Quarterly report pursuant to Section 13 or 15(d)

Stock Options and Warrants

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Stock Options and Warrants
 6 Months Ended
Nov. 30, 2014
Stock Options and Warrants

Note 6—Stock Options and Warrants

The Company has one active stock-based equity plan at November 30, 2014, the CytoDyn Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which was approved by shareholders at the Company’s 2012 annual meeting to replace the 2004 Stock Incentive Plan. The 2012 Plan 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 November 30, 2014, the Company had 754,930 shares available for future stock-based grants under the 2012 Plan.

During the six months ended November 30, 2014, the Company granted options to purchase a total of 483,973 shares of common stock to directors and an employee with exercise prices ranging from $.66 to $.81 per share. The director option awards covering 333,973 shares, vest at 25% per quarter over one year and an option covering 100,000 shares vest at 50% per year over two years, all with a five-year term. The grant date fair value related to these options was $.35 per share. The employee award covering 50,000 shares of common stock vests ratably over three years with a five-year term. The grant date fair value related to these options was $.43 per share. In addition, a warrant to purchase a total of 150,000 shares of common stock at an exercise price of $1.05 per share was granted to a third party consultant. The warrant vests in three tranches of 50,000 shares each, based on three separately identified milestones. In the event any milestone is not achieved, the shares subject to the satisfaction of such milestone shall not vest and will not be exercisable for such shares. The warrant has a five-year term and is not currently exerciseable.

In connection with the issuance of a convertible note during the six months ended November 30, 2014, the Company issued 250,000 warrants to the note holder. The terms of these warrants have been disclosed in Note 4.

Compensation expense related to stock options and warrants was approximately $150,000, $287,800 and $261,000 and $487,000 for the three and six-months ended November 30, 2014 and November 30, 2013, respectively. The grant date fair value of options and warrants vested during the three and six-month periods ended November 30, 2014 and November 30, 2013 was approximately $227,000, $309,000 and $459,000 and $1,574,000, respectively. As of November 30, 2014, there was approximately $691,000 of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.42 years.

During the period ended November 30, 2014, in connection with inducement to convert certain convertible promissory notes into common stock, (see Note 4), an aggregate of 1,413,333 shares of Common Stock were issued upon the exercise of previously outstanding warrants held by Note holders. The Company received cash proceeds of $777,333 from the exercise of the warrant shares.

The following table presents stock option and warrant activity as of and for the six months ended November 30, 2014:

 

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

Options and warrants outstanding—May 31, 2014

      30,806,361      $ 1.13         3.29       $ 177,042   

Granted

      883,973      $ 0.76         —           —     

Exercised

      (1,413,333 )    $ 0.55         —           —     

Forfeited/expired/cancelled

      (6,523,843 )    $ 1.76         —           —     
  

 

 

          

Options and warrants outstanding—November 30, 2014

      23,753,158      $ 0.89         3.83       $ 10,302,869   
  

 

 

          

Outstanding exercisable—November 30, 2014

      22,108,780      $ 0.90         3.82       $ 9,615,260