Edgar Filing: CYTODYN INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-QSB -Amendment #1

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: February 28, 2005 Commission File Number 000-49908
----------------- ---------

CYTODYN, INC.
-------------
(Exact name of small business issuer as specified in its charter)

COLORADO 75-3056237
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

200 W. DeVargas Street, Suite 1, Santa Fe, New Mexico 87501
----------------------------------------------------- -----
(Address of principal executive offices) (Zip code)

(505) 988-5520
--------------
(Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---

Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

Common stock, no par value 8,069,307
-------------------------- ---------
Class Number of shares outstanding at May 31, 2005

Transitional Small Business Disclosure Format: Yes No X
--- ---

--------------------------------------------------------------------------------
This document is comprised of 17 pages.
--------------------------------------------------------------------------------

INDEX

Page
----

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed balance sheet, February 28, 2005 (unaudited).................. 3
Condensed statements of operations, three and nine months ended
February 28, 2005 (unaudited) and 2004 (unaudited)................... 4
Condensed statements of operations, nine months ended
February 28, 2005 (unaudited) and 2004 (unaudited)................... 5
Notes to condensed financial statements (unaudited)..................... 6

Item 2. Management's Discussion and Analysis or Plan of Operation...... 12

Item 3. Controls and Procedures........................................ 15

PART 2 - OTHER INFORMATION

Item 1. Legal Proceedings.............................................. 15
Item 2. Changes in Securities and Small Business Issuer Purchases of
Equity Securities........................................... 16
Item 3. Defaults Upon Senior Securities................................ 17
Item 4. Submission of Matters to a Vote of Security Holders............ 17
Item 5. Other Information.............................................. 17
Item 6. Exhibits....................................................... 17

Signatures................................................................ 17

Part I, Item 1. Financial Statements

CYTODYN, INC.
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)

February 28, 2005

Assets

Cash .......................................................... $ 84,948
Property and equipment, less accumulated
depreciation of $1,211 .................................... 5,087
Deposit ....................................................... 495
-----------

$ 90,530
===========

Liabilities and Shareholders' Deficit

Current liabilities:
Accounts payable .......................................... $ 463,275
Accrued liabilities ....................................... 83,367
Indebtedness to related parties (Note 2) .................. 137,979
Long Term Liabilities:
Notes payable (Note 3) .................................... 85,000
Accrued interest payable (Note 3) ......................... 47
-----------
Total liabilities ........................... 769,668
-----------

Commitments (Note 7) .......................................... --

Shareholders' deficit:
Preferred stock, no par value; 5,000,000 shares authorized,
-0- shares issued and outstanding ...................... --
Common stock, no par value; 25,000,000 shares authorized,
8,069,307 shares issued and outstanding ................ 1,916,334
Additional paid-in capital ................................ 40,942
Accumulated deficit ....................................... (1,601,912)
Deficit accumulated during development stage .............. (1,034,502)
-----------
Total shareholders' deficit ................. (679,138)
-----------

$ 90,530
===========

See accompanying notes to condensed financial statements

CYTODYN, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)

Three Months Ended Nine Months Ended
February 28, February 28,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------

Operating expenses:
General and administrative ............... $ 89,435 $ 128,996 $ 320,785 $ 188,929
Stock-based compensation (Note 5):
Financial consulting services ......... -- -- 11,928 --
Legal fees, related party ................ -- -- -- --
Depreciation ............................. 460 -- 1,211 --
Research and development (Note 6) ........ 362,342 -- 362,342 --
----------- ----------- ----------- -----------
Total operating expenses... 452,237 128,996 696,266 188,929
----------- ----------- ----------- -----------
Operating loss ............ (452,237) (128,996) (696,266) (188,929)

Interest income .............................. 3 52 230 55
Interest expense ............................. (92) (296) (422) (441)
----------- ----------- ----------- -----------
Loss before income taxes... (452,326) (129,240) (696,458) (189,315)

Income tax provision (Note 4) ................ -- -- -- --
----------- ----------- ----------- -----------

Net loss .................. $ (452,326) $ (129,240) $ (696,458) $ (189,315)
=========== =========== =========== ===========

Basic and diluted loss per share ............. $ (0.06) $ (0.02) $ (0.09) $ (0.05)
=========== =========== =========== ===========

Basic and diluted weighted average
common shares outstanding ................ 8,069,307 6,674,862 8,069,307 3,909,985
=========== =========== =========== ===========

See accompanying notes to condensed financial statements

CYTODYN, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)

Nine Months Ended
February 28,
-----------------------
2005 2004
---------- ----------

Net cash used in
operating activities ....... $ (194,361) $ (191,741)
---------- ----------

Cash flows from investing activities:
Property and equipment purchases ................ (3,167) (1,722)
---------- ----------
Net cash used in
investing activities ....... (3,167) (1,722)
---------- ----------

Cash flows from financing activities:
Capital contributions by president (Note 2) ..... 5,512 2,500
Proceeds from notes payable to
related parties (Note 2) ..................... 5,000 10,000
Proceeds from notes payable to others (Note 3)... 85,000 --
Proceeds from the sale of common stock .......... -- 405,000
Payment of offering costs ....................... -- (49,500)
---------- ----------
Net cash provided by
financing activities ....... 95,512 368,000
---------- ----------

Net change in cash ......... (102,016) 174,537

Cash, beginning of period ........................... 186,964 3,238
---------- ----------

Cash, end of period ................................. $ 84,948 $ 177,775
========== ==========

Supplemental disclosure of cash flow information:
Income taxes .................................... $ -- $ --
========== ==========
Interest ........................................ $ 375 $ --
========== ==========

See accompanying notes to condensed financial statements

CYTODYN, INC.
(A Development Stage Company)

Notes to Condensed Financial Statements
(Unaudited)

Note 1: Basis of Presentation

The condensed financial statements presented herein have been prepared by the
Company in accordance with the instructions for Form 10-QSB and the accounting
policies in its Form 10-KSB filed for the year ended May 31, 2004 and should be
read in conjunction with the notes thereto.

In the opinion of management, the accompanying condensed financial statements
contain all adjustments (consisting only of normal recurring adjustments) which
are necessary to provide a fair presentation of operating results for the
interim periods presented. The results of operations presented for the periods
ended February 28, 2005 are not necessarily indicative of the results to be
expected for the year.

The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises".

Financial data presented herein are unaudited.

Note 2: Related Party Transactions

During the nine months ended February 28, 2005, the Company's president paid
administrative expenses on behalf of the Company totaling $5,512. The payments
have been recorded as contributed capital and is included in the accompanying
condensed financial statements as "Additional paid-in capital".

As of May 31, 2004, the Company owed two officers promissory notes totaling of
$71,694. On January 18, 2005, an officer advanced the Company an additional
$5,000 for working capital. 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 $76,694
remained unpaid at February 28, 2005 and is included in the accompanying
condensed financial statements as "Indebtedness to related parties".

As of May 31, 2004, the Company owed a director $61,285 for legal services
provided to the Company. As of February 28, 2005 no arrangements had been made
for the Company to repay this obligation; however, management plans to repay the
balance through cash payments, issuance of the Company's common stock, or a
combination thereof. The Company anticipates that the director will continue to
provide legal services in the future. The balance due of $61,285 is included in
the accompanying condensed financial statements as "Indebtedness to related
parties".

Note 3: Notes Payable

The Company's promissory notes payable consist of the following at February 28,
2005:

Note payable to an individual issued on February 24, 2005,
matures March 9, 2006, 5% annual interest rate,
unsecured................................................ $ 30,000
Note payable to an individual issued on February 24, 2005,
matures March 9, 2006, 5% annual interest rate,
unsecured................................................ 25,000
Note payable to an individual issued on February 24, 2005,
matures March 8, 2006, 5% annual interest rate,
unsecured................................................ 25,000
Note payable to an individual issued on February 24, 2005,
matures March 9, 2006, 5% annual interest rate,
unsecured................................................ 5,000
-----------
$ 85,000
===========

Accrued interest payable on the above notes totaled $47 at February 28, 2005.

Note 4: Income Taxes

The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses for all
periods presented resulting in a deferred tax asset, which was fully allowed for
by a valuation allowance; therefore, the net benefit and expense resulted in
$-0- income taxes.

Note 5: Stock Awards

During the year ended May 31, 2004, the Company committed to grant a financial
representative warrants to purchase 426,000 shares of the Company's common
stock. The warrants carry an exercise price of $.30 per share, vest on the date
of grant and expire after five years from the date of grant. The warrants were
granted on November 25, 2004 and were included in the registration for the
public offering under our SB-2 filing. No warrants have yet been exercised.

The Company's common stock had no traded market value on the date of grant. The
market value of the stock was determined to be $.30 per share base on
contemporaneous sales of common stock to unrelated third party investors. The
weighted average exercise price and weighted average fair value of these options
as of November 30, 2004 were $0.30 and $0.028, respectively.

The fair value for the options granted during the six months ended November 30,
2004 was estimated at the date of grant using the Black-Scholes option-pricing
model with the following assumptions:

Risk-free interest rate...................... 2.00%
Dividend yield............................... 0.00%
Volatility factor............................ 0.00%
Weighted average expected life............... 5 years

The following schedule summarizes the changes in the Company's outstanding stock
options:

Number of Exercise Price Price
Shares Per Share Per Share
------------- ---------------- -----------
Balance at May 31, 2004........ 150,000 $0.50 to $1.50 $ 1.00
Awards granted.............. 426,000 $0.30 $ 0.30
Awards exercised............ - $0.00 $ -
Awards cancelled/expired.... - $0.00 $ -
------------- -----------

Balance at February 28, 2005... 576,000 $0.30 to $1.50 $ 0.48
=============

Note 6: Research and Development

The Company's director, Peggy C. Pence, PhD., is the President and Chief
Executive Officer of Symbion Research International, Inc. ("Symbion"). On
January 5, 2005, the Company entered into a buy-sell agreement to purchase
certain intellectual property owned by Symbion. The agreement describes the
intellectual property in detail which summarized, is the Phase 1 clinical data
and the protocol for the Phase II study. This intellectual property is necessary
to obtain approval for, and to conduct, further FDA clinical tests of Cytolin.
Cytolin is a potential new drug being developed by the Company for the treatment
of Human Immunodeficiency Virus ("HIV").

Under the terms of this agreement:

- The Company may purchase Symbion's Phase I clinical data in connection with
obtaining approval from the FDA to conduct the Phase II/Phase III studies
for Cytolin.
- The Company will grant 83,122 non-qualified stock options with an exercise
price of $.75 per share that will vest immediately and be exercisable over
5 years.
- The Company will pay $25,000 to Symbion by February 10, 2005, 30 days after
execution of the agreement.
- The Company will pay $275,000 to Symbion once the Company's secondary
financing is received.

The Company paid Symbion $25,000 out of loan proceeds received in March 2005.
Although the payment was late, Symbion has accepted it and the contract is in
force. In the event the Company's shareholders do not approve the company's
option plan by December 31, 2005, the Company will pay Symbion $62,342.

The results of the Phase II/III studies for Cytolin shall be the sole property
of the Company upon Symbion's receipt of the final payment called for by this
agreement. If all remaining payments are not received, the property shall revert
to Symbion.

Note 7: Commitments

The Company has signed Personal Service Agreements with three officers that
cover the two years ended May 31, 2005 and 2006. Under the terms of the
agreements, if an officer is terminated by the Company without cause or
terminates service for good cause within three months of a change in control,
the Company is required to pay the officer the balance of the base salary for
the term of the agreement and for an additional 12 months after the expiration
of the term.

Note 8: Financial Information - Development Stage

Following is the Statement of Operations for the period in which the Company has
been in the development stage as required by SFAS No. 7.

October 28, 2003 Through February 28, 2005

Operating expenses:
General and administrative ............. $ 638,465
Stock-based compensation:
Financial consulting services ....... 11,928
Legal fees, related party .............. 20,050
Depreciation ........................... 1,415
Research and development................ 362,342
------------
Total operating expenses ........... 1,034,200
------------
Operating loss ..................... (1,034,200)

Interest income ........................... 573
Interest expense .......................... (875)
------------
Loss before income taxes ........... (1,034,502)

Income tax provision ...................... --
------------

Net loss ........................... $ (1,034,502)
============

Following is the Statement of Cash Flows for the period in which the Company has
been in the development stage as required by SFAS No. 7.

October 28, 2003 Through February 28, 2005

Net cash used in
operating activities ................ $ (551,256)
----------

Cash flows from investing activities:
Equipment purchases ............................... (6,502)
----------
Net cash used in
investing activities ................ (6,502)
----------

Cash flows from financing activities:
Capital contributions by president ................ 5,512
Proceeds from notes payable issued to
related parties ................................. 116,194
Repayment of notes payable to related
parties ......................................... (50,000)
Proceeds from notes payable issued to others ...... 85,000
Proceeds from the sale of common stock ............ 540,000
Payment of offering costs ......................... (54,000)
----------
Net cash provided by
financing activities ................ 642,706
----------

Net change in cash ................... 84,948

Cash, beginning of period ........................... --
----------

Cash, end of period ................................. $ 84,948
==========

Supplemental disclosure of cash flow information:
Income taxes ...................................... $ --
==========
Interest.......................................... $ 828
==========

Note 9: Litigation

CytoDyn of New Mexico, Inc. et al., v. Amerimmune Pharmaceuticals, Inc. et al.,
--------------------------------------------------------------------------------
Case number BC 290154, California Superior Court in and for the County of Los
--------------------------------------------------------------------------------
Angeles.
--------

The First Amended and Supplemental Complaint alleged causes of action for unfair
business competition, inducement of breach of contract, fraud and unjust
enrichment, and declaratory and equitable relief. This case was dismissed due to
the attorney's lack of attention to the case. The judge stated that the evidence
was not presented in an orderly and logical fashion. The company may appeal this
case given the costs associated with it and the relief awarded to us in the case
below.

Rex H. Lewis, a Defendant and former director and C.E.O. of Amerimmune
Pharmaceuticals, Inc. has filed a First Amended Cross-Complaint against CytoDyn
of New Mexico, Inc., Allen D. Allen, Corinne E. Allen, Ronald J. Tropp, Brian J.
McMahon , Daniel M. Stickland, M.D. and unknown others designated as "Does
101-150".

Mr. Lewis alleges, among other things, misrepresentations or failure to make
disclosures related to Cytolin and its development, approval and marketing;

interference with Amerimmune's attempt to complete clinical research related to
Cytolin and Mr. Lewis' actual or prospective business relationships; and libel
and slander of Mr. Lewis.

Currently the Cross-Complaint asserts causes of action for fraud, interference
with prospective business interests, libel and slander. The requested relief
includes damages (alleged to range from $3 million to $20 million or more),
punitive damages, costs and other "just and proper" relief.

The outcome of litigation is uncertain. Management believes that an unfavorable
result is unlikely with respect to the claims raised by the Complaint, and that
the claims raised by the Cross-Complaint are without merit. The defendants have
retained new counsel which are the same attorney's that represented us in the
following case that was decided in our favor.

Discovery is continuing. Trial is scheduled for June 2005.

CytoDyn, Inc., et al. v. Amerimmune, Inc. et al., Case number SC039250,
--------------------------------------------------------------------------------
California Superior Court in and for the County of Ventura.
-----------------------------------------------------------

The Declaratory Relief Sought and Attorneys' Fees Were Awarded.

The action was filed on April 21, 2004. CytoDyn and Allen D. Allen were the
plaintiffs. The defendants were Amerimmune Inc., its parent Amerimmune
Pharmaceuticals, Inc., and unknown others designated as "Does 1-100".

The action concerned a Conditional License Agreement, dated February 24, 2000,
between Allen D. Allen and CytoDyn of New Mexico, on one hand, and Amerimmune,
Inc., on the other. The complaint alleged that the Conditional License Agreement
licensed to the defendants technology and patents related to Cytolin and
assigned to defendants an FDA approved investigational new drug application
related to Cytolin. Further, it alleged that the defendants breached the
Conditional License Agreement, resulting in its termination.

The principal relief sought was a declaration that the license granted and the
assignment of the technology, patents and drug application made pursuant to the
Conditional License Agreement were terminated no later than September 12, 2001,
and that Allen and we are the owners of the technology, patents and
investigational new drug application, free of any claims of the defendants.
Costs, attorney's fees, and other "just and proper" relief also were sought.

This case was decided in favor of the plaintiffs, CytoDyn and Allen October 4,
2004.

Symbion Research International, Inc., v. Amerimmune, Inc. et al., Case number
--------------------------------------------------------------------------------
SC035668, California Superior Court in and for the County of Ventura.
---------------------------------------------------------------------

The complaint was filed on March 14, 2003. Symbion Research International, Inc
was the plaintiff. Amerimmune, Inc. was the remaining defendant. We were not a
party to this action, however the action affects intellectual property which is
important to us.

A default judgment was entered on December 18, 2003. A judgment was entered in
favor of Symbion Research International ("Symbion") on September 17, 2004
granting the declarative relief sought by Symbion.

The action concerned intellectual property generated in connection with services
provided by Symbion with respect to early phase FDA clinical trials of Cytolin,
including research data and a patent application filed in 2002. The complaint
alleged that Symbion performed early phase FDA trials (designated in the

Complaint as "Phase Ia" and "Phase Ib/II", on behalf of Amerimmune pursuant to
an oral agreement, and that Amerimmune failed to pay Symbion for its services,
and otherwise breached its obligations under the agreement.

The complaint asserted causes of action for breach of oral contract, account
stated, work and labor done, fraud, and declaratory and injunctive relief. The
relief sought included a declaration that Symbion is the owner of the
intellectual property resulting from the services provided by Symbion.

Note 10: Subsequent Events

During March 2005, the Company issued promissory notes payable for proceeds of
$36,000. The notes carry a 5% interest rate and mature one year from the date of
the note.

During March 2005, the Company paid Symbion $25,000 toward its Buy-Sell
Agreement (see Note 6).

Part I. Item 2. Management's Discussion and Analysis or Plan of Operation
------- ---------------------------------------------------------

Plan of Operation

During the next 12 months, our objectives are:

o to continue clinical trials of Cytolin;
o to continue our efforts to protect our technology by obtaining
additional patents in The United Kingdom, the European Union and Hong
Kong;
o to develop an established market for our shares,
o to raise funds to support our research and development efforts, the
clinical trials relating to Cytolin, and our general and
administrative expenses; and
o to explore joint venture arrangements for other possible
pharmaceutical products.

Continuing Clinical Trials:

Phase I clinical trials were conducted by Symbion Research International under
the sponsorship of Amerimmune, Inc. during 2002. We believe that the data from
these trials support approval by the FDA of Phase II trials.

Projected costs to complete our research and development and to obtain FDA
--------------------------------------------------------------------------------
approval of a BLA:
------------------

We have negotiated with Symbion International for the right to use the Phase 1
data for a total of $362,000 and to seek approval for the Phase II trials from
the FDA. If the Phase II/III study is approved by the FDA, we expect it,
together with the pre-Phase II/III efforts, to cost an estimated $2,050,000 to
$3,350,000 for Symbion to conduct the clinical trials, plus estimated
manufacturing and supply costs of $350,000 to $400,000 and $362,000 for the
Phase Ia/b data for a total of $2,762,000 to $4,112,000.

Timing and anticipated completion dates for research and development.
---------------------------------------------------------------------

These trials can take anywhere from 29 to 42 months. Until we have met with the
FDA, which we plan to do within the next six months, we cannot be certain what
additional studies, assuming that Phase II/III study supports the efficacy and
safety of Cytolin, will be required to receive marketing approval The completion
of a Phase II/III Pivotal Study would allow the submission of a marketing
application and if approved, would allow us to market Cytolin in the United
States.

Date we expect to begin benefiting from the product:
----------------------------------------------------

We expect to complete our research and development of all Cytolin clinical
trials needed for approval of a marketing application if at all by December
2008.

Risks and uncertainties associated with completing development within reasonable
--------------------------------------------------------------------------------
period of time and if products are not completed on a timely basis:
-------------------------------------------------------------------

Even if we are able to complete the development within a reasonable period of
time our competitors could still come out with something competitive to our
product. Toxicity in the product could go undetected until Phase IV Safety
Surveillance after drug approval. We may have to continue to litigate to protect
technology, or challenges to patents that have not yet expired, etc. The medical
community may lack of acceptance of our product. There may be an inability to
secure third party payees such as if Medicare would cover costs. Post
registration manufacturing problems or downturn of economy or industry could
also be risks.

If we are unable to complete clinical trials on a timely basis, with favorable
results, our costs will increase significantly and we may not have enough
capital to support further research and development and continue in business.
Also, if we incur significant delays in being able to market our product, even
if we are ultimately able to do so, we will be delayed in earning revenues and
probably will require additional financing to continue in business.

Patents

During fiscal year 2004, several European patents were granted. The new patents
are covered by our License Agreement with Allen D. Allen, our president that
gives us the exclusive right to develop his technology worldwide. These patents
are designated European Patent No. 94 912826.8, for the United Kingdom, Germany,
France, Switzerland, Italy, the Netherlands, Portugal, Spain, and Sweden, and
are the counterparts to our United States Patent No. 5424066. Patents are
pending in those same countries which, if granted, will be the equivalent of our
United States Patent No. 5651970. We estimate the costs associated with these
pending patents to be approximately $65,000, including amounts we have already
spent. We may file additional patents during the current fiscal year if our
research and development efforts warrant them, but we do not have any such
potential patents identified at this time. The license acquired gives us the
right to develop Mr. Allen's worldwide patents.

Litigation

For a thorough discussion of our pending litigation, please see the section
entitled "Legal Proceedings." In Part 2, Item 1.

We were plaintiffs in two pending cases, CytoDyn of New Mexico, Inc. et. al., v.
Amerimmune Pharmaceuticals, Inc. et al., Case number BC290154 and the other in
Ventura County, in a case captioned CytoDyn, Inc., et al. v. Amerimmune, Inc. et
al., Case number SC039250., each involving our rights to the patented technology
underlying Cytolin and any other products we might wish to develop. The first
case was dismissed and the second case was decided in our favor.

Establishing a Market and Obtaining Funding

We will require funding during the 2005 fiscal year in order to continue with
research and development efforts and to stay in business. If we are able to
complete this offering we will be able to pay company expenses for 6 months.
Additional funding will have to occur within the next twelve months in order to
continue operations. The amount of that funding is directly related to the
clinical trials we are able to conduct and the amounts we will need to continue
operations.

In addition to operating funds, we will need from approximately $2,762,000 to
$4,112,000 for research and development, including clinical trials, and
manufacturing and supply costs, depending upon whether we are approved by the
FDA to conduct a Phase II/III pivotal study.

We borrowed $121,000 from certain individuals who are friends and business
acquaintances of the officers and directors of the Company in March 2005. The
company issued promissory notes in exchange for the borrowed funds. The notes
carry 5% interest and are due by March 9, 2006. In addition to operating funds
and clinical trial funds the company will need to raise the funds to repay these
notes.

We do not have any of this funding arranged or secured, and we do not yet have
plans for raising the funding we require. We anticipate that we will seek the
funding through further equity offerings, either by private placement or by
registered offering, or by possible joint venture arrangements with other
parties. If we are unable to secure the necessary funding, we will not be able
to conduct our research and development activities or to continue in business.

Joint Ventures

Buy-Sell Agreement with Symbion Research International. Effective January 5,
2005.

Our director, Peggy C. Pence, PhD., is the President and Chief Executive Officer
of Symbion Research International, Inc. On January 5, 2005, we entered into a
buy-sell agreement to purchase intellectual property owned by Symbion. The
agreement describes the intellectual property in detail which summarized, is the
Phase 1 clinical data and the protocol for the Phase II study. Under the terms
of this agreement:

- CytoDyn, Inc may purchase Symbion's Phase I clinical data in connection
with obtaining approval from the FDA to conduct the Phase II/Phase III
studies for Cytolin.
- CytoDyn, Inc will grant 83,122 non-qualified stock options with an exercise
price of $.75 per share that will vest immediately and be exercisable over
5 years.
- CytoDyn, Inc will pay $25,000 to Symbion by February 10, 2005, 30 days
after execution of the agreement.
- CytoDyn, Inc will pay $275,000 to Symbion once our secondary financing is
received.

We have paid Symbion $25,000 out of the loan proceeds we received in March 2005.
Although the payment was late, Symbion has accepted it and the contract is in
force.

In the event the shareholders do not approve the company's option plan by
December 31, 2005, CytoDyn, Inc will pay Symbion $62,341.50 in U.S. dollars.

The results of the Phase II/III studies for Cytolin shall be the sole property
of CytoDyn, Inc upon Symbion's receipt of the final payment called for by this
agreement. If all remaining payments are not received, the property shall revert
to Symbion.

Exploring Other Joint Ventures

While we continue to pursue FDA approval of our Cytolin product, we are also
considering entering into joint ventures to develop other types of products. We
have, for instance, entered into a nondisclosure agreement with another
development stage biotech company to discuss the possibility of the joint
development of drugs to treat neuropsychiatric diseases or disorders. These
discussions are in the early stages and we do not know if we will enter into a
joint venture or other arrangement with this company or if any products might
ensue from our efforts.

We may also pursue joint ventures or other arrangements to obtain funding for
our Cytolin-related endeavors, but we have not pursued this possibility and do
not have any prospects at this time.

Other Matters

We do not expect, in the next 12 months, to make any significant expenditures
for equipment. We will continue to staff the company as funds become available.
However, currently, we have no plans for significant changes in number of
employees.

Part I. Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures
------------------------------------------------

We maintain controls and procedures designed to ensure that information
required to be disclosed in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, our chief executive officer and the chief financial officer
concluded that our disclosure controls and procedures were adequate.

(b) Changes in internal controls
----------------------------

There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the
date of the evaluation of those controls by the chief executive officer and
chief financial officer.

Part 2. Other Information
------- -----------------

Item 1 - Legal Proceedings.

CytoDyn of New Mexico, Inc. et al., v. Amerimmune Pharmaceuticals, Inc. et al.,
Case number BC 290154, California Superior Court in and for the County of Los
Angeles

Mr. Lewis alleges, among other things, misrepresentations or failure to make
disclosures related to Cytolin and its development, approval and marketing;
interference with Amerimmune's attempt to complete clinical research related to
Cytolin and Mr. Lewis' actual or prospective business relationships; and libel
and slander of Mr. Lewis.

Discovery is continuing. Trial is scheduled for June 2005.

This case was decided in favor of the plaintiffs, CytoDyn and Allen, on October
4, 2004 and the plaintiffs were awarded the declaratory relief sought and
attorneys' fees.

Symbion Research International, Inc., v. Amerimmune, Inc. et al., Case number
--------------------------------------------------------------------------------
SC035668, California Superior Court in and for the County of Ventura. We were
-----------------------------------------------------------------------
not a party to this action; however the action affects intellectual property
which is important to us.

A default was entered against Amerimmune, Inc. on December 18, 2003. A judgment
was entered in favor of Symbion International on September 17, 2004 granting the
declarative relief sought.

The intellectual property generated in the early phase FDA clinical trials is
necessary to obtain approval for, and to conduct, further FDA clinical tests of
Cytolin. Because a satisfactory result was obtained in this action, we
anticipate negotiating an agreement with Symbion that will allow the use in
subsequent phases of clinical test of Cytolin of the research data generated in
the early phases. CytoDyn will purchase this data for $362,000 as stated under a
purchase agreement, $25,000 will paid from the SB-2 registration proceeds,
83,122 stock options will be granted with an exercise price of $0.75 per share
and $275,000 will be due and payable once the secondary round of financing has
been received.

Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity
Securities.

No response required.

Item 3 - Defaults Upon Senior Securities.

No response required.

Item 4 - Submission of Matters to a Vote of Security Holders.

No response required.

Item 5 - Other Information.

No response required.

Item 6 - Exhibits and Reports on Form 8-K.

(a) Exhibits:

1. 31.1: Certification by the CEO
2. 31.2: Certification by the CFO
3. 32.1: Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - CEO
4. 32.2: Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - CFO

(b) Reports on Form 8-K:

None.

SIGNATURES

The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the three and six months ended November 30,
2004 have been included.

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CYTODYN, INC.
(Registrant)

DATE:June 3, 2005 BY: /s/ Allen D. Allen
------------ ------------------------------
Allen D. Allen
President and CEO