SHAREHOLDERS’ EQUITY

12 Months Ended

May 31, 2024

Equity [Abstract]

SHAREHOLDERS’ EQUITY

NOTE 6: SHAREHOLDERS’ EQUITY

STOCK OPTION AND RESTRICTED STOCK PLANS

In December 2014, the Company adopted and shareholders approved a stock option and restricted stock plan (the “2014 Plan”). Subsequently, in December 2017, the Company adopted and shareholders approved a stock option and restricted stock plan (the “2017 Plan”). In February 2020, the Board approved the 2020 Stock Incentive Plan (the “2020 Plan”, and collectively with the 2014 Plan and 2017 Plan, the “Equity Incentive Plans”) and on December 11, 2020, the shareholders of the Company approved the 2020 Plan. In April 20, 2023, the Board approved the Company’s 2023 Stock Incentive Plan and on December 7, 2023, the shareholders of the Company approved the 2023 Plan.

The Equity Incentive Plans provide that non-qualified options and incentive stock options and restricted stock may be granted to directors, affiliates, employees, or consultants of the Company. The Equity Incentive Plans authorize awards representing up to 850,000, 900,000, 900,000, and 1,200,000 shares of the Company’s common stock to be issued under the 2014 Plan, 2017 Plan, 2020 Plan, and 2023 Plan, respectively. Awards granted under the Equity Incentive Plans typically vest over 4 years. Options granted under the Equity Incentive Plans will be granted at prices not less than 80% of the then fair market value of the common stock and will expire not more than 10 years after the date of grant. The 2014 Plan expires in December 2024, the 2017 Plan expires in December 2027, the 2020 Plan expires in December 2030, and 2023 Plan expires on April 20, 2033.

Stock-based compensation expense for the years ended May 31, 2024 and 2023 is as follows:

	For the Year Ended May 31,
	2024		2023
Cost of sales	$	70,000	$	143,000
Selling, general and administrative		742,000		971,000
Research and development		25,000		71,000
Total stock option expense	$	837,000	$	1,185,000

Activity as to aggregate stock options outstanding is as follows:

	Number of Stock Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options Outstanding at May 31, 2022		2,321,616		$	3.72	$	1,838,000
Options granted		243,000		$	2.70	$	-
Options exercised		(46,500	)	$	1.73	$	90,000
Options canceled or expired		(175,500	)	$	5.56	$	-
Options Outstanding at May 31, 2023		2,342,616		$	3.52	$	146,000
Options granted		1,338,500		$	1.13	$	-
Options canceled or expired		(201,500	)	$	4.64	$	-
Options Outstanding at May 31, 2024		3,479,616		$	2.53	$	-
Options vested and exercisable at May 31, 2024		2,047,712		$	3.23	$	-

The weighted average grant date fair value of options granted during 2024 and 2023 were $0.80 and $2.19, respectively.

On May 31, 2024, total compensation cost related to non-vested stock option awards not yet recognized totaled approximately $1,265,000. The weighted-average period over which this amount is expected to be recognized is 2.37 years. The weighted average remaining contractual term of options that were exercisable on May 31, 2024 was 4.97 years. The weighted average remaining contractual term of options that were vested, exercisable, or expected to vest on May 31, 2024 was 6.62 years.

COMMON STOCK ACTIVITY

On January 22, 2021, the Company filed a prospectus supplement to the base prospectus included in a registration statement filed with the SEC on July 21, 2020, and declared effective by the SEC on September 30, 2020, for purposes of selling up to $15,000,000 in the ATM Offering, as defined in Rule 415 promulgated under the Securities Act.

On May 21, 2021, in conjunction with the Company’s 2020 Stock Incentive Plan, that was approved by shareholders at the Company’s annual meeting in December 2020, the Company filed an S-8 Registration Statement to register up to 900,000 shares of the Company’s common stock that could be issued under this Plan.

Under the ATM Offering, the sales agent uses commercially reasonable efforts to sell on the Company’s behalf all of the shares requested to be sold from time to time by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the agent and the Company. The Company has no obligation to sell any of the shares under the ATM Offering, and may at any time suspend offers under, or terminate the ATM Offering.

During the year ended May 31, 2023 the Company sold 573,889 shares of its common stock at prices ranging from $3.15 to $4.26 pursuant to the ATM Offering, which resulted in gross proceeds of approximately $2,014,000 and net proceeds to the Company of $1,961,000, after deducting commissions for each sale and legal, accounting, and other fees related to the offering in the amount of $53,000.

On March 7, 2023, the Company sold 3,333,333 shares of common stock in a firm commitment public offering at a gross sales price of $2.40 per share, with net total proceeds, after deducting issuance fees and expenses of $700,000, of approximately $7,300,000. As a result of this public offering, the Company terminated the ATM offering agreement.

On September 28, 2023, the Company filed a “shelf” registration statement on Form S-3 with the SEC, allowing the Company to issue up to $20,000,000 in common shares. Under this registration statement, shares of our common stock may be sold from time to time for up to three years from the filing date. On May 10, 2024, the Company filed a prospectus supplement with the SEC, as part of the registration statement filed on September 28, 2023, which was declared effective on September 29, 2023. This supplement was intended to facilitate the sale of up to $5,500,000 in common stock through ATM offerings, as defined in Rule 415 under the Securities Act.

During the year ended May 31, 2024, the Company has not sold any shares of its common stock through the ATM Offering.

PREFERRED STOCK ACTIVITY

On February 24, 2020, the Company entered into and closed on a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Palm Global Small Cap Master Fund LP (“Palm”) pursuant to which the Company agreed to sell and issue to Palm, and Palm agreed to purchase from the Company, 571,429 shares of the Company’s Series A 5% Convertible Preferred Stock, $0.08 par value per share for a purchase price of approximately $2 million, or $3.50 per Series A Convertible Preferred Stock. Under the terms of the Stock Purchase Agreement, each share of issued Convertible Preferred Stock can be converted at any time by Palm into one share of the Company’s common stock, subject to certain adjustments.

The Series A 5% Convertible Preferred Stock accrued annual preferred dividends at a rate of $0.175 per Series A 5% Convertible Preferred Share. However, accruing dividends were payable only when, as, and if declared by the Board and the Company had no obligation to pay such accruing dividends.

On March 24, 2020, Palm converted 250,000 shares of Convertible Preferred Stock into 250,000 shares of unregistered common stock. On July 21, 2020, the Company filed with the SEC a registration statement on Form S-3, that among other things, registered 571,429 common shares issued, or to be issued, to Palm upon conversion of the Convertible Preferred Stock into common shares. On September 30, 2020, the Company received a Notice of Effectiveness from the Securities and Exchange Commission for registration of these shares. On January 21, 2021, Palm converted their remaining 321,429 Convertible Preferred Shares into registered common shares. On May 30, 2021, the Company had no shares of Preferred Stock outstanding. Under the terms of the Preferred Stock Purchase Agreement, none of the cumulative dividends were paid to Palm during the period they owned the Preferred Stock. Once converted to common shares, Palm lost all rights to receive any past cumulative dividends.