Note 7 – Stock-based compensation and equity transactions

On December 2, 2024, we granted 47,500 incentive stock options. The incentive stock options vest equally over four years as follows: (i) one-quarter of the options vested on December 2, 2025 and (ii) the remaining options shall vest in three equal annual installments over the next three years.

On January 13, 2025, we granted a total of 82,500 shares of restricted stock and 165,000 incentive stock options. 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 13, 2026 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

On December 1, 2025, we granted 55,500 incentive stock options. The incentive stock options vest equally over four years as follows: (i) one-quarter of the options shall vest on December 1, 2026 and (ii) the remaining options shall vest in three equal annual installments over the next three years.

On January 7, 2026, we granted a total of 82,500 shares of restricted stock and 165,000 incentive stock options. 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 7, 2027 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

No other shares or options were granted to Company employees during the three and nine months ended July 31, 2026 and 2025.

The fair value of each option granted during the nine months ended July 31, 2026 and 2025 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

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 2026 and 2025 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 expected dividend yield is based upon the historical dividend yield.

Company stock option plans

Descriptions of our stock option plans are set forth in Note 8 to our audited financial statements included in our Form 10-K for the fiscal year ended  October 31, 2025. A summary of the status of the options granted under our stock option plans as of  July 31, 2026 and the changes in options outstanding during the nine months then ended is presented in the table that follows:

Weighted average remaining contractual life of options outstanding as of  July 31, 2026: 6.64 years

Weighted average remaining contractual life of options exercisable as of  July 31, 2026: 5.35 years

Weighted average remaining contractual life of options vested and expected to vest as of  July 31, 2026: 6.64 years

Aggregate intrinsic value of options outstanding at  July 31, 2026: $8,524,000

Aggregate intrinsic value of options exercisable at  July 31, 2026: $4,913,000

Aggregate intrinsic value of options vested and expected to vest at  July 31, 2026: $8,524,000

As of  July 31, 2026, $1,193,000 and $921,000 of expenses with respect to nonvested stock options and restricted shares, respectively, have yet to be recognized but are expected to be recognized over a weighted average period of 1.3 and 1.3 years, respectively.

Stock option expense

During the three months ended  July 31, 2026 and 2025, stock-based compensation expense totaled $283,000 and $219,000 respectively, and was classified in selling and general expense. During the nine months ended July 31, 2026 and 2025, stock-based compensation expense totaled $824,000 and $640,000, respectively, and was classified in selling and general expense.