5. SHAREHOLDERS' EQUITY

STOCK OPTION AND RESTRICTED STOCK PLANS

In August 2010, the Company adopted a stock option and restricted stock plan (the "2010 Plan") which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 850,000 shares of the Company's unissued common stock may be granted to affiliates, employees or consultants of the Company. This plan was approved by shareholders in December 2010. The 2010 Plan expires in December 2020. Options granted under the 2010 Plan 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.

In December 2014, the Company adopted a stock option and restricted stock plan (the "2014 Plan") which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 850,000 shares of the Company's unissued common stock may be granted to affiliates, employees or consultants of the Company. This plan was approved by shareholders in December 2014. The 2014 Plan expires in December 2024. Options granted under the 2014 Plan 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.

In December 2017, the Company adopted a stock option and restricted stock plan (the “2017 Plan”) which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 900,000 shares of the Company’s unissued common stock may be granted to affiliates, employees or consultants of the Company. This plan was approved by shareholders in December 2017. The 2017 Plan expires in December 2027. Options granted under the 2017 Plan 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.

Stock option expense during fiscal 2019 was $151,224. This included, by department, $3,714 for research and development, $143,299 in administrative, $4,163 in sales and marketing and $49 in Mexico. In fiscal 2018 stock option expense was $18,473. This included $2,486 in research and development, $14,613 in administrative, $1,223 in sales and marketing and $151 in Mexico.

Activity as to aggregate stock options outstanding is as follows:

	NUMBER OF STOCK OPTIONS	EXERCISE PRICE RANGE PER SHARE	WEIGHTED AVERAGE EXERCISE PRICE
	NUMBER OF STOCK OPTIONS	EXERCISE PRICE RANGE PER SHARE	WEIGHTED AVERAGE EXERCISE PRICE
Options outstanding at May 31, 2017	897,000	$0.71-$1.61	$	0.98
Options granted	287,000	$2.41-$3.90	$	3.63
Options exercised	(34,750)	$0.71-$1.04	$	0.80
Options canceled or expired	(10,625)	$0.71-$2.41	$	1.44
Options outstanding at May 31, 2018	1,138,625	$0.71-$3.90	$	1.65
Options granted	558,000	$2.25-$3.62	$	2.60
Options exercised	(163,500)	$0.71-$1.04	$	0.76
Options canceled or expired	(56,916)	$0.71-$3.62	$	2.49
Options outstanding at May 31, 2019	1,476,209	$0.82-$3.90	$	2.07

The weighted average fair value of options granted during 2019 and 2018 was $2.60 and $3.63, respectively. The aggregate intrinsic value of options exercised during 2019 and 2018 was approximately $364,000 and $87,000, respectively. The aggregate intrinsic value of options outstanding at May 31, 2019 and 2018 was approximately $808,000 and $2,755,000, respectively. The aggregate intrinsic value of options vested and exercisable at May 31, 2019 and 2018 was approximately $685,000 and $1,749,000, respectively.

Number of non-vested stock options included in table above is as follows:

		STOCK OPTIONS WEIGHTED AVERAGE AVERAGE GRANT DATE FAIR VALUE


	NUMBER OF SHARES
	NUMBER OF SHARES
Nonvested shares at May 31, 2018	583,000	$	2.34
Granted	558,000	$	2.60
Vested/Exercised	(331,500)	$	2.34
Forfeited	(39,916)	$	3.08
Nonvested shares at May 31, 2019	769,584	$	2.49

At May 31, 2019, total compensation cost related to non-vested stock option awards not yet recognized totaled approximately $332,000. The weighted-average period over which this amount is expected to be recognized is 2.31 years. The weighted average remaining contractual term of options that were exercisable at May 31, 2019 was 4.93 years.

The following summarizes information about all of the Company's stock options outstanding at May 31, 2019. These options are comprised of those granted under the 2010, 2014 and 2017 plans.

		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE IN YEARS
			WEIGHTED AVERAGE EXERCISE PRICE	NUMBER EXERCISABLE AT MAY 31, 2019
	NUMBER OUTSTANDING May 31, 2019				WEIGHTED AVERAGE EXERCISE PRICE
RANGE OF EXERCISE PRICES	NUMBER OUTSTANDING May 31, 2019				WEIGHTED AVERAGE EXERCISE PRICE
$ 0.82	295,375	5.72	$ 0.82	283,375	$ 0.82
$ 0.85-$ 1.04	47,500	1.42	$ 1.02	35,500	$ 1.02
$ 1.20-$ 1.61	330,000	6.56	$ 1.26	233,750	$ 1.26
$ 2.25-$ 3.90	803,334	8.00	$ 2.93	154,000	$2.93

COMMON STOCK ACTIVITY

During the year ended May 31, 2019, options to purchase 163,500 shares of common stock were exercised at prices ranging from $0.71 to $1.04. Total net proceeds to the Company were $121,790.

During the year ended May 31, 2018, options to purchase 34,750 shares of common stock were exercised at prices ranging from $0.71 to $1.04. Total net proceeds to the Company were $27,436.

During the year ended May 31, 2019, the Company sold 625,677 shares of its common stock at prices ranging from $2.59 to $4.16 under its S-3 Registration Statement which resulted in gross proceeds of $1,847,662 and net proceeds to the Company of $1,776,575 after deducting commissions for each sale and legal, accounting and other fees related to the filing of the S-3.

During the year ended May 31, 2018, the Company sold 342,088 shares of its common stock at prices ranging from $3.73 to $4.74 under its S-3 Registration Statement which resulted in gross proceeds of $1,379,226 and net proceeds to the Company of $1,275,933 (after receipt of subscriptions receivable at May 31, 2018) after deducting commissions for each sale and the initial legal and accounting fees related to the filing of the S-3. The subscriptions receivable of $9,062 was collected on June 4, 2018.