STOCK-BASED COMPENSATION

9 Months Ended

Feb. 29, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

10. STOCK-BASED COMPENSATION

Stock-based compensation expense consists of expenses for stock options, restricted stock units (“RSUs”), performance RSUs (“PRSUs”), restricted shares, performance restricted shares and employee stock purchase plan (“ESPP”), purchase rights. Stock-based compensation expense for stock options and ESPP purchase rights is measured at each grant date, based on the fair value of the award using the Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of publicly traded options. For RSUs, PRSUs, restricted shares and performance restricted shares, stock-based compensation expense is based on the fair value of the Company’s common stock at the grant date and is recognized as expense over the employee’s requisite service period. All of the Company’s stock-based compensation is accounted for as equity instruments. See Note 13 in the Company’s Annual Report on Form 10-K for fiscal 2023 filed on August 28, 2023 for further information regarding the 2016 Equity Incentive Plan and the ESPP. On October 23, 2023, the shareholders of the Company approved the 2023 Equity Incentive Plan and on October 27, 2023, the Company filed the Form S-8 to issue awards during this quarter onwards from a pool of 1,500,000 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 Equity Incentive Plan. 

The following table summarizes the stock-based compensation expense for the three and nine months ended February 29, 2024 and February 28, 2023:

	Three Months Ended				Nine Months Ended
	February 29,		February 28,		February 29,		February 28,
(In thousands)	2024		2023		2024		2023
Cost of sales	$	58	$	75	$	222	$	252
Research and development		148		158		440		513
Selling, general and administrative		377		359		1,081		1,330
	$	583	$	592	$	1,743	$	2,095

Stock-based compensation expense totaling $252,000 and $120,000 was capitalized as part of inventory as of February 29, 2024 and as of May 31, 2023, respectively.

The Company’s nonvested RSU, PRSU and restricted shares activities during the three and nine months ended February 29, 2024 were as follows:

				Weighted
				Average Grant
				Date Fair
	Shares			Value
	(in thousands)			Per Share
Unvested, May 31, 2023		345		$	6.40
Granted		-
Vested		(77	)		7.16
Forfeited		(52	)		5.79
Unvested, August 31, 2023		216		$	6.27
Granted		203			31.51
Vested		(28	)		8.02
Forfeited		(1	)		29.79
Unvested, November 30, 2023		390		$	19.28
Granted		1			22.57
Vested		(32	)		12.42
Forfeited		(6	)		6.21
Unvested, February 29, 2024		353		$	20.16

Under the ESPP, the Company issued 24,000 and 109,000 shares, respectively, during the nine months ended February 29, 2024 and February 28, 2023. As of February 29, 2024 and February 28, 2023, ESPP shares available for issuance totaled 373,000 and 499,000, respectively.