Annual report pursuant to section 13 and 15(d)

Stock Options and Warrants

v2.4.0.8
Stock Options and Warrants
 12 Months Ended
May 31, 2013
Stock Options and Warrants

5 - Stock Options and Warrants

The Company has one stock-based equity plan at May 31, 2013. Pursuant to the 2004 Stock Incentive Plan, as amended, which was originally adopted by the Company’s shareholders in 2005, the Company was authorized to issue options to purchase up to 7,600,000 shares of the Company’s common stock. On December 12, 2012, the Company’s shareholders approved the CytoDyn Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which replaced the 2004 Stock Incentive Plan and provides for the issuance of up to 3,000,000 shares of common stock pursuant to various forms of incentive awards allowed under the 2012 Plan. As of May 31, 2013, the Company had 1,976,710 shares available for future stock-based grants under the 2012 Plan.

During the year ended May 31, 2013, the Company granted a total of 148,290 common stock options to directors with exercise prices ranging from $1.40 to $1.55 per share, which vest in quarterly increments over one year and have an expiration date of five years from the date of grant. The average grant date fair value related to these options was $.89 per share.

During the year ended May 31, 2013, the Company granted a total of 1,225,000 common stock options to employees with exercise prices ranging from $.80 to $1.80 per share. Of the options, 112,500 vested immediately, and 112,500 vest in October 2013. The remaining options vest annually over three years, beginning one year following the grant date. The options have expiration dates that range from three to five years from the date of grant. The average grant date fair value related to these options was $.60 per share.

During the year ended May 31, 2013, the Company granted a total of 515,000 common stock warrants to consultants with exercise prices ranging from $1.00 to $5.00 per share. The warrants have varying vesting terms, but were fully vested in April 2013. The expiration dates for the warrants range from September 2014 to October 2015. The average grant date fair value related to these warrants was $.56 per share.

On July 27, 2012, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with William Carmichael and Mojdeh Javadi (the “Plaintiffs”) with respect to a complaint filed in December 2011 alleging breach of contract for failure to issue warrants to purchase shares of the Company’s common stock to the Plaintiffs pursuant to a contract entered into between the Company and the Plaintiffs in November 2007, as well as failure to pay compensation to which the Plaintiffs were allegedly entitled pursuant to the Contract described in Note 3 above. In the Settlement, the Company granted warrants to purchase a total of 750,000 common shares to the Plaintiffs at an exercise price of $.25 per share. All compensation expense associated with the warrants was recognized at May 31, 2012, totaling approximately $540,000. All the warrants were exercised during the year ended May 31, 2013. Ms. Javadi is the spouse of the Company’s chief executive officer.

As discussed in Note 4, the Company issued warrants to purchase a total of 8,527,984 common shares to investors. The grant date fair value of the warrants was $.72 per share.

Net cash proceeds from the exercise of common stock warrants and options were $201,000 for the year ended May 31, 2013.

Compensation expense related to stock options and warrants was approximately $3,262,000 and $1,692,000 for the year ended May 31, 2013, and 2012, respectively. The grant date fair value of options and warrants vested during the year ended May 31, 2013 and 2012 was approximately $8,889,000 and $1,562,000, respectively. As of May 31, 2013 there was approximately $1,748,000 of unrecognized compensation costs related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.57 years.

The estimated fair value of options and warrants is determined using the Black-Scholes option valuation model with the following weighted-average assumptions for the periods ended May 31, 2013 and 2012:

 

     2013    2012

Risk free rate

    0.12% - 0.70%    0.12% -.87%

Dividend yield

    —      —  

Volatility

    87% - 102%    93% - 102%

Expected term

    1 - 4 years    1 - 4 years

 

The following table represents stock option and warrants activity for the periods ended May 31, 2013 and 2012:

 

     Number of
Shares		     Weighted
Average
Exercise Price		      Weighted
Average
Remaining
Contractual
Life		      Aggregate
Intrinsic Value		  

Options and warrants outstanding - May 31, 2011

      7,473,576      $ 1.34         3.84       $ 10,495,913   
  

 

 

    

 

 

     

 

 

     

 

 

  

Granted

      3,456,088      $ 2.04         —          —    

Exercised

      (527,500 )    $ .62         —          —    

Forfeited/expired/cancelled

      (74,500 )    $ 2.49         —          —    
  

 

 

    

 

 

     

 

 

     

 

 

  

Options and warrants outstanding - May 31, 2012

      10,327,664      $ 1.60         3.20       $ 2,308,279   

Granted

      11,166,274      $ 1.61         —          —    

Exercised

      (780,000 )    $ 0.26         —          —    

Forfeited/expired/cancelled

      (2,567,000 )    $ 1.73         —          —    
  

 

 

    

 

 

     

 

 

     

 

 

  

Options and warrants outstanding - May 31, 2013

      18,146,938      $ 1.65         1.86       $ 140,321   
  

 

 

    

 

 

     

 

 

     

 

 

  

Exercisable - May 31, 2013

      16,253,188      $ 1.68         1.65       $ 140,321