Item 1.01 Entry into a Material Definitive Agreement.
On February 14, 2022, CytoDyn Inc. (the "Company") entered into a Surety Bond
Backstop Agreement (the "Backstop Agreement") with David Fairbank Welch, both
individually and in his capacity as trustee of a revocable trust, LRFA, LLC, a
Delaware limited liability company, and certain other related parties
(collectively, the "Indemnitors"). Pursuant to the Backstop Agreement, the
Indemnitors have agreed to assist the Company in obtaining a surety bond (the
"Surety Bond") for posting in connection with the Company's ongoing litigation
with Amarex Clinical Research, LLC, by, among other things, agreeing to
indemnify the issuer of the Surety Bond with respect to the Company's
obligations under the Surety Bond.
Under the Backstop Agreement, as consideration for the Company's indemnity of
the Surety Bond, the Company has agreed to (i) issue to 4-Good Ventures LLC, an
affiliate of the Indemnitors ("4-Good Ventures"), a warrant for the purchase of
15,000,000 shares of the common stock, $0.001 par value per share, of the
Company (the "Common Stock"), as a backstop fee (the "Initial Warrant"), (ii)
issue to 4-Good Ventures an additional warrant for the purchase of 15,000,000
shares of Common Stock, which additional warrant may be exercised only if
Indemnitors are required to make any payment to the issuer of the Surety Bond as
a result of their indemnification (the "Make-Whole Warrant" and, together with
the Initial Warrant, the "4-Good Warrants"), and (iii) if Indemnitors are
required to make any payment to the issuer of the Surety Bond as a result of
their indemnification, (A) within 90 days of payment by Indemnitors, reimburse
Indemnitors for any amount paid by them to the issuer of the Surety Bond and
(B) pay to Indemnitors an indemnification fee in an amount equal to 1.5 times
the amount paid by Indemnitors to the issuer of the Surety Bond.
The Initial Warrant has a five-year term. The Make-Whole Warrant will be
exercisable, if at all, beginning on the date that payment by the Indemnitors to
the issuer of the Surety Bond is required (the "Commencement Date") and ending
on the later of (i) five years following the date of issuance of the Make-Whole
Warrant and (ii) five years following the Commencement Date if such date occurs
within two years following issuance of the 4-Good Warrants. The exercise price
of the 4-Good Warrants is $0.30 per share. The payment obligations of the
Company to the Indemnitors under the Backstop Agreement bear interest at 10% per
annum and are secured by substantially all of the patents of the Company.
Under the Backstop Agreement, on or before the 120th day following the date of
issuance of the 4-Good Warrants, the Company will use commercially reasonable
efforts to file a Registration Statement on Form S-3 with the Securities and
Exchange Commission (the "SEC") that is intended to register for resale the
shares underlying the 4-Good Warrants.
The foregoing description of the Backstop Agreement and 4-Good Warrants is not
complete and is qualified in its entirety by reference to the complete text of
the Backstop Agreement, Initial Warrant, and Make-Whole Warrant, copies of which
are filed as Exhibits 10.1, 4.1 and 4.2, respectively, to this Current Report on
Form 8-K.
Item 3.02 Unregistered Sale of Equity Securities.
The Company is providing this disclosure under Item 3.02 because, as of
February 14, 2022, its unregistered sales of equity securities, in the
aggregate, exceeded 1% of the shares of its Common Stock outstanding as of
January 25, 2022, the date of its last report under Item 3.02.
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4-Good Warrants
The information contained in Item 1.01 is hereby incorporated by reference into
this Item 3.02 in its entirety. The Company relied on the exemption from
registration afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the issuance of the 4-Good
Warrants.
Private Placement of Common Stock and Warrants
On February 14, 2022, the Company issued to accredited investors in a private
placement a total of 560,000 shares of Common Stock, together with warrants to
purchase a total of 280,000 shares of Common Stock at an exercise price of $0.45
per share. The securities were issued with a combined purchase price of $0.45
per fixed combination of one share of Common Stock and one-half of one warrant
to purchase one share of Common Stock, for total gross proceeds to the Company
of $252,000. The warrants have a five-year term and are immediately exercisable.
Additionally, on February 14, 2022, the Company issued to three accredited
investors in a private placement a total of 5,000,000 shares of Common Stock,
together with warrants to purchase a total of 2,500,000 shares of Common Stock
at an exercise price of $0.40 per share. The warrants have a five-year term and
are immediately exercisable. The securities were issued with a combined purchase
price of $0.40 per fixed combination of one share of Common Stock and one-half
of one warrant to purchase one share of Common Stock, for total gross proceeds
to the Company of $2,000,000. In connection with and as additional consideration
for the purchases, the Company agreed with two investors to issue an additional
611,111 shares of Common Stock, effectively lowering the purchase price of
500,000 shares plus related warrants previously purchased by the investor to
$0.45 per unit, and to replace warrants to purchase a total of 1,134,544 shares
at an exercise price of $1.00 per share with warrants to purchase 1,266,000
shares at an exercise price of $1.00 per share and warrants to purchase 250,000
shares at an exercise price of $0.45 per share. The Company agreed with the
third investor to issue an additional 100,000 shares of Common Stock,
effectively lowering the purchase price of 1,000,000 shares plus 250,000
warrants previously purchased by the investor from $1.10 to $1.00 per unit, and
to replace warrants to purchase a total 250,000 shares at an exercise price of
$1.10 per share with warrants to purchase 330,000 shares at an exercise price of
$1.00 per share. The subscription agreements with the three investors also
provide that, by June 14, 2022, the Company will use commercially reasonable
efforts to file a Registration Statement on Form S-3 with the SEC that is
intended to register for resale the shares purchased by the investors, as well
as the shares underlying the related warrants.
The subscription agreements, other than as modified to reflect the terms
described above and to update the representations, warranties and other
information regarding the Company included therein, were substantially similar
to the form of subscription agreement filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the SEC on November 23, 2021. The
warrants, other than as described above, were substantially similar to the form
of warrant filed as Exhibit 4.1 to the Company's Current Report on
Form 8-K filed with the SEC on September 7, 2021. The foregoing summary of the
terms of the subscription agreements and warrants is subject to, and qualified
in its entirety by, such documents.
The representations, warranties and covenants contained in the subscription
agreements were made solely for the benefit of the parties to the subscription
agreements. In addition, such representations, warranties and covenants (i) are
intended as a way of allocating the risk between the parties to the subscription
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agreements and not as statements of fact, and (ii) may apply standards of
materiality that are different from what may be viewed as material by
stockholders of, or other investors in, the Company. Accordingly, the
subscription agreements generally do not provide investors with other factual
information regarding the Company. Moreover, information concerning the subject
matter of the representations and warranties may change after the date of each
subscription agreement, which subsequent information may or may not be fully
reflected in public disclosures by the Company.
The Company relied on the exemption from registration afforded by Rule 506 of
Regulation D and Section 4(a)(2) of the Securities Act in connection with the
sales of securities to accredited investors in the private placement.
Consultant Warrant
On February 16, 2022, the Company issued to a third-party consultant as
consideration for services a warrant (the "Consultant Warrant") to purchase
25,000 shares of Common Stock at an exercise price of $1.04 per share and with a
term expiring on December 6, 2031. The Consultant Warrant is fully exercisable
as to 15,000 shares, and will become exercisable as to the remaining 10,000
shares beginning December 6, 2022, subject to forfeiture if the consultant
ceases to provide services to the Company prior to that date. Except as
described above, the terms of the Consultant Warrant are substantially similar
to those set forth in the form of consultant warrant filed as Exhibit 4.4 to the
Company's Current Report on Form 8-K filed on June 22, 2017; the foregoing
summary is subject to, and qualified in its entirety by, such document. The
Company relied on the exemption from registration afforded by Section 4(a)(2) of
the Securities Act in connection with the issuance of the Consultant Warrant.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
4.1 Form of Initial Warrant
4.2 Form of Make-Whole Warrant
10.1 Surety Bond Backstop Agreement dated February 14, 2022, among the
Company and certain parties named therein (the Company agrees to
furnish a copy of Schedule 3, which has been omitted, supplementally
to the SEC upon request)
104 Cover Page Interactive Data File (formatted as inline XBRL)
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