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Note 9 - Stock Options

12 Months Ended

Oct. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 9 – Stock options

Incentive and non-qualified stock option plans

On July 22, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”). In September 2020, the Company’s stockholders approved the 2020 Plan by vote as required by NASDAQ. An aggregate of 1,250,000 shares of common stock was set aside and reserved for issuance under the 2020 Plan. As of October 31, 2023, 703,252 shares of common stock were remaining for future grants of stock options under the 2020 Plan.

Additional disclosures related to stock option plans

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 11, 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 11, 2023, we granted a total of 54,092 shares of restricted stock and 108,181 incentive stock options to one manager and three officers, respectively. 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 11, 2023, we granted another manager 50,000 incentive stock options. As of October 31, 2023, the 50,000 incentive stock options granted to manager were cancelled and forfeited as the manager was no longer employed. All incentive stock options expire 10 years from the date of grant.

On August 29, 2023, we granted one employee 10,000 incentive stock options. These options vested with respect to 2,500 shares on the date of grant, and the remaining shares vests in equal installments thereafter on each of the next three anniversaries of August 29, 2023. The options expire 10 years from the date of grant.

No other shares or options were granted to Company employees during fiscal 2023.

The fair value of each option granted in 2023 and 2022 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

		2023				2022
Weighted average volatility			54.27	%			53.36	%
Expected dividends			0.00	%			0.00	%
Expected term (in years)			7.0				7.0
Risk-free interest rate			3.78	%			1.47	%
Weighted average fair value of options granted during the year		$	3.15			$	3.77
Weighted average fair value of options vested during the year		$	2.80			$	2.32

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.

Additional information regarding all of our outstanding stock options at October 31, 2023 and 2022 and changes in outstanding stock options in 2023 and 2022 follows:

		2023								2022
		Shares or				Weighted				Shares or				Weighted
		Price Per				Average				Price Per				Average
		Share				Exercise Price				Share				Exercise Price
Outstanding at beginning of year			691,005			$	5.87				618,858			$	5.33
Options granted			168,181			$	5.36				145,001			$	6.94
Options exercised			(45,000	)		$	1.90				(60,854	)		$	2.45
Options canceled or expired			(60,000	)		$	5.33				(12,000	)		$	7.58
Options outstanding at end of year			754,186			$	6.04				691,005			$	5.87

Options exercisable at end of year			479,588			$	6.10				366,714			$	6.13

Options vested and expected to vest at end of year			748,358			$	6.13				685,154			$	5.88

Option price range at end of year		$1.90 - $8.69								$1.90 - $8.69

Aggregate intrinsic value of options exercised during year		$	144,005							$	245,420

Weighted average remaining contractual life of options outstanding as of October 31, 2023: 6.29 years

Weighted average remaining contractual life of options exercisable as of October 31, 2023: 5.46 years

Weighted average remaining contractual life of options vested and expected to vest as of October 31, 2023: 6.29 years

Aggregate intrinsic value of options outstanding at October 31, 2023: $58,000

Aggregate intrinsic value of options exercisable at October 31, 2023: $40,000

Aggregate intrinsic value of options vested and expected to vest at October 31, 2023: $57,000

As of October 31, 2023, $642,000 and $612,000 of expense 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 2.34 and 0.96 years, respectively.

Under the compensation policies adopted by the Compensation Committee, directors who also are officers and/or employees of the Company do not receive any compensation for serving on the Board. On September 8, 2022, the Board determined that the compensation payable to directors as Board fees for the next year ending with the 2023 annual meeting of stockholders will be $90,000 ($40,000 in cash and $50,000 in restricted stock). In addition, effective September 8, 2022, the Board determined that additional chair fees and committee member fees would be paid in cash as follows:

		Chair				Member
Board		$	25,000
Audit Committee		$	8,000			$	5,000
Compensation Committee		$	6,000			$	5,000
Nominating and Corporate Governance Committee		$	4,000			$	4,000
Strategic Planning and Capital Allocation Committee		$	4,000			$	4,000

The restricted stock fees vest on the earlier of (i) one year from the date of grant, or (ii) the Company’s next annual meeting of stockholders. The number of restricted shares granted to each director was 7,485 determined by dividing the amount of the fee by the closing price of the Company’s common stock from the date of grant ($6.68). Accordingly, on September 8, 2022, Mr. Holdsworth, Ms. Cefali, Mr. Cohenour, Mr. Garland, and Ms. Tidwell were each granted 7,485 shares of restricted stock. The cash fees vests in four equal quarterly installments paid in arrears commencing November 1, 2022.