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Note 2 - Stock Incentive Plans and Other Share-based Compensation

Apr. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(2)

Stock Incentive Plans and Other Share‑Based Compensation

On March 29, 2022, the Company’s shareholders approved the First Amendment (the “First Amendment”) to the Optical Cable Corporation 2017 Stock Incentive Plan (the “2017 Plan”) that was recommended for approval by the Company’s Board of Directors. The First Amendment reserves an additional 350,000 common shares of the Company for issuance under the 2017 Plan. As a result, there were approximately 355,000 shares available for grant under the 2017 Plan as of April 30, 2022 (including the 350,000 new shares added to the 2017 Plan).

Share-based compensation expense for employees, a consultant and non-employee Directors recognized in the condensed consolidated statements of operations for the three months and six months ended April 30, 2022 was $113,212 and $237,651, respectively, and for the three months and six months ended April 30, 2021 was $101,762 and $142,367, respectively. Share-based compensation expense is entirely related to expense recognized in connection with the vesting of restricted stock awards or other stock awards.

Stock Compensation

The Company has granted, and anticipates granting from time to time, restricted stock awards subject to approval by the Compensation Committee of the Board of Directors. Since fiscal year 2004, the Company has exclusively used restricted stock awards for all share-based compensation of employees and consultants, and restricted stock awards or stock awards to non-employee members of the Board of Directors.

The restricted stock awards granted to employees under the 2017 Plan vest over time if certain operational performance-based criteria are met. Failure to meet the criteria required for vesting will result in a portion or all of the shares being forfeited. During the three months ended April 30, 2022, a restricted stock award for an employee under the 2017 Plan totaling 17,500 shares were approved by the Compensation Committee of the Board of Directors of the Company. All of the restricted shares granted are operational performance-based shares vesting over approximately four years beginning on April 9, 2023 based on the achievement of certain quantitative operational performance goals.

During the three months ended April 30, 2022, OCC also granted restricted stock awards totaling 27,364 shares to non-employee Directors under the 2017 Plan. The shares are subject to a one-year vesting period and are part of the non-employee Directors’ annual compensation for service on the Board of Directors. The Company recorded expense totaling $56,175 and $83,900, respectively, during the three months and six months ended April 30, 2022 and recorded expense totaling $35,917 and $71,834, respectively, during the three months and six months ended April 30, 2021 related to the grants to non-employee Directors.

Restricted stock award activity during the six months ended April 30, 2022 consisted of restricted stock grants totaling 44,864 shares, restricted shares forfeited totaling 25,313 shares and restricted shares withheld for taxes in connection with the vesting of restricted shares totaling 22,166. OCC restricted stock grants provide the participant with the option to surrender shares to pay for withholding tax obligations resulting from any vesting restricted shares, or to pay cash to the Company or taxing authorities in the amount of the withholding taxes owed on the value of any vesting restricted shares in order to avoid surrendering shares.

As of April 30, 2022, the estimated amount of compensation cost related to unvested equity-based compensation awards in the form of service-based and operational performance-based shares that the Company will recognize over a 3.5 year weighted-average period is approximately $1.2 million.