible, in lieu of the shares of common stock into which it was convertible prior to such event, into the kind and amount of securities, cash or other property which a holder of the number of shares of common stock of the Corporation issuable upon conversion of one share of Series B Convertible Preferred Stock immediately prior to such reorganization would have been entitled to receive pursuant to such transaction. (f) No Impairment. The Corporation will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all of the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Convertible Preferred Stock against impairment. 3 (g) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times use its best efforts to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Convertible Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Convertible Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all outstanding shares of Series B Convertible Preferred Stock, the Corporation will take such corporate action as is necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 4. Status of Converted or Reacquired Stock. In case any shares of Series B Convertible Preferred Stock shall be converted pursuant to Section 3 hereof, the shares so converted shall cease to be a part of the authorized capital stock of the Corporation. 5. Voting Rights. The Series B Convertible Preferred Stock does not have any voting rights. 6. Notices. Any notice required to be given to holders of shares of Series B Convertible Preferred Stock shall be deemed given upon deposit in the United States mail, postage prepaid, addressed to such holder of record at his address appearing on the books of the Corporation, or upon personal delivery of the aforementioned address." THIRD: Such Amendment was duly adopted by the Board of Directors of the Corporation on the __ day of September 2009. 4 EXHIBIT A CYTODYN, INC. CONVERSION NOTICE Reference is made to the Articles of Amendment describing the terms of the Series B Convertible Preferred Stock (the "Articles of Amendment"). In accordance with and pursuant to the Articles of Amendment, the undersigned hereby elects to convert the number of shares of Series B Convertible Preferred Stock, no par value (the "Preferred Shares"), of CytoDyn, Inc., a Colorado corporation (the "Company"), indicated below into shares of Common Stock, no par value per share (the Common Stock"), of the Company, by tendering the stock certificates representing the share(s) of Preferred Shares specified below as of the date specified below. Date of Conversion: ____________________________ Number of Preferred Shares to be converted: ____________________________ Stock certificate no(s). of Preferred Shares to be converted: ____________________________ Please confirm the following information: Conversion Price: ____________________________ Number of shares of Common Stock to be issued: ____________________________ Please issue the Common Stock into which the Preferred Shares are being converted in the following name and to the following address: Issue to (name and address): ____________________________ ____________________________ ____________________________ ____________________________ Dated: ____________________________ By: ________________________ Name: ______________________ Exhibit 10.6 SETTLEMENT AGREEMENT This Settlement Agreement (hereafter "Agreement") is entered into by and between Maya, LLC ("Maya"), Rex H. Lewis and AIDS Research, LLC, on the one hand, and Cytodyn of New Mexico, Inc. ("CNMI"), Allen D. Allen, Corinne E. Allen and CytoDyn, Inc. (collectively hereinafter sometimes referred to as "the CytoDyn Parties"), on the other hand, with respect to the following facts and circumstances: RECITALS A. Maya filed an action in Los Angeles Superior Court entitled Maya v. Cytodyn of New Mexico, Inc., CytoDyn, Inc., Allen D. Allen and Corinne E. Allen and DOES 1-50; Case Number EC041590 (hereinafter "the Glendale Action"). B. In the Glendale Action, Maya's claims for relief fall into two broad categories. The first category consists of several counts for securities fraud consisting of the following: (1) intentional misrepresentation; (2) negligent misrepresentation; (3) suppression of facts; and (4) violating California Corporations Code section 25401, et seq. C. The second category of claims consists of Maya's claims that it asserts derivatively on behalf of Amerimmune, Inc. and Amerimmune Pharmaceuticals, Inc. and consisting of claims for intentional interference with contractual relations, negligent interference with contractual relations and interference with prospective economic advantage (collectively "Maya's Derivative Claims on Behalf of the Amerimmune Entities"). D. There is now pending in the Commonwealth of Massachusetts an action entitled CytoDyn, Inc., et al. v. Amerimmune, Inc., et al.; Cause of Action Number 05-0452-C (hereinafter "the Massachusetts Action"). In the Massachusetts Action, CytoDyn, Inc. ("CytoDyn") and Allen D. Allen, the plaintiffs, and Maya, the plaintiff-in-intervention, are asserting competing claims to a cell bank currently being stored by Biovest International, Inc. (the "Cell Bank"). Both CytoDyn and Mr. Allen, on the one hand, and Maya and AIDS Research, LLC, on the other hand, maintain that they are entitled to possession and ownership of the Cell Bank. E. CNMI previously submitted an application to the United States Food & Drug Administration ("the FDA") for permission to conduct clinical trials for an Investigational New Drug ("IND"). It is commonly referred to as BB-IND 6845 ("the Old IND"). CytoDyn and Mr. Allen, on the one hand, and Maya and AIDS Research, LLC, on the other hand, have made claims to the Old IND. F. CytoDyn, Inc. previously filed an action on or about April 20, 2004 against Amerimmune Pharmaceuticals, Inc. and Amerimmune, Inc. in the Superior Court for the County of Ventura, Case No. SC-039250. CytoDyn, Inc. obtained a default judgment on or about October 4, 2004 (the "Ventura County Default Judgment"). A copy of the Ventura County Default is attached hereto as Exhibit "A." The Ventura County Default Judgment purported to grant CytoDyn, Inc. ownership of certain "Technology," including the Cell Bank and the "Old IND. " G. CytoDyn, Inc. recently submitted a new and different application to the FDA seeking its permission to conduct clinical trials for an Investigational New Drug named Cytolin ("the New IND"). CytoDyn is the sponsor for the New IND and possesses the rights associated with and pursuant to the New IND. 1 H. It is understood and agreed that this Agreement is made to compromise contested claims and is entered into solely for the purpose of avoiding the expense and inconvenience of further proceedings, and that nothing contained herein shall be interpreted or construed as an admission or acknowledgment by any of the parties hereto of any wrongdoing or fault, of any nature whatsoever, and that any and all such faults or wrongdoings are hereby expressly denied. I. It is further understood and agreed that none of the dismissals filed pursuant to this Agreement are on the merits and that they do not reflect on the merits of any of the claims dismissed, but are the result of a settlement for consideration, and such dismissals shall not constitute a "favorable termination" of the claims dismissed for purposes of the torts of malicious prosecution or abuse of process, any claims for which are in any event hereby waived. NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, THE MUTUAL PROMISES CONTAINED HEREIN, AND FOR OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, IT IS HEREBY AGREED AS FOLLOWS: COVENANTS --------- 1.1 Maya will file a notice of settlement with the Court in the Glendale Action forthwith so that all scheduled hearings and the trial will be taken off calendar in order to allow the parties to avoid incurring additional attorneys' fees and costs. In the event the payment due on or before December 31, 2008 is not paid, the trial shall be placed back on the Court's trial calendar. 1.2 The CytoDyn Parties, for themselves, and for each and all of their parents, subsidiaries, assignees, and successors, and for all others claiming through or under them hereby release their claims, if any, to the following: (1) the cell bank, as described more particularly on Exhibit "B" hereto, and the documentation, electronic files, and batch files stored with Biovest International, Inc. or elsewhere with respect to the cell bank (collectively referred to as the "Cell Bank"); and (2) the Old IND. The CytoDyn Parties also waive the benefits of the Ventura County Default Judgment with respect to the Cell Bank and the Old IND. Upon the exchange of executed copies of this Agreement, the CytoDyn Parties shall also provide to counsel for Maya a signed letter for delivery to the United States Food & Drug Administration confirming their release of their claims to the above-described items to it. Said letter shall be in the form of the letter attached as Exhibit "c" hereto. 1.3 CytoDyn, Inc. shall pay Maya $50,000.00 on or before January 14, 2008, and $25,000 on or before December 31,2009 by delivering cashier's checks payable to Maya to its counsel, Bruce M. Lorman, Esq. at his office located at 1717 Fourth Street, 3rd Floor, Santa Monica, CA 90401. The $25,000 payment due by December 31, 2009 shall accrue simple interest at a rate of ten (10%) per annum. 1.4 Upon delivery by CytoDyn, Inc. of the cashier's check in the amount of $50,000 to Mr. Lorman described in Paragraph 1.3 above, Maya and the CytoDyn Parties shall file with the Superior Court in the Glendale Action a stipulation and order for dismissal of Maya's first amended complaint in its entirety with prejudice in the form attached as Exhibit "D" hereto. The Cytodyn Parties and Maya hereby stipulate and agree that judgment shall be entered in the Massachusetts Action in the form attached as Exhibit "E" hereto. Upon the exchange of executed copies of this Agreement, the Cytodyn Parties shall provide to counsel for Maya a fully signed original of Exhibit "E." The stipulation and order in the Glendale Action shall provide, inter alia, that (1) the Court in the Glendale Action shall retain jurisdiction to enforce this Agreement 2 pursuant to California Code of Civil Procedure Section 664.6; and (2) in the event of a failure by CytoDyn to make the second settlement payment described above by the date due (i.e., December 3 1, 2009), the entire unpaid balance of the settlement shall become immediately due and payable and the Court shall upon ex parte application by Maya, vacate the dismissal and enter judgment in favor of Maya, and against the CytoDyn Parties, in the amount of the unpaid balance of the settlement, together with simple interest on said unpaid balance of the settlement at a rate of ten (10%) per annum from December 31, 2008 to the date of entry of judgment. 1.5 Upon payment of the sum of $50,000 referred to in Section 1.4, except for the obligations created by this Agreement, Maya and AIDS Research, LLC, for themselves and for each and all of their members, shareholders, parents, subsidiaries, assignees, and successors, and for all others claiming through or under them (collectively the "Maya Releasors"), hereby irrevocably and unconditionally remise, release, acquit, absolve and forever discharge the CytoDyn Parties and each of them, and each and all of their past or present predecessors, successors, members, parents, subsidiaries, shareholders, assigns, heirs, executors, administrators, agents, representatives, consultants, directors, officers, attorneys, employees, and insurers (hereinafter collectively "the CytoDyn Party Releasees") of and from any and all manner of actions, causes of action, in law or in equity, debts, contracts, charges, complaints, claims, suits, damages, obligations, promises, agreements, controversies, losses, costs, judgments, or expenses (including attorney's fees and court costs), of any nature whatsoever, known or unknown, fixed or contingent, direct or derivative, subrogated or assigned, suspected or unsuspected, which the Maya Releasors have or may have, or which the Maya Releasors at any time heretofore had or claimed to have, or which the Maya Releasors at any time hereafter may have or claim to have, against any of the CytoDyn Party Releasees by reason of any matter, cause, act, omission, or thing whatsoever from the beginning of time to the date of this Agreement. 1.6 Except for the obligations created by this Agreement, the CytoDyn Parties, for themselves, and for each and all of their shareholders, parents, subsidiaries, assignees and successors, and for all others claiming through or under them, hereby irrevocably and unconditionally remise, release, acquit, absolve and forever discharge Maya, LLC, AIDS Research, LLC and Rex Lewis, and each and all of their past or present predecessors, successors, members, parents, subsidiaries, shareholders, assigns, heirs, executors, administrators, agents, representatives, consultants, directors, officers, attorneys, employees, and insurers (hereinafter collectively "the Maya Releasees") of and from any and all manner of actions, causes of action, in law or in equity, debts, contracts, charges, complaints, claims, suits, damages, obligations, promises, agreements, controversies, losses, costs, judgments, or expenses (including attorney's fees and court costs), of any nature whatsoever, known or UnknO\\-11, fixed or contingent, direct or derivative, subrogated or assigned, suspected or unsuspected, which the CytoDyn Parties have or may have, or which the Cy10Dyn Parties at any time heretofore had or claimed to have, or which the CytoDyn Parties at any time hereafter may have or claim to have, against any of the Maya Party Releasees by reason of any matter, cause, act, omission, or thing whatsoever from the beginning of time to the date of this Agreement. 1.7 Upon payment of the sum of $50,000 referred to in Section 1.4, except for the obligations created by this Agreement, Rex Lewis, for himself, and for each and all of his assignees, successors, and for all others claiming through or under him, hereby irrevocably and unconditionally remises, releases, acquits, absolves and forever discharges the Cy10Dyn Party Releasees of and from any and all manner of actions, causes of action, in law or in equity, debts, contracts, charges, complaints, claims, suits, damages, obligations, promises, agreements, controversies, losses, costs, judgments, or expenses (including attorney's fees and court costs), of any nature whatsoever, known or unknown, fixed or contingent, direct or derivative, subrogated 3 or assigned, suspected or unsuspected, which Mr. Lewis has or may have, or which he at any time heretofore had or claimed to have, or which the he at any time hereafter may have or claim to have, against any of the CytoDyn Party Releasees by reason of any matter, cause, act, omission, or thing whatsoever from the beginning of time to the date of this Agreement. 1.8 The parties hereto, and each of them, hereby expressly waive all rights or benefits which they now have, or in the future may have, under Section 1542 of the California Civil Code, and any law or principle of similar effect of any state or territory of the United States. Section 1542 of the California Civil Code reads as follows: "Section 1542. A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." 1.9 The parties hereto hereby acknowledge that they are aware that they may hereafter discover facts in addition to or different from those which they now know or believe to exist with respect to the matters covered by this Agreement. The parties hereto also acknowledge that such different or additional facts, if they exist, may have given or may hereafter give rise to causes of action, claims, demands, controversies, damages, costs, and expenses which are presently unknown, unanticipated, and unsuspected. The parties hereto further agree, represent, and warrant that the releases contained herein have been negotiated and agreed upon in light of that realization, and that it is their intention through this Agreement, and with the advice of counsel, fully, finally, and forever to settle and release to the fullest extent permitted by law any and all possible claims, causes of action, disputes, and differences, known or unknown, suspected or unsuspected, arising out of all facts, events, circumstances or occurrences from the beginning of time to the date of this Agreement, except for those obligations created herein. In furtherance of such intention the parties agree that the releases contained in this Agreement will remain in effect and will be fully binding notwithstanding the discovery or existence of any additional or different facts. 1.10 The parties hereto, and each of them, covenant and agree not to bring any suit, action or arbitration proceeding against any of the other parties hereto with respect to any of the matters referenced herein, including without limitation, all claims and/or causes of action asserted in the Glendale Action and the Massachusetts Action, and in particular including, but not limited to, any derivative claims on behalf of Amerimmune Pharmaceuticals, Inc. or Amerimmune, Inc. MISCELLANEOUS PROVISIONS ------------------------ 2.1 This Agreement is intended by the parties hereto as the final expression of their agreement and as a complete and exclusive statement of the terms and provisions thereof. Nothing other than this Agreement shall be relevant or admissible to supplement or vary any of the terms or provisions set forth herein. No party hereto has made any statement or representation to any other party regarding any fact or facts relied upon by any other party in entering into this Agreement, and each party specifically does not rely upon any statement, representation, or promise of any other party in executing this Agreement, or in making the settlement provided for herein. This Agreement constitutes a single, integrated written contract expressing the entire agreement of the parties hereto relative to the subject matter hereof. No covenants, agreements, representations, or warranties of any kind whatsoever have been made by any party hereto, except as specifically set forth in this Agreement. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by, this 4 Agreement. 2.2 This Agreement may be executed in one or more counterparts including facsimile copies, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument. A signature transmitted by facsimile shall be as binding and effective as an original. Moreover, photocopies of this Agreement, including photocopies of the signature pages hereof, may be used as originals, in the absence of any bona fide challenge to their authenticity. 2.3 The parties to this Agreement, and each of them, represent and warrant that none of the claims or rights purported to be released herein has previously been assigned or otherwise transferred to any other person or entity, including by way of subrogation or operation of law. In the event that any claim, demand, or suit is made or instituted against any party hereto because of any such purported assignment, subrogation, or transfer, the party or parties so assigning or transferring, as the case may be, agree(s) to (1) indemnify and hold harmless each of the parties to this Agreement against any such assigned, subrogated or transferred claim, demand or suit; (2) satisfy any such assigned, subrogated, or transferred claim, demand, or suit; and (3) pay all reasonable costs of defense and/or investigation, including attorneys' fees and court costs. 2.4 This Agreement shall inure to the benefit of and bind the successors, assigns, heirs, executors, and administrators of the parties. 2.5 For the purposes of interpretation of this Agreement, it is specifically agreed by all parties hereto that it shall be assumed that all parties drafted each provision of this Agreement. 2.6 Each individual signing and executing this Agreement on behalf of a partnership, corporation, trust, or other entity, warrants that he or she is duly authorized to sign and execute this Agreement on behalf of such partnership, corporation, trust or other entity, in accordance with the authority granted under the formation documents of such entity, that all conditions to the exercise of such authority have been satisfied, and that this Agreement is binding upon such entity in accordance with its terms. 2.7 Each party to this Agreement agrees to do all things necessary or convenient to carry out or effectuate the terms and intent of this Agreement. Each and every provision hereof requiring a party to do a certain act, however expressed, shall include the obligation of such party not to take directly or indirectly, any action or do any act, or aid, assist or cooperate with any third party in the taking of any action or in the doing of any act, that would tend to defeat in any way the intent of this Agreement. 2.8 All questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereto shall be governed by the laws of the State of California. 2.9 Each person signing this Agreement has had a full and fair opportunity to receive independent legal advice from attorneys of his, her or its choice with respect to the advisability of making the settlement provided for herein, and with respect to the advisability of executing this Agreement. Prior to the execution of this Agreement, that person reviewed same at length, made such investigation of the facts pertaining to this settlement as he, she or it deemed necessary, and received, to the extent desired, the advice of counsel in reviewing and explaining the terms and consequences of this Agreement. This Agreement has been carefully read by, the contents hereof are known and understood by, and it is signed freely by each person executing same. 2.10 In any action to enforce this Agreement or to recover damages for its breach, the 5 revailing party shall be entitled to an award of reasonable attorneys' fees. Wherefore, the parties have executed this agreement as of the dates set forth below. DATED: December __ , 2008 ___________________________ Rex H. Lewis DATED: December __ , 2008 Maya, LLC By: ___________________________ Rex H. Lewis, Its Manager DATED: December __ , 2008 AIDS Research, LLC By: ___________________________ Rex H. Lewis, Its Manager DATED: December __ ,2008 Cytodyn of New Mexico, Inc. By: ___________________________ Allen D. Allen DATED: December __, 2008 CytoDyn , Inc. By: ___________________________ Allen D. Allen, President DATED: December __, 2008 By: ___________________________ Allen D. Allen DATED: December __, 2008 ___________________________ Corinne E. Allen 6 APPROVED AS TO FORM: LAW OFFICES OF BRUCE M. LORMAN By: _______________________________ Bruce M. Lorman, Esq. Attorneys for Plaintiff MUNDELL, ODLUM & HAWS, LLP By: _______________________________ Marshall Brubacher, Esq. Attorneys for Defendants 7

JUDGMENT 1. [X] BY DEFAULT a. Defendant was properly served with a copy of the summons and complaint. b. Defendant failed to answer the complaint or appear and defend the action within the time allowed by law. c. Defendant's default was entered by the clerk upon plaintiff's application. d. [ ] Clerk's Judgment (Code Civ. Proc., ss 585(a)). Defendant was sued only on a contract or judgment of a court of this state for the recovery of money. e. [X] Court Judgment (Code Civ. Proc.,ss.585(b)). The court considered (1) [ ] plaintiff's testimony and other evidence. (2) [X] plaintiff's written declaration (Code Civ. Proc.,ss.585(d)). 2. [ ] ON STIPULATION a. Plaintiff and defendant agreed (stipulated) that a judgment be entered in this case. The court approved the stipulated judgment and b. [ ] the signed written stipulation was filed in the case. c. [ ] the stipulation was stated In open court [ ] the stipulation was stated on the record. 3. [ ] AFTER COURT TRIAL The jury was waived. The court considered the evidence. a. The case was tried on (date and 6me): before (name of judicial officer): b. Appearances by: [ ] Plaintiff (name each): [ ] Plaintiff's attorney (name each): (1) (1) (2) (2) [ ] Continued on Attachment 3b. [ ] Defendant (name each): (1) [ ] Defendant's attorney (name each): (1) (1) (2) (2) [ ] Continued on Attachment 3b. c. [ ] Defendant did not appear at trial. Defendant was properly served with notice of trial. d. [ ] A statement of decision (Code Civ. Proc..ss.632) [ ] was not [ ] was requested. Page 1 of 2 ________________________________________________________________________________ JUDGMENT

Date: October 4, 2004 [ ] ________________________ JUDICIAL OFFICER Date: [ ] Clerk, by __________________, Deputy ________________________________________________________________________________ CLERK'S CERTIFICATE (Optional) I certify that this is a true copy of the original judgment on tile in the court. Date: Clerk, by __________________, Deputy Page 2 of 2 ________________________________________________________________________________ JUDGMENT ________________________________________________________________________________ SHORT TITLE: Cytodyn Inc., et al. v. Amerimmune Inc., et al. CASE NUMBER: SC 039250 ________________________________________________________________________________ ATTACHMENT 7 ------------ IT IS HEREBY ORDERED, ADJUDGED AND DECREED that (1) the license and assignment of plaintiffs, technology to defendants Amerimmune, Inc. and Amerimmune Pharmaceuticals, Inc. (collectively "Defendants"), pursuant to the Conditional License Agreement dated February 24, 2000 ("CLA"), terminated no later than September 12, 2001; and (2) by reason thereof, plaintiffs are, and have been since at least that date, the owners of the technology licensed and assigned, pursuant to the CLA, including, but not limited to, Allen D. Allen's patents (i.e., U.S. Patents Nos. 5,424,066 and 5,651,970) and the investigational new drug application BB-IND #6485, free from any claims by Defendants. (Required for verified pleading) The items on this page stated on information and belief are (specify item numbers, not line numbers): This page may be used with any Judicial Council form or any other paper filed with the court. Page 3 ________________________________________________________________________________ ADDITIONAL PAGE Attach to Judicial Council Form or other Court Paper Exhibit B --------- - ------------------------------------------------------------------------------- Liquid | Location | MCB | MWCB | Cell | Batch # | Project | Total | Nitrogen | | | | Line | | # | # of | ID# | | | | | | | Vials | - ------------------------------------------------------------------------------- LN003 | Rack 1 Box 1 | | | S6Fl | 006703184 | 67-02 | 35 | Vapor | | X | | | | | | Phase | | | | | | | | OMP | | | | | | | | - ------------------------------------------------------------------------------- LN002 | Rack 11 Box | | | S6Fl | 006703184 | 67-02 | 50 | Vapor | 1 | X | | | | | | Phase | | | | | | | | OMP | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 5 Box 1 | | | S6Fl | 016705321 | 67-06 | 21 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 4 Box 5 | | | S6Fl | 016705321 | 67-06 | 24 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 3 Box 5 | | | S6Fl | 016705321 | 67-06 | 25 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 3 Box 4 | | | S6Fl | 016705321 | 67-06 | 25 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 2 Box 5 | | | S6Fl | 016705321 | 67-06 | 25 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 2 Box 2 | | | S6Fl | 016705321 | 67-06 | 24 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN005 | Rack 5 Box 4 | | | S6F1 in | Customer | 67 | 1 | Liquid | | | | HSFM | Vial | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN006 | Rack 5 Box 3 | | | S6Fl | 016705321 | 67-06 | 18 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN006 | Rack 5 Box 2 | | | S6Fl | 016705321 | 67-06 | 25 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN006 | Rack 5 Box 1 | | | S6Fl | 016705321 | 67-06 | 25 | Liquid | | | X | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- LN001 | Rack D Box 4 | | | S6F1 | 082200 | 67-01 | 20 | Vapor | | | | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LNOO 1 | Rack D Box 4 | | | S6F1 | COOl7 | | 21 | Vapor | | | | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- LN001 | Rack D Box 4 | | | DB9G8 | COO16 | | 5 | Vapor | | | | | | | | Phase | | | | | | | | - ------------------------------------------------------------------------------- ---------------------------------------------------------------------- | Freezer ID# | Sample Type | Cell Line | Batch # | Project # | ---------------------------------------------------------------------- | FR007 -20 | ILS, ICS and | S6F1 | 006702208 | 67-03 | | degrees | Harvest | | | | | | Retentions | | | | ---------------------------------------------------------------------- Exhibit C --------- December 15,2008 Attention: Debra Birnkrant, M.D. Director Division of Antiviral Products Office of Antimicrobial Products Center for Drug Evaluation and Research Food and Drug Administration Therapeutic Biological Products Document Room 5901- B Ammendale Road Beltsville, MD 20705-1266 Re: BB-IND 6845 Serial # 0025 Submission of CytoDyn, Inc., to Relinquish Claims of IND Sponsorship Dear Dr. Birnkrant: Reference is made to Investigational New Drug Application, BB-IND 6845, for the product "Murine Monoclonal Antibody (Cytolin(R)) to Human Leucocyte Function Antigen-l (LFA-l)". The ownership of BB-IND 6845 has been in dispute as described below. Maya, LLC, a Nevada limited liability company ("MAYA") obtained a judgment (from the District Court of Clark County, Nevada) judicially approving its foreclosure upon BB-IND 6845 from Amerimmune, its sponsor. Consequently, MA Y A requested that sponsorship of BB- IND 6845 be transferred from Amerimmune to MA Y A on October 18, 2004. The undersigned, on behalf of CytoDyn, Inc., opposed the transfer of BB-IND 6845 sponsorship to MA Y A and requested transfer of BB- IND 6845 sponsorship to CytoDyn, Inc., on the basis of a judgment (from the Superior Court of California, County of Ventura) judicially ruling that CytoDyn, Inc., was the owner of BB- IND 6845 pursuant to termination of CytoDyn' s Conditional License Agreement with Amerimmune, no later than September 2001. CytoDyn wishes to inform the agency that we hereby relinquish our claim of ownership of BBIND 6845 and any data contained therein. We agree that MAYA, LLC should be the undisputed sponsor of this IND. This relinquishment of CytoDyn's claim of ownership of BB-IND 6845 is without prejudice to CytoDyn's submission, sponsorship and ownership of a subsequently submitted different Investigational New Drug application for Cytolin (the "New IND.") The authorized representative and contact for MAYA, LLC is: Christine H. Schwab Vice President MAYA, LLC 72 W. Horizon Ridge Parkway Suite 120 PMB 194 Henderson, NV 89012 We would appreciate having the appropriate Office in the agency respond to us and also to MA Y A, LLC, to confirm that the agency officially recognizes MAYA LLC as the sponsor of BB-IND 6845. We will be happy to answer any questions you may have or provide any additional documentation that you require. Thank you for your attention to this matter. Sincerely, Allen D. Allen President and CEO CytoDyn, Inc. Cc: Gerald F. Masoudi, Chief Counsel, FDA Christine Schwab, Vice President, MAYA, LLC EXHIBIT "D" ----------- THOMAS C. MUNDELL, #99081 MARSHALL L. BRUBACHER, #199100 MUNDELL, ODLUM & HAWS, LLP 2829 Townsgate Road, Suite 320 Westlake Village, CA 91361 Telephone: (805) 446-2221 Facsimile (805) 446-2251 Attorneys for Defendants Cytodyn of New Mexico, Inc. Allen D. Allen, Corinne E. Allen, Cytodyn, Inc. BRUCE M. LORMAN, #82364 LAW OFFICES OF BRUCE M. LORMAN 1717 Fourth Street Third Floor Santa Monica, California 90401 Attorneys for Plaintiff Maya, LLC SUPERIOR COURT FOR THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES MAYA, LLC, a Nevada Limited Liability ) CASE NO: EC 041590 Company ) ) [PROPOSED] JOINT STIPULATION Plaintiff, ) FOR DISMISSAL; ORDER THEREON vs. ) ) [Assigned for all purposes to ) Hon. Charles W. Stoll, Dept. NCGD] ) CYTODYN OF NEW MEXICO, INC., a ) Action filed: September 30, 2005 corporation; CYTODYN, INC., a corporation; ) ALLEN D. ALLEN; CORINNE E. ALLEN; ) and DOES 1 through 50, inclusive, ) ) Defendants. ) ) ) ) ___________________________________________) The parties hereto hereby stipulate and agree as follows, subject to the approval of the court: 1. The first amended complaint filed herein by plaintiff Maya, LLC shall be dismissed in its entirety with prejudice pursuant to the terms of a written settlement agreement 1 ________________________________________________________________________________ Stipulation for Dismissal entered into by the parties; 2. The court shall retain jurisdiction to enforce said written settlement agreement pursuant to California Code of Civil Proceduress.664.6; 3. Without limiting the power of the court to enforce any and all terms of the settlement agreement by appropriate application or motion, the parties specifically stipulate and agree that in the event of a default by defendant CytoDyn, Inc. in performing its obligations under Paragraph 1.3 of the settlement agreement, cross-complainants may apply to or move the court for appropriate relief as outlined in Paragraph 1.4 of the written settlement agreement, including, to the extent provided for therein, an order vacating the dismissal of this action and entering judgment in favor of plaintiff and against defendants on the terms set forth in said Paragraph 1.4. DATED: December ____,2008 ___________________________ Rex H. Lewis DATED: December ____,2008 Maya, LLC By: ___________________________ Rex H. Lewis, Its Manager Rex H. Lewis, Its Manager DATED: December ____,2008 Cytodyn of New Mexico, Inc. By: ___________________________ Allen D. Allen DATED: December ____,2008 CytoDyn , Inc. By: ___________________________ Allen D. Allen, President DATED: December ____,2008 By: ___________________________ Allen D. Allen DATED: December ____,2008 ___________________________ Corinne E. Allen 2 ________________________________________________________________________________ Stipulation for Dismissal ORDER ----- IT IS SO ORDERED. Dated: ___________________________ ___________________________ Superior Court Judge 3 ________________________________________________________________________________ Stipulation for Dismissal CERTIFICATE OF SERVICE ---------------------- I,_________________, declare as follows: I am employed in the County of Ventura in the State of California. I am over the age of eighteen years. I am not a party to this action. My business address is 2829 Townsgate Road, Suite 320, Westlake Village, California 91361. On __________________,200_, I served the within PROPOSED] JOINT STIPULATION FOR DISMISSAL; ORDER THEREON on the interested parties in this action by placing a true and correct copy thereof in an envelope addressed to said interested parties' attorneys of record as follows: Bruce M. Lorman LAW OFFICES OF BRUCE M. LORMAN 1717 Fourth Street Third Floor Santa Monica, California 90401 and by then depositing said envelope, first class postage prepaid, in a box or other facility regularly maintained by the United States Postal Service at Westlake Village, California, for delivery on a next business day priority basis to the addressee(s) listed above. I declare under penalty of perjury that the foregoing is true and correct and this declaration is executed on _________ at Westlake Village, California. ________________________ EXHIBIT E --------- COMMONWEALTH OF MASSACHUSETTS WORCESTER, SS. SUPERIOR COURT CIVIL ACTION NO. 05-0452-C ________________________________________ CYTODYN, INC. and ) ALLEN D. ALLEN, ) ) ) Plaintiffs, ) and ) ) MAYA, LLC ) ) Plaintiff In Intervention, ) v. ) ) AMERIMMUNE, INC. and ) AMERIMMUNE PHARMACEUTICALS, INC. ) ) Defendants, ) ) v. ) ) BIOVEST INTERNATIONAL, INC. ) ) Trustee Defendant. ) ________________________________________) AGREEMENT FOR JUDGMENT ---------------------- The undersigned parties, through their counsel hereby agree as follows: 1. The Complaint of Plaintiffs Cytodyn, Inc. and Allen D. Allen is dismissed with prejudice. 2. Judgment shall enter forthwith on Maya, LLC's Complaint for Intervention declaring that it is the lawful owner of the materials, goods and effects of Defendants Amerimmune, Inc. and Amerimmune Pharmaceuticals, Inc. set forth in the Trustee Defendant Biovest International, Inc.'s Answer and Disclosure, including without limitation any and all related technical and scientific documentation and electronic files and batch files stored with the Trustee Defendant Biovest International, Inc. or elsewhere. 3. Plaintiffs withdraw their Motion to Charge the Trustee, which was allowed on May 27, 2005, and hereby discharge the Trustee defendant Biovest. 4. Plaintiffs and Plaintiff in Intervention hereby waive their rights to appeal. Each party is responsible for their own costs and attorneys' fees. Respectfully submitted, Respectfully submitted, CYTODYN, INC. and ALLEN D. ALLEN MAYA, LLC. By their attorneys, By its attorneys ____________________________ ____________________________ David P. Russman, Esq. BBO #567796 Marie Mercier, Esq. BBO #343150 The Russman Law Firm, P.C. Nicholas M. Kelley, BBO#265640 33 Bellevue Street, Suite 1 Kotin Crabtree & Strong, LLP Boston, MA 02125 One Bowdoin Square 617.282.5300 Boston, MA 02114 617.227.7031 Exhibit 10.7 VISTA BIOLOGICALS STATEMENT OF WORK The following information, production outline and specifications will be used in completing the contractual obligations between Vista Biologicals Corporation (VISTA) and CytoDyn, Inc. (CytoDyn). VISTA Information Company: Vista Biologicals Corporation 2120-C Las Palmas Drive Carlsbad, CA 92009-1523 (760) 438-5058 (760) 438-0229 FAX Contacts (s): Robert Fleischaker, PhD, President CUSTOMER Information Company: CytoDyn, Inc. P.O. Box 66 Glorieta, NM 87535 (505) 577-1636 (800) 417-7252 FAX Contact (s): Mr. Allen D Allen Shipping Source: Federal Express ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 1 SOW for CytoOyn June 2008 ____________________ Contract Objectives Phase I: Review current manufacturing directions and SOP's, prepare summary of production work to date and help in preparation of CMC section of new IND. Phase Ib: Clone and produce CDlla Phase II: Evaluate growth and productivity using several different commercial media. Purify material using the three previous purification methods. Show equivalency of material produced by three methods in terms of an activity assay. Phase III: Bring in Materials. Phase IV: Prepare S6FIAntibody. Review of Manufacturing Directions and SOP's, and support of preparation of new IND (CMC section) The original DMF for the production of S6Fl will be reviewed. In addition the CMC section of the material produced by Amerimmune will also be reviewed. The proposed production and purification protocol will be compared and contrasted to the two previous methods. Additionally the response to questions previously asked by the FDA for a phase II trial will be addressed. ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 2 SOW for CytoOyn June 2008 ____________________ Demonstration of Equivalency of Material Produced by the Different Methods. A small study will be initiated to compare growth and production by several of the now commercially available media. In addition material will be produced and purified by the two previous methods and the purity and activity will be compared. Production of S6Fl Ordering and Preparing Materials Materials, such as media, chromatography gels, UF filters, and chemicals for buffer preparation will be ordered, quarantined, and tested for identity. Cell Line Cell Description: Murine hybridoma Cell Designation: S6Fl Starting Seed Train Vessel(s): T-75cm2, T-150cm2, & T-225cm2 polystyrene flasks, spinner flasks, and 10L bioreactor. Cell resurrection: Rapidly thaw vial in warm water, dilute into 30ml growth medium, centrifuge and decant supernatant. Resuspend cell pellet in 30ml growth medium. Initiate culture in 75cm2 flask. ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 3 SOW for CytoOyn June 2008 ____________________ Plant: Roughly 2 X 105 cells/mL. or roughly 1:5 split ratio from confluent cultures. Subculture: By dilution when cell density roughly 1 X 106 cells/mL every 2 days in order to expand culture to a final density of roughly 2-4 X 108 cells. Special Handling: Do not allow cell density to significantly exceed 1 X 106 cells/mL as this effects culture viability and/or productivity. Growth Medium: Gibco CHO-SFM Production in Bioreactor Culture System Required Runs: One (1) Configuration: 1001 working volume Bioreactor Planting Density: 2-3 X 105 cells/mL Agitation: 30-60 rpm Temperature: 37-38 C Sampling: Cell number and viability is determined 3 times per week. Perfusion System: Media is perfused through the system at a rate dependent upon the culture density. The conditioned media is collected into sterile bags ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 4 SOW for CytoOyn June 2008 ____________________ and held at 2-8(degree)C until further processing is completed. Purification of Product The S6F1 antibody is purified from the conditioned media using a series of chromatographic and UF steps. Viral inactivation is provided for by a low pH hold and via UF filtration through a Milipore Virasolve membrane. Analysis of Product The S6F1 antibody is analyzed for purity using gel electrophoresis. Concentration is determined using OD28oo Activity is determined using an ELISA type assay. Endotoxin is determined by LAL. Additional Testing of Product Vista will arrange to have an outside lab provide the additional safety testing required for the release of the product for clinical trial use. Final Product Specifications Description Acceptance Criteria Bulk Product Not less than 10 grams of purified S6F1 antibody as determined via OD28o Final Product Volume Determined by weight (1.0 gram equals 1.0 mL.) ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 5 SOW for CytoOyn June 2008 ____________________ Purity Greater than 95 % as determined via SDS-PAGE Endotoxin Less than lEU / mg as determined via LAL. Shipping Conditions Single shipment following harvest. Product sent via Federal Express. Batch Record Review Upon completion of the work Vista will provide CytoDyn with a report summarizing the trial run study and the assay results. In addition Vista will provide CytoDyn copies of all batch records and supporting documents. CytoDyn will review those batch records and make requests for any additional documents or clarification within 1 week of receiving those documents. Vista will provide additional documents and clarification within 1 week following CytoDyn's review. General Terms and Conditions Taxes: Services subject to taxes will be itemized on the invoice Costs: The fees are: Starting review of DMF, (SOP's and manufacturing directions) 40,000 Ordering and Preparing Materials, 80,000 Beginning Cloning effort 15,000 Continuing document review (2nd month) 40,000 Continuing cloning (2nd month) 15,000 Evaluation of media and comparison of purification methods 30,000 Starting Seed Train, 55,000 Production in Bioreactor, 50,000 Starting Purification of Product, 50,000 ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 6 SOW for CytoOyn June 2008 ____________________ Continuing Production (2nd month) 50,000 Analysis of Product, 40,000 Batch Record Review and Analysis 40,000 Subtotal $505,000. Payment: In addition, the cost of outside tests, such as the end of production viral testing, LAL, etc ... will be paid by CytoDyn directly. Also, as in previous agreements CytoDyn will indemnify Vista against liabilities arising from the use or production of the S6Fl antibody, Vista will provide CytoDyn with S6Fl for research use only. Confidential Information The Parties recognize and acknowledge that in the course of providing the Services under this Agreement, each Party may acquire from the other information that is confidential or proprietary and the disclosure of which may cause irreparable injury to the disclosing Party. All such confidential or proprietary information disclosed hereunder shall be treated and protected as Confidential Information. Intellectual Property Ownership Vista Biological Corporation understands and agrees that the underlying rights to the intellectual property and materials that are the subject of each Price Contract (including, without limitation, all intellectual property rights in Company Confidential Information, Materials and/ or any proteins or protein products under development by CytoDyn), are owned solely by CytoDyn. Neither Vista Biological Corporation nor any Company-approved subcontractor shall acquire any rights of any kind whatsoever with respect to any of the foregoing as a result of conducting the Services. ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 7 SOW for CytoOyn June 2008 ____________________ Physical property created under this Statement of Work, including but without limitation, batch records, communications with the FDA, cell banks and bulk product will become the property of CytoDyn, Inc. It is anticipated that new intellectual property will be created during the work to be done under this Statement of Work. CytoDyn, Inc. will pay for the prosecution of one or more patents protecting such intellectual property, listing Robert Fleischaker as the inventor. In consideration of a reasonable royalty, Dr. Fleischaker will assign all such patent applications and patents to CytoDyn, Inc. Dr. Fleischaker will cooperate with the prosecution and assignment of patents, promptly providing all necessary information to CytoDyn, Inc. and promptly executing all necessary documents. _____________________________________ President, Vista Biologicals Corp. Robert Fleischaker, PhD _____________________________________ CytoDyn, Inc. Allen D Allen ________________________________________________________________________________ Vista Biologicals Corporation proprietary rights are included in the information disclosed herein. Recipient by accepting this document agrees that neither this document nor the information herein nor any part thereof shall be reproduced or transferred to other documents or used or disclosed to others for manufacturing or for any other purpose except as specifically authorized in writing by Vista Biologicals Corporation. Unpublished - created on preparation of this document. All rights reserved under copyright laws. VISTA BIOLOGICALS CORPORATION Page 8 Exhibit 31.1 Certification of Chief Executive Officer I, Allen D. Allen, Chief Executive Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Cytodyn, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report; 4. The Registrant other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the Registrant's internal controls over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal controls over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors; (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Allen D. Allen -------------------------- Allen D. Allen President and Chief Executive Officer Date: March 12, 2010 Exhibit 31.2 Certification of the Chief Financial Officer I, Corinne Allen, Chief Financial Officer, certify that: 1. I have reviewed this Annual Report on Form 10-K of Cytodyn, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report; 4. The Registrant's other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d) disclosed in this report any change in the Registrant's internal controls over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal controls over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors; (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Corinne Allen ------------------------- Corinne Allen Chief Financial Officer Date: March 12, 2010 Exhibit 32.1 Certification of the Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Cytodyn, Inc. (the "Company") for the year ended May 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Allen D. Allen, the Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. section 1350, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Allen D. Allen -------------------------- Allen D. Allen President and Chief Executive Officer Date: March 12, 2010 Exhibit 32.2 Certification of the Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Cytodyn, Inc. (the "Company") for the year ended May 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Corinne Allen, the Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. section 1350, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Corinne Allen ------------------------- Corinne Allen Chief Financial Officer Date: March 12, 2010

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