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Equity Compensation Plans | 6 Months Ended
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Nov. 30, 2022
Equity Compensation Plans | 7. EQUITY COMPENSATION PLANS Incentive and non-qualified options to purchase shares of common stock have been granted to directors, officers and employees of Neogen under the terms of the Company’s stock option plans. These options are granted at an exercise price of not less than the fair market value of the stock on the date of grant. Options vest ratably over three and five year periods and the contractual terms are generally five, seven or ten years. A summary of stock option activity during the six months ended November 30, 2022 follows:
(options in thousands) |  | Shares |  |  | Weighted- Average Exercise Price |
Options outstanding June 1, 2022 |  |  | 3,244 |  |  | $ | 32.13 |
Granted |  |  | 1,687 |  |  |  | 14.63 |
Exercised |  |  | (4 | ) |  |  | 10.75 |
Forfeited/Expired |  |  | (592 | ) |  |  | 29.75 |
Options outstanding November 30, 2022 |  |  | 4,335 |  |  | $ | 25.66 |
During the three and six month periods ended November 30, 2022 and 2021, the Company recorded $2,632,000 and $1,748,000, and $4,499,000 and $3,438,000, respectively, of expense related to its share-based awards, recorded in general and administrative expense in the consolidated income statement. The weighted-average fair value per share of stock options granted during the first six months of fiscal years 2023 and 2022, estimated on the date of grant using the Black-Scholes option pricing model, was $ 4.59 and $ 9.54 . The fair value of stock options granted was estimated using the following weighted-average assumptions.
|  | FY 2023 |  |  | FY 2022 |
Risk-free interest rate |  |  | 3.3 | % |  |  | 0.4 | %
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected stock price volatility |  |  | 34.0 | % |  |  | 32.8 | %
Expected option life |  |  | 4.61 years |  |  |  | 3.12 years |
The company grants restricted stock units (RSUs) to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan, which vest ratably over three and five year periods. The current units are expensed straight-line over the remaining weighted-average period of 3.2 years. On November 30, 2022 there was $12,820,000 in unamortized compensation cost related to non-vested RSUs. A summary of RSU activity during the six months ended November 30, 2022 follows:
(RSUs in thousands) |  | Shares |  |  | Weighted- Average Fair Value |
RSUs outstanding June 1, 2022 |  |  | 257 |  |  | $ | 36.14 |
Granted |  |  | 584 |  |  |  | 13.72 |
Released |  |  | (47 | ) |  |  | 37.62 |
Forfeited/Cancelled |  |  | (5 | ) |  |  | 37.63 |
RSUs outstanding November 30, 2022 |  |  | 789 |  |  | $ | 19.46 |
Under the terms of an agreement entered into with 3M as part of the combination of the FSD, the Company issued stock options and RSUs to conveying 3M employees to replace their existing unvested 3M awards under an exchange ratio based on the closing prices of Neogen and 3M common stock on August 31, 2022, the day before the transaction. These substitute options and RSUs retained their original vesting and expiration terms (originally three year vesting and ten year lives). There were a total of 131,746 substitute options and 29,770 substitute RSUs issued during the second quarter to the conveying 3M employees as part of the employee matters agreement; the Company recognized $184,000 in compensation expense (included in the overall compensation expense of $ 2,632,000 ) during the quarter for these awards. The Company offers eligible employees the option to purchase common stock at a 5% discount to the lower of the market value of the stock at the beginning or end of each participation period under the terms of the 2021 Employee Stock Purchase Plan; the discount is recorded in general and administrative expense. Total individual purchases in any year are limited to 10% of compensation.

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