Stock Options and Warrants |
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Feb. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Options and Warrants |
Note 6 – Stock Options and Warrants The Company has one active stock-based equity plan at February 28, 2019, the CytoDyn Inc. 2012 Equity Incentive Plan, as amended (the “2012 Plan”) and one stock-based equity plan that is no longer active, but under which certain prior awards remain outstanding, the CytoDyn Inc. 2004 Stock Incentive Plan (the “2004 Plan” and, together with the 2012 Plan, the “Incentive Plans”). The 2012 Plan was approved by stockholders at the Company’s 2012 annual meeting to replace the 2004 Plan. The 2012 Plan was amended by stockholder approval in February 2015 to increase the number of shares available for issuance from 3,000,000 to 5,000,000 shares of common stock and in March 2016 to increase the number of shares available for issuance from 5,000,000 to 7,000,000 shares of common stock. At the annual meeting of stockholders held on August 24, 2017, the stockholders approved an amendment to the 2012 Plan to increase the number of shares available for issuance from 7,000,000 to 15,000,000 shares of common stock. As of February 28, 2019, the Company had 164,144 shares available for future stock-based grants under the 2012 Plan. Stock Options During the nine months ended February 28, 2019, the Company granted annual stock option awards to directors to purchase a total of 680,822 shares of common stock. The exercise price of the stock option awards is $0.49 per share, except for one stock option award covering 80,822 shares of common stock, which has an exercise price of $0.47 per share. These stock option awards vest quarterly over one year and have a ten-year term. The grant date fair value related to these stock options was $0.31 per share, except the stock option award covering 80,822 shares of common stock, which was $0.30 per share. These awards reflect an increase in the annual non-employee director stock option award from 75,000 to 100,000 shares per year, effective for fiscal year 2019. During the nine months ended February 28, 2019, the Company granted a pro-rata stock option award to a director, covering 38,904 shares of common stock, which has an exercise price of $0.50 per share. This stock option award vests 13,904 shares on March 1, 2019 and 25,000 shares on June 1, 2019. The grant date fair value of this stock option award was $0.27 per share. During the nine months ended February 28, 2019, the Company granted a stock option award covering 950,000 shares of common stock with an exercise price of $0.49 per share, to its Executive Chairman. This stock option award vests ratably over 24 months, has a ten-year term and a grant date fair value of $0.41 per share.
During the nine months ended February 28, 2019, the Company granted stock options, covering an aggregate of 875,000 shares of common stock, to executive management and employees with exercise prices of $0.49 per share. The stock option awards vest annually over three years, with a ten-year term and grant date fair values of $0.31 per share. Additionally, the Company granted a stock option covering an aggregate of 1,000,000 shares of common stock, to an officer with an exercise price of $0.565 per share. The stock option award vests 50% upon grant and 50% on April 8, 2019; it has a ten-year term and grant date fair value of $0.30 per share. The Company also granted stock options, covering an aggregate of 500,000 shares of common stock to certain directors with an exercise price of $0.565 per share. The stock option awards vest upon grant, have a ten-year term and grant date fair value of $0.30 per share. During the nine months ended February 28, 2019, the Company granted a stock option award covering 350,000 shares of common stock with an exercise price of $0.551 per share to Dr. Richard G. Pestell, M.D., Ph.D., in connection with his employment agreement as Chief Medical Officer and the closing of the ProstaGene transaction described in Note 7. The stock option award vests annually over three years, with a ten-year term and grant date fair value of $0.30 per share. During the nine months ended February 28, 2019, the Company granted a stock option award covering 400,000 shares of common stock with an exercise price of $0.48 per to the Company’s Chief Technology Officer, in connection with his employment agreement. The stock option award vests annually over three years, has a ten-year term and grant date fair value of $0.26 per share. On January 4, 2019, in connection with the resignation of a director, the Company’s Board of Directors approved a motion to accelerate all outstanding unvested stock options held by the director, to vest immediately upon the effectiveness of his resignation and to retain the stock options’ exercise period through their respective expiration date. Stock options covering 1,145,834 shares of common stock were subject to acceleration. The other terms of the accelerated stock options remained otherwise unchanged. In addition, the expiration terms of certain other previously awarded stock options covering an aggregate of 150,000 shares common stock were extended from five years to 10 years. The other terms of the extended stock options remained otherwise unchanged.
Warrants During the year ended May 31, 2018, the Company determined to extend the expiration dates of certain warrants from May 31, 2017 to June 30, 2017 covering 3,295,000 shares of common stock. The warrants were originally issued in connection with 2012 convertible promissory notes and had an amended exercise price of $1.00 per share. The extension to June 30, 2017 was contingent upon immediate exercise of the warrants at a reduced exercise price of $0.50 per share. The Company received proceeds of approximately $1.6 million and, pursuant to U.S. GAAP, the Company recognized non-cash inducement interest expense of approximately $0.8 million, which represented the incremental increase in the fair value of the extended warrants.
On June 15, 2018, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued warrants covering 1,970,000 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with the registered direct offering, the Company also issued warrants covering 133,600 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.55 per share. During the nine months ended February 28, 2019, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 23,487,585 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with this offering, the Company also issued common stock warrants covering 4,446,917 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision. During the nine months ended February 28, 2019, the Company issued compensable warrants covering an aggregate of 300,000 shares of common stock to consultants. The warrants have a five-year term, an exercise price of $0.56 per share and a grant date fair value of $0.30 per share. In addition the Company issued a warrant covering 500,000 shares of common stock to a director. The warrant has a ten-year term, an exercise price of $0.51 per share and a grant date fair value of $0.28 per share. During the nine months ended February 28, 2019, in connection with the offering of 2019 Short-term Convertible Notes, as fully described in Note 4, the Company issued common stock warrants covering a total of 5,460,000 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.30 per share. In connection with this offering, the Company also issued common stock warrants covering 972,000 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision.
During the nine months ended February 28, 2019, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued common stock warrants covering a total of 5,364,240 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.50 per share. In connection with this offering, the Company also issued common stock warrants covering 965,563 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision. During the nine months ended February 28, 2019, in connection with the issuance of the January 2019 Note, as fully described in Note 4, the Company issued a warrant covering a total of 5,000,000 shares of common stock to January investor. The warrant has a five-year term and an exercise price of $0.30 per share.
Compensation expense related to stock options, compensatory warrants and common stock reserved for advisory services for the three and nine months ended February 28, 2019 and February 28, 2018 was approximately $1.4 million and $0.6 million and approximately $2.9 million and $1.1 million, respectively. The grant date fair value of options and compensatory warrants vested during the three and nine month periods ended February 28, 2019 and February 28, 2018 was approximately $0.7 million and $0.8 million and $1.8 million $1.3, respectively. As of February 28, 2019, there was approximately $4.9 million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 2.58 years.
The following table represents stock option and warrant activity as of and for the nine months ended February 28, 2019:
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