5. SHAREHOLDERS' EQUITY

STOCK OPTION AND RESTRICTED STOCK PLANS

In August 1999, the Company adopted a stock option and restricted stock plan (the "1999 Plan") which provides that non-qualified options and incentive stock options and restricted stock covering an aggregate of 1,000,000 shares of the Company's unissued common stock may be granted to affiliates, employees or consultants of the Company. As of January 1, of each calendar year, commencing January 1, 2000, this amount is subject to automatic annual increases equal to the lesser of 1.5% of the total number of outstanding common shares, assuming conversion of convertible securities, or 500,000 shares. The 1999 plan expired in November 2009. Options granted under the 1999 Plan were granted at prices not less than 80% of the then fair market value of the common stock and expired not more than 10 years after the date of grant.

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.

Activity as to stock options outstanding is as follows:

	NUMBER OF STOCK OPTIONS	PRICE RANGE PER SHARE	WEIGHTED AVERAGE EXERCISE PRICE
	NUMBER OF STOCK OPTIONS	PRICE RANGE PER SHARE	WEIGHTED AVERAGE EXERCISE PRICE
Options outstanding at May 31, 2016	1,199,000	$ 0.43-$ 1.20	$	0.81
Options granted	55,000	$ 1.52-$ 1.61	$	1.55
Options exercised	(341,500)	$ 0.43-$ 1.04	$	0.46
Options canceled or expired	(15,500)	$ 0.43-$ 1.04	$	0.90
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

The weighted average fair value of options granted during 2018 and 2017 was $3.63 and $1.55, respectively. The aggregate intrinsic value of options exercised during 2018 and 2017 was approximately $87,000 and $616,000, respectively. The aggregate intrinsic value of options outstanding at May 31, 2018 and 2017 was approximately $2,755,000 and $1,354,000, respectively. The aggregate intrinsic value of options vested and exercisable at May 31, 2018 and 2017 was approximately $1,749,000 and $616,000, respectively.

Activity as to non-vested stock options is as follows:

		STOCK OPTIONS WEIGHTED AVERAGE AVERAGE GRANT DATE FAIR VALUE


	NUMBER OF SHARES
	NUMBER OF SHARES
Nonvested shares at May 31, 2017	517,250	$	0.96
Granted	287,000	$	3.63
Vested/Exercised	(212,125)	$	1.00
Forfeited	(9,125)	$	1.56
Nonvested shares at May 31, 2018	583,000	$	2.34

At May 31, 2018, total compensation cost related to non-vested stock option awards not yet recognized totaled approximately $212,000. The weighted-average period over which this amount is expected to be recognized is 1.82 years. The weighted average remaining contractual term of options that were exercisable at May 31, 2018 was 5.25 years.

The following summarizes information about all of the Company's stock options outstanding at May 31, 2018. These options are comprised of those granted under the 1999, 2010, 2014 and 2017 plans.

		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE IN YEARS
			WEIGHTED AVERAGE EXERCISE PRICE	NUMBER EXERCISABLE AT MAY 31, 2018
	NUMBER OUTSTANDING 05/31/2018				WEIGHTED AVERAGE EXERCISE PRICE
RANGE OF EXERCISE PRICES	NUMBER OUTSTANDING 05/31/2018				WEIGHTED AVERAGE EXERCISE PRICE
$ 0.71-$ 0.84	460,625	4.66	$0.80	371,750	$0.79
$ 0.85-$ 1.04	65,000	2.22	$0.99	32,625	$0.98
$ 1.20-$ 1.61	330,000	8.32	$1.26	151,250	$1.23
$ 2.41-$ 3.90	283,000	8.69	$3.65	--	--

COMMON STOCK ACTIVITY

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 proceeds to the Company were $27,436.

During the year ended May 31, 2017, options to purchase 341,500 shares of common stock were exercised at prices ranging from $0.43 to $1.04. Total proceeds to the Company were $157,728.

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.