Quarterly report pursuant to sections 13 or 15(d)

Stock Options and Warrants

Stock Options and Warrants
3 Months Ended
Aug. 31, 2013
Stock Options and Warrants

Note 5 - Stock Options and Warrants

The Company has one active stock-based equity plan at August 31, 2013. Pursuant to the 2004 Stock Incentive Plan, as amended, which was approved by the Company’s shareholders in 2005, the Company was authorized to grant options to purchase up to 7,600,000 shares of the Company’s common stock. On December 12, 2012, the Company’s shareholders approved, at its Annual Meeting, the CytoDyn Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which replaces 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 August 31, 2013, the Company had 1,776,710 shares available for future stock-based grants under the 2012 Plan.

During the three months ended August 31, 2013, the Company granted options to purchase a total of 200,000 shares of common stock to directors with an exercise price of $.80 per share. These option awards vest at 25% per quarter over one year. The grant date fair value related to these options was $.47 per share.

During the three months ended August 31, 2013, the Company issued common stock warrants exercisable for three years to investors in certain convertible notes to purchase a total of 923,072 shares at a price of $0.50 per share. The warrants were issued in connection with the sale of $1,200,000 in convertible promissory notes effective July 31, 2013 (the “July Notes”) (see Note 4). Until October 1, 2013, each holder of a July Note had the right to convert the principal amount of the July Note plus accrued but unpaid interest into Units consisting of two shares of common stock plus a warrant to purchase one share of common stock. Each Unit is valued at $1.30 for purposes of this conversion right. Each Unit warrant issued upon conversion will have an exercise price of $0.75 per share and a five-year term.

Compensation expense related to stock options and warrants was approximately $226,000 and $1,612,000, for the three months ended August 31, 2013 and August 31, 2012, respectively. The grant date fair value of options and warrants vested during the three month periods ended August 31, 2013 and August 31, 2012 was $1,115,000 and $2,092,000, respectively. As of August 31, 2013, there was approximately $1,615,000 of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 2.32 years.

The following table represents stock option and warrant activity as of and for the three months ended August 31, 2013:


     Number of
Exercise Price
Life in Years
Intrinsic Value

Options and warrants outstanding – May 31, 2013

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


     1,123,072      $ .55         


     —        $ —           


     (403,500   $ 1.41         

Options and warrants outstanding – August 31, 2013

     18,866,510      $ 1.59         1.77       $ 417,243   

Outstanding exercisable – August 31, 2013

     17,104,010      $ 1.62         1.57       $ 417,243