Stock-Based Compensation

3 Months Ended

Aug. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 10

Stock-Based Compensation

On June 25, 2015, the Corporation’s Board of Directors approved the 2015 Stock Incentive Plan (“Plan”), which allows the granting of stock options and other equity awards to directors, officers, employees, and eligible independent contractors of the Corporation and is intended to retain and reward key employees’ performance and efforts as they relate to the Corporation’s long-term objectives and strategic plan. The Plan was subsequently approved by shareholders at the Corporation’s annual shareholder meeting on September 21, 2015. A total of 700,000 shares of Common Stock has been reserved for issuance under the Plan. Stock option awards are granted with an exercise price equal to, or greater than, the market price of the Corporation’s stock at the date of grant and vest over a period of time as determined by the Corporation at the date of grant up to the contractual ten year life of the options, at which time the options expire.

On June 25, 2015, the Corporation granted 200,000 stock options at an exercise price per share of $3.12 with a five year vesting period. Stock-based compensation expense for the fair value of the stock options vested during the three months ended August 31, 2015 was not significant.

At August 31, 2015, the intrinsic value of all options outstanding approximated $38,000 and had a weighted-average remaining contractual life of ten years. Total unrecognized compensation expense related to stock-based awards outstanding at August 31, 2015, was $421,000 and is to be recorded over a weighted-average life of five years.

The Corporation records all stock-based payments, including grants of stock options, in the consolidated statements of operations and retained earnings based on their fair values at the date of grant.

The Corporation currently uses the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock options on the date of grant using an option-pricing model is affected by stock price as well as assumptions that include expected stock price volatility over the term of the awards, expected life of the awards, risk-free interest rate, and expected dividends.

Stock price volatility is estimated based on historical volatility measured monthly for a time period equal to the expected life of the option ending on the date of grant. The expected life of stock options (estimated average period of time the options will be outstanding) is estimated based on the contractual life or the vesting period of the options. The risk-free interest rate is determined based on observed U.S. Treasury yields in effect at the time of grant for maturities equivalent to the expected life of the options. The expected dividend yield is estimated based on the dividend yield at the time of grant as adjusted for any expected changes during the life of the options.