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Note 8 - Stock-based Compensation and Equity Transactions | 6 Months Ended
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Apr. 30, 2023
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] | Note 8 – Stock-based compensation and equity transactions On January 10, 2022, we granted a total of 39,666 shares of restricted stock and 106,001 incentive stock options to one manager and three officers. The shares of restricted stock and incentive stock options vest over four years as follows: (i) one-quarter of the restricted shares and options vested on January 10, 2023; and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years. All incentive stock options expire 10 years from the date of grant. On January 10, 2023, we granted a total of 54,092 shares of restricted stock and 108,181 incentive stock options to one manager and three officers. 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 10, 2024; and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years. Also on January 10, 2023, we granted another manager 50,000 incentive stock options. These options shall vest in five equal installments on each of the next five anniversaries of January 10, 2023. All incentive stock options expire 10 years from the date of grant. No other shares or options were granted to company employees during the three and six months ended April 30, 2023 and 2022. The weighted average fair value of employee stock options that were granted during the six months ended April 30, 2023 and 2022 was estimated to be $3.21 and $3.84, respectively, per share, using the Black-Scholes option pricing model with the following assumptions:
|  | Six Months Ended April 30, |
|  | 2023 |  |  | 2022 |
Risk-free interest rate |  |  | 3.76 | % |  |  | 1.23 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected life of the option (in years) |  | 7.00 |  |  | 7.00 |
Volatility factor |  |  | 54.30 | % |  |  | 53.35 | %
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 2023 and 2022 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 9 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2022. A summary of the status of the options granted under our stock option plans as of April 30, 2023 and the changes in options outstanding during the six months then ended is presented in the table that follows:
|  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |
|  | Shares |  |  | Exercise Price |
Outstanding at November 1, 2022 |  |  | 691,005 |  |  | $ | 5.87 |
Options granted |  |  | 158,181 |  |  | $ | 5.46 |
Options exercised |  |  | (45,000 | ) |  | $ | 1.90 |
Options cancelled |  |  | - |  |  | $ | - |
Options outstanding at April 30, 2023 |  |  | 804,186 |  |  | $ | 6.01 |
Options exercisable at April 30, 2023 |  |  | 405,840 |  |  | $ | 6.68 |
Options vested and expected to vest at April 30, 2023 |  |  | 798,697 |  |  | $ | 6.02 |
Weighted average remaining contractual life of options outstanding as of April 30, 2023: 6.93 years Weighted average remaining contractual life of options exercisable as of April 30, 2023: 5.92 years Weighted average remaining contractual life of options vested and expected to vest as of April 30, 2023: 6.94 years Aggregate intrinsic value of options outstanding at April 30, 2023: $146,555 Aggregate intrinsic value of options exercisable at April 30, 2023: $39,720 Aggregate intrinsic value of options vested and expected to vest at April 30, 2023: $144,162 As of April 30, 2023, $987,788 and $652,629 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 2.67 and 1.29 years, respectively. Stock option expense During the three months ended April 30, 2023 and 2022, stock-based compensation expense totaled $230,000 and $168,000, respectively, and was classified in selling and general expense. During the six months ended April 30, 2023 and 2022, stock-based compensation expense totaled $441,000 and $307,000, respectively, and was classified in selling and general expenses.

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