NOTE 5. STOCK-BASED COMPENSATION

12 Months Ended

Mar. 31, 2023

Notes

NOTE 5. STOCK-BASED COMPENSATION

NOTE 5. STOCK-BASED COMPENSATION

Stock Option Plan

Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors, and certain service providers of incentive stock options and nonstatutory stock options. Generally, the options may be exercised at any time prior to expiration, subject to vesting based on terms of employment. The period ranges from immediate vesting to vesting over a five-year period. The options have exercisable lives ranging from one year to ten years from the date of grant, and are generally not eligible to vest early in the event of retirement, death, disability, or change in control. Exercise prices are not less than fair market value of the underlying Common Stock at the date the options are granted. Stock-based compensation expense was $59,657 in fiscal 2023 and $81,855 in fiscal 2022.

Valuation assumptions

We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options. The following assumptions were used to estimate the fair value of options granted:

	Year Ended March 31,
	2023	2022
Risk-free interest rate	0.9% – 3.0%	0.7% – 0.9%
Expected volatility	35% – 39%	35% – 36%
Expected life (years)	4.6%	4.6
Dividend yield	5.0% – 5.5%	5.0% – 5.4%

The determination of the fair value of the awards on the date of grant using the Black-Scholes-Merton model is affected by our stock price as well as assumptions of other variables, including projected stock option exercise behaviors, risk-free interest rate, and expected volatility of our stock price in future periods. Our estimates and assumptions affect the amounts reported in the financial statements and accompanying notes.

Expected life

We analyze historical exercise and termination data to estimate the expected life assumption. We believe historical data currently represents the best estimate of the expected life of a new option.

Risk-free interest rate

The risk-free rate is based on the yield of U.S. Treasury securities on the grant date for maturities similar to the expected lives of the options.

Volatility

We use historical volatility to estimate the expected volatility of our common stock.

Dividend yield

We assumed a 5.0% to 5.5% dividend yield for fiscal 2023 and 5.0% to 5.4% for fiscal 2022 based on the dividend yield on the date the options were granted.

Tax effects of stock-based compensation

Stock-based compensation reduced deferred tax assets by $16,976 for fiscal 2023 and increased deferred tax assets by $13,521 for fiscal 2022.

General stock option information

The following table summarizes the activity for all stock options outstanding for the years ended March 31:

	2023				2022
	Shares		Weighted Average  Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding at beginning of year	29,000		$	69.52	30,500		$	68.28
Granted	6,500			50.35	6,500			74.22
Exercised	(1,000	)		57.46	(5,000	))		61.36
Terminated	-			-	(3,000	)		80.75
At March 31,	34,500		$	66.26	29,000		$	69.52
Options exercisable at March 31,	32,000		$	63.60	24,000		$	64.32

Weighted average grant date fair value of options granted during the year $ 9.06 $ 13.04

The following table summarizes additional information about stock options outstanding and exercisable at March 31, 2023:

Options Outstanding						Options Exercisable
	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Exercisable	Weighted Average Exercise Price		Aggregate Intrinsic Value
Options Outstanding
34,500	5.67	$	66.26	$	562,415	32,000	$	63.60	$	562,415

The remaining weighted-average exercisable life was 5.9 years as of March 31, 2023 and 5.0 years as of March 31, 2022. 32,000 outstanding options were exercisable as of March 31, 2023 and 24,000 outstanding options were exercisable as of March 31, 2022. The total intrinsic value of options outstanding March 31, 2023, based on our closing stock price for that day, was $562,415, all of which was exercisable. The total fair value of option grants was $58,900 in fiscal 2023. There was $2,173 of unrecognized stock-based compensation as of March 31, 2023 related to nonvested options, which we expect to recognize in the first quarter of fiscal 2024.