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EMPLOYEE STOCK PLANS | 12 Months Ended
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May 31, 2024
EMPLOYEE STOCK PLANS |
EMPLOYEE STOCK PLANS | 11. EMPLOYEE STOCK PLANS 2023 Equity Incentive Plan On October 23, 2023, the shareholders of the Company approved the 2023 Equity Incentive Plan (the "2023 Plan") to replace the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) and reserved a total of 1,500,000 shares of common stock under the 2023 Plan. The 2023 Plan permits grants to employees of share-based awards, including stock options, RSUs, PRSUs, restricted shares, performance restricted shares. Full value awards, which are equity awards other than options, stock appreciation rights or other awards that are based solely on an increase in value of the shares following the grant date, when granted or forfeited will be counted as the same number of common stock shares added or deducted to the remaining available shares for issuance under the 2023 Plan. 2016 Equity Incentive Plan In October 2016, the Company’s 2016 Plan was approved by the Company’s shareholders. The 2016 Plan replaced the 2006 Equity Incentive Plan and would continue in effect until 2026. The exercise price of each stock option equals the market value of the Company's common stock on the date of grant. Options typically vest over four years, subject to the grantee’s continued service with the Company through the scheduled vesting date, and expire in seven years from the grant date. A total of 4,848,000 shares of common stock have been reserved for issuance under the Company’s 2016 Plan. Full value awards, which are equity awards other than options, stock appreciation rights or other awards that are based solely on an increase in value of the shares following the grant date, when granted or forfeited will be counted as two times the number of shares added or deducted to the remaining available shares for issuance under the 2016 Plan. The following table summarizes the total stock-based compensation expense for the fiscal years ended May 31, 2024, 2023, and 2022:
|  | Year Ended May 31, |
(In thousands, except per share data) |  | 2024 |  |  | 2023 |  |  | 2022 |
Cost of sales |  | $ | 330 |  |  | $ | 331 |  |  | $ | 234 |
Research and development |  |  | 639 |  |  |  | 706 |  |  |  | 968 |
Selling, general and administrative |  |  | 1,549 |  |  |  | 1,711 |  |  |  | 1,721 |
Net effect on net income |  | $ | 2,518 |  |  | $ | 2,748 |  |  | $ | 2,923 |
Effect on earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.09 |  |  | $ | 0.10 |  |  | $ | 0.11 |
Diluted |  | $ | 0.09 |  |  | $ | 0.09 |  |  | $ | 0.11 |
As of May 31, 2024 and 2023, stock-based compensation totaling $0.3 million and $0.1 million, respectively, was capitalized as part of inventory. The following table presents the combined stock activities and the total number of shares available for grant under the Company’s equity incentive plans:
(in thousands) |  | Available Shares for Grant |
Balance, May 31, 2021 |  |  | 573 |
Additional shares reserved under the 2016 Plan |  |  | 1,414 |
Options granted |  |  | (303 | )
RSUs granted |  |  | (1,044 | )
RSUs cancelled |  |  | 20 |
Shares withheld for taxes and not issued |  |  | (30 | )
Options terminated |  |  | 105 |
Balance, May 31, 2022 |  |  | 735 |
Options granted |  |  | (110 | )
RSUs granted |  |  | (674 | )
RSUs cancelled |  |  | 60 |
Options terminated |  |  | 16 |
Balance, May 31, 2023 |  |  | 27 |
Shares reserved under the 2023 Plan |  |  | 1,500 |
Shares retired under the 2016 Plan |  |  | (95 | )
Options granted |  |  | (4 | )
RSUs granted |  |  | (221 | )
RSUs cancelled |  |  | 144 |
Options terminated |  |  | 12 |
Balance, May 31, 2024 |  |  | 1,363 |
Restricted Stock Units, Performance Restricted Stock Units and Restricted Stock Awards The Company’s nonvested RSU, PRSU and restricted stock awards granted to employees and members of the Company’s Board of Directors for the fiscal year ended May 31, 2024 were as follows:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value |
|  | (in thousands) |  |  | Per Share |  |  | (In Years) |  |  | (in thousands) |
Unvested, May 31, 2023 |  |  | 345 |  |  | $ | 6.40 |  |  |  | 2.35 |  |  | $ | 11,392 |
Granted (1) |  |  | 205 |  |  |  | 31.36 |  |  |  |  |  |  |  |  |
Vested |  |  | (170 | ) |  |  | 9.31 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (86 | ) |  |  | 13.63 |  |  |  |  |  |  |  |  |
Unvested, May 31, 2024 |  |  | 294 |  |  | $ | 20.08 |  |  |  | 2.29 |  |  | $ | 3,381 |
(1) | Includes 88,000 performance-based awards. The number of shares subject to performance-based conditions represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term.
During fiscal 2024, the Company recorded stock-based compensation related to RSUs, PRSUs, performance restricted shares and restricted shares of $1.3 million. As of May 31, 2024, the total unrecognized compensation expense related to unvested RSU, PRSU and restricted shares was $3.9 million. This expense will be amortized on a straight-line basis over a weighted average period of approximately 2.29 years. Stock Options The following table summarized the stock option transactions during fiscal 2024:
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term |  |  | Aggregated Intrinsic Value |
|  | (in thousands) |  |  | Per Share |  |  | (In Years) |  |  | (in thousands) |
Balances, May 31, 2023 |  |  | 961 |  |  | $ | 3.67 |  |  |  | 4.02 |  |  | $ | 28,211 |
Options granted |  |  | 4 |  |  |  | 49.21 |  |  |  |  |  |  |  |  |
Options terminated |  |  | (12 | ) |  |  | 3.78 |  |  |  |  |  |  |  |  |
Options exercised |  |  | (251 | ) |  |  | 2.51 |  |  |  |  |  |  |  |  |
Balances, May 31, 2024 |  |  | 702 |  |  | $ | 4.37 |  |  |  | 3.26 |  |  | $ | 5,322 |
Options exercisable, May 31, 2024 |  |  | 536 |  |  | $ | 3.26 |  |  |  | 2.83 |  |  | $ | 4,512 |
Options exercisable and expected to vest |  |  | 701 |  |  | $ | 4.37 |  |  |  | 3.26 |  |  | $ | 5,320 |
The fair value of the Company’s stock options granted to employees was estimated on the date of grant using the Black-Scholes model and the straight-line attribution approach with the following weighted average assumptions:
|  | Year Ended May 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Expected term (in years) |  |  | 5 |  |  | 5-6 |  |  | 5-6 |
Volatility |  |  | 93 | % |  |  | 86 | % |  |  | 88 | %
Risk-free interest rates |  |  | 4.34 | % |  |  | 3.12 | % |  |  | 1.50 | %
Weighted average grant date fair value |  | $ | 36.02 |  |  | $ | 6.29 |  |  | $ | 4.01 |
The total intrinsic values of options exercised were $9.5 million, $17.1 million, and $12.5 million during fiscal 2024, 2023, and 2022, respectively. During fiscal 2024, the Company recorded stock-based compensation related to its stock options of $0.4 million. As of May 31, 2024, the Company had $0.9 million of total unrecognized compensation expense related to unvested stock options granted and outstanding which is expected to be recognized over a weighted average remaining period of 3.26 years. Employee Stock Purchase Plan The ESPP permits employees to purchase common stock at a discount through payroll withholdings at certain specified dates (purchase period) within a defined offering period. The purchase price is 85.0% of the fair market value of the common stock at the end of the purchase period and is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. For the fiscal years ended May 31, 2024, 2023, and 2022, approximately 72,000, 211,000, and 178,000 shares of common stock, were issued under the ESPP. As of May 31, 2024, 326,000 shares remain available for issuance under the ESPP. The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes model with the following weighted-average assumptions:
|  | Year Ended May 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Expected term (in years) |  | 0.5 – 2.0 |  |  | 0.5 – 2.0 |  |  | 0.5 – 2.0 |
Volatility |  | 70% – 94 | % |  | 91% – 203 | % |  | 101% – 272 | %
Risk-free interest rates |  | 4.72%–5.53 | % |  | 3.97%–4.94 | % |  | 0.05%–2.44 | %
Weighted average grant date fair value |  | $ | 6.30 |  |  | $ | 13.60 |  |  | $ | 9.68 |
During fiscal 2024, 2023, and 2022, the Company recorded stock-based compensation related to its ESPP of $0.8 million, $0.8 million, and $0.9 million, respectively. As of May 31, 2024, the total unrecognized compensation expense related to purchase rights under the ESPP was $1.1 million. This expense will be amortized on a straight-line basis over a weighted average period of approximately 1.2 years. Employee Stock Ownership Plan The Company has a non-contributory, trusteed employee stock ownership plan or Employee Stock Ownership Plan (“ESOP”) for full-time and part-time employees. The Company can contribute either shares of the Company’s stock or cash to the ESOP. During the fiscal years ended May 31, 2024, 2023 and 2022, the Company contributed 9,085, 29,832 and 26,666 shares to the ESOP. As a result, the Company recognized stock-based compensation expense totaling $0.3 million, $0.3 million and $0.3 million during the fiscal years ended May 31, 2024, 2023 and 2022, respectively. Shares held in the ESOP are included in the net income per share calculation.

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