Note

–

Stock-based compensation and equity transactions

December 3, 2018,

two

employees were each granted

25,000

incentive stock options. These options vested

5,000

each on the date of grant, and the balance vests as to

5,000

shares each per year thereafter on each of the next

four

anniversaries of

December 3, 2018,

and expire

ten

years from the date of grant. Also on

December 3, 2018,

one

employee was granted

10,000

incentive stock options. These options vested

2,000

shares on the date of grant, and the balance vests as to

2,000

shares per year thereafter on each of the next

four

anniversaries of

December 3, 2018,

and expire

ten

years from the date of grant.

March 8, 2019,

one

employee was granted

25,000

incentive stock options. These options vested

5,000

on the date of grant, and the balance vests as to

5,000

shares per year thereafter on each of the next

four

anniversaries of

March 8, 2019,

and expire

ten

years from the date of grant.

December 6, 2019,

one

employee was granted

50,000

incentive stock options. These options vested

10,000

on the date of grant, and the balance vests as to

10,000

shares per year thereafter on each of the next

four

anniversaries of

December 6, 2019,

and expire

ten

years from the date of grant.

January 9, 2020,

we granted the following equity awards to our managers and officers:

●

Stock grants for a total of

12,075

common shares to

three

employees. We accounted for these shares as stock-based compensation totaling

$77,000;

●

A total of

3,241

incentive stock options to

two

employees, all of which vested immediately on the date of grant; and

●

A total of

38,500

shares of restricted stock and

77,000

incentive stock options to

five

employees. The shares of restricted stock and incentive stock options vest over

four

years as follows: (i)

one

-quarter of the restricted shares and options shall vest on

January 9, 2021;

and (ii) the remaining restricted shares and options shall vest in

twelve

equal quarterly installments over the next

three

years, commencing with the

first

quarter following

January 9, 2021.

All incentive stock options expire

ten

years from the date of grant.

June 30, 2020,

one

employee was granted

10,000

incentive stock options. These options vested

2,500

on the date of grant, and the balance vests as to

2,500

shares per year thereafter on each of the next

three

anniversaries of

June 30, 2020,

and expire

ten

years from the date of grant.

other shares or options were granted to company employees during the

three

and

nine

months ended

July 31, 2020

and

2019.

The weighted average fair value of employee stock options that were granted during the

nine

months ended

July 31, 2020

and

2019

was estimated to be

$3.06

and

$3.98,

respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

	Nine Months Ended July 31,
	2020			2019
Risk-free interest rate		1.58	%		2.86	%
Dividend yield		0.63	%		0.98	%
Expected life of the option (in years)		7.01			5.90
Volatility factor		52.68	%		55.42	%

Expected volatilities are based on historical volatility of our stock price and other factors. We used the historical method to calculate the expected life of the

2020

and

2019

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.

Company stock option plans

Descriptions of our stock option plans are included in Note

of our Annual Report on Form

-K for the year ended

October 31, 2019.

A summary of the status of the options granted under our stock option plans as of

July 31, 2020

and the changes in options outstanding during the

nine

months then ended is presented in the table that follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at November 1, 2019		890,147		$	3.62
Options granted		140,241		$	6.40
Options exercised		(241,209	)	$	1.85
Options outstanding at July 31, 2020		789,179		$	4.66
Options exercisable at July 31, 2020		459,513		$	4.48
Options vested and expected to vest at July 31, 2020		788,143		$	4.67

Weighted average remaining contractual life of options outstanding as of

July 31, 2020:

4.98

years

Weighted average remaining contractual life of options exercisable as of

July 31, 2020:

2.84

years

Weighted average remaining contractual life of options vested and expected to vest as of

July 31, 2020:

4.97

years

Aggregate intrinsic value of options outstanding at

July 31, 2020:

$719,000

Aggregate intrinsic value of options exercisable at

July 31, 2020:

$433,000

Aggregate intrinsic value of options vested and expected to vest at

July 31, 2020:

$714,000

As of

July 31, 2020,

$619,000

and

$255,000

of expenses with respect to nonvested stock options and restricted shares, respectively, has yet to be recognized but is expected to be recognized over a weighted average period of

4.31

and

1.27

years, respectively.

Non-employee directors receive a compensation package of

$50,000

annually, which is paid

one

-half in cash and

one

-half through the grant of non-qualified awards. For fiscal

2020,

compensation payable to non-employee directors will be prorated from

November 1, 2019

through

August 31, 2020.

November 4, 2019,

we granted each of our

five

non-employee directors

3,270

shares of restricted stock. The number of restricted shares granted to each director was determined by prorating

$25,000

for the

months ending

August 31, 2020

and dividing by the

-day average RFIL stock price (

$6.36

). These restricted shares vest ratably through

August 31, 2020.

Non-employee directors who are also a chairperson of a committee of the Board receive additional compensation of

$15,000

annually, which is payable in cash. On

June 5, 2020,

the Board of Directors revised the committee chair compensation so that all future compensation from

July 1, 2020

through the next annual meeting of the stockholders will be payable in shares of common stock rather than cash. Shares issued as compensation will be valued at the closing RFIL stock price on the last day of each quarter. Accordingly, on

July 31, 2020,

each of the

four

committee chairpersons was awarded

279

shares at

$4.47

per share. Beginning

August 1, 2020,

the full

$15,000

additional compensation will be payable in shares of common stock valued at the closing RFIL stock price on the last day of the quarter. We account for these shares as stock-based compensation.

Stock option expense

During the

three

months ended

July 31, 2020

and

2019,

stock-based compensation expense totaled

$166,000

and

$68,000,

respectively, and was classified in selling and general expense. During the

nine

months ended

July 31, 2020

and

2019,

stock-based compensation expense totaled

$449,000

and

$260,000,

respectively, and was classified in selling and general expenses.