If we offer a specific series of preferred stock under this prospectus, we will describe the terms of the
preferred stock in the prospectus supplement for such offering and will file a copy of the certificate establishing the terms of the preferred stock with the SEC. To the extent required, this description will include:
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the title and stated value;
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the number of shares offered, the liquidation preference per share and the purchase price;
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the dividend rate(s), period(s) and/or payment date(s), or method(s) of calculation for such dividends;
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whether dividends will be cumulative or non-cumulative and, if
cumulative, the date from which dividends will accumulate;
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the procedures for any auction and remarketing, if any;
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the provisions for a sinking fund, if any;
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the provisions for redemption, if applicable;
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any listing of the preferred stock on any securities exchange or market;
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whether the preferred stock will be convertible into our common stock, and, if applicable, the conversion price
(or how it will be calculated) and conversion period;
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whether the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price (or
how it will be calculated) and exchange period;
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voting rights, if any, of the preferred stock;
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a discussion of any material and/or special U.S. federal income tax considerations applicable to the preferred
stock;
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the relative ranking and preferences of the preferred stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of CytoDyn; and
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any material limitations on issuance of any class or series of preferred stock ranking senior to or on a parity
with the series of preferred stock as to dividend rights and rights upon liquidation, dissolution or winding up of CytoDyn.
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Series B
Preferred Stock
Our Board of Directors previously established a series of preferred stock designated as Series B Convertible Preferred Stock
(“Series B Preferred Stock”), comprising 400,000 shares of Series B Preferred Stock, of which 92,100 shares remain outstanding as of September 26, 2019. Subject to superior rights of any other outstanding preferred stock from time to
time, each outstanding share of Series B Preferred Stock is entitled to receive, in preference to the common stock, annual cumulative dividends equal to $0.25 per share per annum from the date of issuance, which shall accrue, whether or not
declared. At the time shares of Series B Preferred Stock are converted into common stock, accrued and unpaid dividends will be paid in cash or with shares of common stock. In the event we elect to pay dividends with shares of common stock, the
shares issued will be valued at $0.50 per share. Series B Preferred Stock does not have any voting rights. In the event of liquidation, each share of Series B Preferred Stock is entitled to receive, in preference to the common stock, a liquidation
payment equal to $5.00 per share plus any accrued and unpaid dividends. If there are insufficient funds to permit full payment, the assets legally available for distribution will be distributed pro rata among the holders of the Series B Preferred
Stock.
Each share of Series B Preferred Stock may be converted into ten fully paid shares of common stock at the option of a holder as long as we
have sufficient authorized and unissued shares of common stock available. The conversion rate may be adjusted in the event of a reverse stock split, merger or reorganization.
Series C Preferred Stock
On March 20, 2019, our
Board of Directors established a series of preferred stock designated as Series C Convertible Preferred Stock (“Series C Preferred Stock”), comprising 5,000 shares of Series C Preferred Stock, of which 5,000 shares remain outstanding as of
September 26, 2019. The certificate of designation for the Series C Preferred Stock provides, among other things, that holders of Series C Preferred Stock shall be entitled to receive cumulative dividends at the rate of ten percent (10%) per
share per annum of the stated value of the Series C Preferred Stock, to be paid, at the option of the holder, in cash or shares of common stock. Any dividends paid by the Company will first be paid to the holders of Series C Preferred Stock prior
and in preference to any payment or distribution to holders of common stock. Dividends on the Series C Preferred Stock are mandatory and cumulative and there are no sinking fund provisions applicable to the Series C Preferred Stock. The Series C
Preferred Stock does not have redemption rights. The stated value per share for the Series C Preferred Stock is $1,000 (the “Stated Value”).
In the event of any liquidation, dissolution or winding up of the Company, the Series C Preferred Stock will be paid, prior and in preference to any payment
or distribution on any shares of common stock, currently outstanding series of preferred stock, or subsequent series of preferred stock, an amount per share equal to the Stated Value and the amount of any accrued and unpaid dividends. The holders of
the Series C Preferred Stock will then receive distributions along with the holders of common stock on a pari passu basis according to the number of shares of common stock the Series C Preferred holders would be entitled if they converted their
shares of Series C Preferred Stock at the time of such distribution.
If, at any time while the Series C Preferred Stock is outstanding, the Company
effects any reorganization, merger or sale of the Company or substantially all of its assets (each a “Fundamental Transaction”), a holder of the Series C Preferred Stock will have the right to receive any shares of the acquiring
corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series C Preferred Stock immediately prior to the
Fundamental Transaction.
Each share of Series C Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and
nonassessable shares of common stock determined by dividing the Stated Value by the conversion price of $0.50 (subject to adjustment as set forth in the certificate of designation for the Series C Preferred Stock). No fractional shares will be
issued upon the conversion of the Series C Preferred Stock.
Warrants
Form. The Warrants that are subject of this resale prospectus were issued as individual warrant agreements to the investors. The material terms and
provisions of the Warrants are summarized below. The following description is subject to, and qualified in its entirety by, the form of Warrant, which was filed as an exhibit to a Current Report on Form 8-K
filed by us with the SEC on March 20, 2019. You should review a copy of the form of Warrant for a complete description of the terms and conditions applicable to the Warrants.
Exercisability. The Warrants are exercisable beginning on the date of issuance, and at any time up to five (5) years from the date of issuance.
The Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise. No
fractional shares of common stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, we will, at our option, either (i) pay the holder an amount in cash equal to the fractional amount multiplied by the
market value of a share of common stock or (ii) round up to the next whole share.
Failure to Timely Deliver Shares. If we fail to
deliver to the investor a certificate representing shares issuable upon exercise of a Warrant by the third trading day after the exercise date as required by the Warrant, and if the investor purchases the shares of our common stock after that third
trading day to deliver in satisfaction of a sale by the investor of the underlying Warrant shares that the investor anticipated receiving from us, then, within three trading days of receipt of the investor’s request, we, at the investor’s
option, will either (i) pay cash to the investor in an amount equal to the investor’s total purchase price (including brokerage commissions, if any) for the shares of common stock purchased less the exercise price (as described below), or the buy-in price, at which point our obligation to deliver the Warrant (and to issue the underlying common stock) will terminate, (ii) reinstate the portion of the Warrant and equivalent number of
Warrant shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or (iii) promptly honor our obligation to deliver to the investor a certificate or certificates representing the underlying common
stock and pay cash to the investor in an amount equal to the excess (if any) of the buy-in price over the product of (A) the number of shares of common stock, times (B) the per share
closing price of our common stock on the date of the event giving rise to our obligation to deliver the certificate.
Exercise Price. Each Warrant
represents the right to purchase a share of common stock at an exercise price equal to $0.50 per share (except that 177,600 Warrants tendered into the Warrant Tender Offers were previously exercised at $0.40 per share), subject to adjustment as
described below. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any
distributions of assets, including cash, stock or other property to our stockholders.
Transferability. Subject to applicable laws, the Warrants
may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. There is no public trading market for the Warrants,
and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Warrants on any securities exchange or other trading system.
Rights as a Stockholder. Except as otherwise provided in the Warrants or by virtue of such holder’s ownership of shares of our common stock, the
holder of a Warrant does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the Warrant.
Anti-takeover Effects of Delaware Law and our Certificate of Incorporation, as amended
As described above, our Board of Directors is authorized to designate and issue shares of preferred stock in series and define all rights, preferences and
privileges applicable to such series. This authority may be used to make it more difficult or less economically beneficial to acquire or seek to acquire us.
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