Stock option plan

9 Months Ended

Jul. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock option plan

Note 12 – Stock option plan:

On September 4, 2014, the Board approved the grant of an aggregate of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan (“the Plan”) to certain FREIT executive officers, the members of the Board and certain employees of Hekemian & Co., Inc., FREIT’s managing agent. The options have an exercise price of $18.45 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be September 3, 2024.

On November 10, 2016, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be November 9, 2026.

On May 3, 2018, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2018. The options have an exercise price of $15.50 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be May 2, 2028.

On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.

On April 5, 2018, FREIT shareholders approved an amendment to the Plan reserving an additional 300,000 shares for issuance under the Plan. As of July 31, 2019, 442,060 shares are available for issuance under the Plan.

The following table summarizes stock option activity for the nine-month period ended July 31, 2019:

	No. of Options			Weighted Average
	Outstanding			Exercise Price
Options outstanding beginning of period		305,780		$	18.40
Options granted during period		5,000			15.00
Options forfeited/cancelled during period		(40	)		18.45
Options outstanding end of period		310,740		$	18.35
Options vested and expected to vest		303,990
Options exercisable at end of period		218,860

The estimated fair value of options granted during Fiscal 2019 was $2.43 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:

· Expected volatility – 27.69%

· Risk-free interest rate – 2.72%

· Imputed option life – 6.3 years

· Expected dividend yield – 3.82%

The expected volatility over the options’ expected life was based on the historical volatility of the weekly closing price of the Company’s stock over a five (5) year period. The risk-free interest rate was based on the annual yield on the grant date of a zero-coupon U.S. Treasury Bond, the maturity of which equals the option’s expected life. The imputed option life was based on the simplified expected term calculation permitted by the SEC, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The expected dividend yield was based on the Company’s historical dividend yield, exclusive of capital gain dividends. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

For the nine-month periods ended July 31, 2019 and 2018, compensation expense related to stock options granted amounted to approximately $104,000 and $95,000, respectively. For the three-month periods ended July 31, 2019 and 2018, compensation expense related to stock options granted amounted to approximately $35,000 and $34,000, respectively. At July 31, 2019, there was approximately $137,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.1 years.

The aggregate intrinsic value of options vested and expected to vest and options exercisable at July 31, 2019 was approximately $73,000 and $13,000, respectively.