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Stock options
 12 Months Ended
Oct. 31, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Stock options

Note 7 - Stock options

 

Incentive and non-qualified stock option plans

 

In May 2000, the Board of Directors adopted the Company’s 2000 Stock Option Plan (the “2000 Option Plan”). Under the 2000 Option Plan, the Company was authorized to grant options to purchase shares of common stock to officers, directors, key employees and others providing services to the Company. The number of shares of common stock that the Company was authorized to issue under options granted under the 2000 Option Plan initially was 300,000, which number automatically increased on January 1 of each year by the lesser of (i) 4% of the total number of shares of common stock then outstanding or (ii) 10,000 shares. Subsequently, the Board of Directors and Stockholders approved several increases in the authorized number of options to the 2000 Option Plan. The 2000 Option Plan expired in May 2010. At the time of expiration, the 2000 Plan had authorized the Company to grant options to purchase a total of 1,320,000 shares. Upon the expiration of the 2000 Plan, the Company was no longer able to grant any stock options to its employees, officers and directors. Accordingly, as of October 31, 2011, there were no shares of common stock authorized by the Company to be issued under the 2000 Option Plan. However, there were options for 955,396 shares that had been granted under the 2000 Plan, of which 732,969 were still outstanding and available for exercise.

  

On March 9, 2010, our Board of Directors adopted the RF Industries, Ltd. 2010 Stock Incentive Plan (the “2010 Plan”).  In June 2010, our stockholders approved the 2010 Plan by vote as required by the NASDAQ Capital Market listing standards.  Accordingly, the Company may now make awards under the 2010 Plan as described below. The Board adopted the 2010 Plan because the Company’s prior stock option plan, the 2000 Option Plan that was adopted in May 2000, expired on May 5, 2010. An aggregate of 1,000,000 shares of common stock was set aside and reserved for issuance under the 2010 Plan. As of October 31, 2012, 525,768 shares of common stock were remaining for future grants of stock options under the 2010 Plan.

 

Additional disclosures related to stock option plans

 

The fair value of each option granted in 2012 and 2011 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

    2012     2011  
             
Expected volatility     46.6%-66.2 %     35.9%-55.8 %
Weighted-average volatility     57.7 %     52.7 %
Expected dividends     3.0%-5.0 %     1.9%-6.3 %
Expected term (in years)     3.5-4.2       2.5-3.5  
Risk-free interest rate     0.3%-0.4 %     0.7%-1.2 %
Weighted average fair market value of options granted during the year   $ 1.19     $ 0.89  
Weighted average fair market value of options vested during the year   $ 1.02     $ 0.94  

 

Expected volatilities are based on historical volatility of the Company’s stock. During fiscal 2012, the Company granted options to Board of Directors for the purchase of 63,315 shares that vested immediately with an option life of five years, and options for a new employee the purchase of 50,000 shares with a vesting period of five years and an option life of six years. Since the Company has little historical experience in determining the expected life of these new option terms, the Company used the simplified method to calculate the expected life of these option grants. The expected life represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the U.S. Treasury rate with a maturity date corresponding to the options’ expected life. The dividend yield is based upon the historical dividend yield. The Company estimates forfeiture rates based upon historical exercise behavior.

 

Additional information regarding all of the Company's outstanding stock options at October 31, 2011 and 2010 and changes in outstanding stock options in 2011 and 2010 follows:

 

    2012     2011  
    Shares or
Price Per
Share		     Weighted
Average
Exercise
Price		     Shares or
Price Per
Share		     Weighted
Average
Exercise
Price		  
Options outstanding at beginning of year     2,099,672     $ 2.13       2,454,952     $ 2.00  
Options granted     114,815       3.86       178,009       3.24  
Options exercised     (192,738 )     1.82       (517,817 )     1.90  
Options forfeited     (16,968 )     3.05       (15,472 )     2.70  
                                 
Options outstanding at end of year     2,004,781     $ 2.25       2,099,672     $ 2.13  
                                 
Options exercisable at end of year     1,650,289     $ 2.16       1,599,095     $ 2.00  
                                 
Options vested and expected to vest at end of year     1,987,333     $ 2.25       2,070,866     $ 2.02  
                                 
Option price range at end of year   $ 0.05 - $4.12           $ 0.05 - $3.78        
                                 
Aggregate intrinsic value of options exercised during year   $ 396,976           $ 693,490        

  

Included in the options outstanding are 847,724 in 2012 and 907,724 in 2011 previously granted to six officers and/or key employees of the Company under employment agreements entered into by the Company with each of these officers and employees.

 

Weighted average remaining contractual life of options outstanding at October 31, 2012: 3.63 years.

 

Weighted average remaining contractual life of options exercisable at October 31, 2012: 3.38 years.

 

Weighted average remaining contractual life of options vested and expected to vest at October 31, 2012: 3.38 years.

 

Aggregate intrinsic value of options outstanding at October 31, 2012: $4,331,603

 

Aggregate intrinsic value of options exercisable at October 31, 2012: $3,721,383

 

Aggregate intrinsic value of options vested and expected to vest at October 31, 2012: $4,255,276

 

As of October 31, 2012, $384,950 of expense with respect to nonvested share-based arrangements has yet to be recognized and is expected to be recognized over a weighted average period of 3.61 years.