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Item 1.01.
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Entry into a Material Definitive Agreement.
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On March 31, 2020, CytoDyn Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Agreement”)
pursuant to which the Company issued a secured convertible promissory note, as amended (the “Note”) with a two-year maturity to an institutional accredited investor (the “Investor”) in the initial principal amount of $17.1
million. The Note is secured by all of the assets of the Company, excluding the Company’s intellectual property. The Investor gave consideration of $15.0 million, reflecting original issue discount of $2.1 million. The Company anticipates
using the proceeds for general working capital purposes.
In connection with the investment in the Note, the Company entered into a Security Agreement, pursuant to which all obligations owing to the
Investor by the Company, are secured by a first-position security interest in all the assets of the Company, excluding the Company’s intellectual property.
Interest
accrues on the outstanding balance of the Note at 10% per annum. Upon the occurrence of an Event of Default, interest accrues at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any Event of Default, the
Investor may accelerate the outstanding balance payable under the Note, which will increase automatically upon such acceleration by 15%, 10% or 5%, depending on the nature of the Event of Default.
The Investor
may convert all or any part the outstanding balance of the Note into shares of Common Stock at an initial conversion price of $4.50 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations
specified in the Note. In addition to standard anti-dilution adjustments, the conversion price of the Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the
effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act of 1933, as amended. The Note provides for liquidated damages upon failure
to deliver Common Stock within specified timeframes.
The Investor may redeem any portion of the Note, at any time after six months from the issue date upon three trading days’ notice,
subject to a Maximum Monthly Redemption Amount of $950,000. The Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding
balance of the Note, in part or in full, at a 15% premium to par value, at any time upon fifteen trading days’ notice.
Investor may
sell Conversion Shares pursuant to a registration statement prior to the date that is six (6) months from the issue date and will be limited to 1,000,000 shares per calendar month (the “Volume Limitation”); provided, however, in the
event any intra-day trading price of the Common Stock during the applicable time period meets or exceeds $4.50 per share then the Volume Limitation shall not apply for the remainder of the calendar month or the five trading days thereafter,
whichever is longer.
Pursuant to the terms of the Agreement and the Note, the Company must obtain the Investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $15 million. Upon any such
approval, the outstanding principal balance of the Notes shall increase automatically by 5% upon the issuance of such additional debt.
The Company agreed to use commercially reasonable efforts to file a Registration Statement on Form
S-3 with the SEC by April 30, 2020 registering a number of shares of Common Stock sufficient to convert the entire Outstanding Balance of the Note plus, if legally permissible, 1,666,668 shares of Common Stock from Investor’s February 12, 2020
warrant exercise plus 833,332 shares of Common Stock from Investor’s February 4, 2020 warrant exercise.
The Company relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933 in connection with the
issuance and sale of the Note and underlying shares of Common Stock.
The foregoing description is qualified in its entirety by reference to the full text of the Note, as amended, the Securities Purchase
Agreement and the Security Agreement, a copy of each of which is filed as Exhibit 4.1, Exhibit 10.1 and Exhibit 10.2 hereto, and each of which is incorporated herein by reference.