Optical Cable Corp 10-Q for FY2022 Q2

About this 10-Q

Headline figures

Optical Cable Corp (OCC)

10-Q 2022-06-13 For: 2022-04-30

Added on April 10, 2026

Optical Cable Corp filed this 10-Q on June 13, 2022, covering the quarter ended April 30, 2022 (FY2022 Q2).

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OPTICAL CABLE CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

Quarter ended April 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $17.2M; up 9.3% from $15.74M a year earlier
Net loss: $227.99K; compared with net income of $3.39M a year earlier

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Virginia	54-1237042
(State or other jurisdiction of incorporation	(I.R.S. Employer
or organization)	Identification No.)

Title of Each Class	Trading Symbol	Name of exchange on which registered
Common Stock, no par value	OCC	Nasdaq Global Market

	Large Accelerated Filer ☐	Accelerated Filer ☐	Non-accelerated Filer ☐	Smaller Reporting Company ☒
	Emerging Growth Company ☐

		Page

PART I.	FINANCIAL INFORMATION

	Item 1. Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets – April 30, 2022 and October 31, 2021	2

	Condensed Consolidated Statements of Operations – Three Months and Six Months Ended April 30, 2022 and 2021	3

	Condensed Consolidated Statements of Shareholders’ Equity – Three Months and Six Months Ended April 30, 2022 and 2021	4

	Condensed Consolidated Statements of Cash Flows – Three Months and Six Months Ended April 30, 2022 and 2021	5

	Condensed Notes to Condensed Consolidated Financial Statements	6

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 4. Controls and Procedures	31

PART II.	OTHER INFORMATION

	Item 6. Exhibits	32

SIGNATURES		37

	April 30,		October 31,
	2022		2021
Assets
Current assets:
Cash	$	239,034	$	132,249
Trade accounts receivable, net of allowance for doubtful accounts of $79,565 at April 30, 2022 and $61,527 at October 31, 2021		10,551,849		8,376,000
Other receivables		2,182,809		2,204,456
Inventories		18,645,991		16,303,808
Prepaid expenses and other assets		448,951		549,350
Total current assets		32,068,634		27,565,863
Property and equipment, net		7,647,300		7,912,851
Intangible assets, net		634,894		646,860
Other assets, net		1,428,235		1,790,956
Total assets	$	41,779,063	$	37,916,530
Liabilities and Shareholders’ Equity
Current liabilities:
Current installments of long-term debt	$	331,381	$	324,840
Accounts payable and accrued expenses		6,251,534		4,275,880
Accrued compensation and payroll taxes		1,829,941		1,553,771
Income taxes payable		16,911		13,121
Total current liabilities		8,429,767		6,167,612
Note payable, revolver - noncurrent		7,045,197		3,465,908
Long-term debt, excluding current installments		4,361,021		4,528,611
Other noncurrent liabilities		767,894		1,548,446
Total liabilities		20,603,879		15,710,577
Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; none issued and outstanding		-		-
Common stock, no par value, authorized 50,000,000 shares; issued and outstanding 7,894,862 shares at April 30, 2022 and 7,897,477 shares at October 31, 2021		14,470,664		14,337,649
Retained earnings		6,704,520		7,868,304
Total shareholders’ equity		21,175,184		22,205,953
Commitments and contingencies
Total liabilities and shareholders’ equity	$	41,779,063	$	37,916,530

	Three Months Ended						Six Months Ended
	April 30,						April 30,
	2022			2021			2022			2021
Net sales	$	17,200,578		$	15,741,114		$	31,640,873		$	27,617,687
Cost of goods sold		12,167,132			10,921,898			22,561,575			20,489,081
Gross profit		5,033,446			4,819,216			9,079,298			7,128,606
Selling, general and administrative expenses		5,036,331			4,589,592			9,816,530			8,897,516
Royalty (income) expense, net		6,586			(42,800	)		13,544			(49,767	)
Amortization of intangible assets		11,540			11,011			23,635			21,905
Income (loss) from operations		(21,011	)		261,413			(774,411	)		(1,741,048	)
Other income (expense), net:
Interest expense, net		(182,531	)		(180,980	)		(340,791	)		(354,963	)
Other, net		(29,643	)		3,311,342			(41,028	)		3,313,970
Other income (expense), net		(212,174	)		3,130,362			(381,819	)		2,959,007
Income (loss) before income taxes		(233,185	)		3,391,775			(1,156,230	)		1,217,959
Income tax expense (benefit)		(5,194	)		6,616			7,554			(25,720	)
Net income (loss)	$	(227,991	)	$	3,385,159		$	(1,163,784	)	$	1,243,679
Net income (loss) per share: Basic and diluted	$	(0.03	)	$	0.45		$	(0.16	)	$	0.17

	Six Months Ended April 30, 2022
									Total
	Common Stock					Retained			Shareholders’
	Shares			Amount		Earnings			Equity
Balances at October 31, 2021		7,897,477		$	14,337,649	$	7,868,304		$	22,205,953
Share-based compensation, net		(47,479	)		19,803		—			19,803
Net loss		—			—		(935,793	)		(935,793	)
Balances at January 31, 2022		7,849,998		$	14,357,452	$	6,932,511		$	21,289,963

Share-based compensation, net		44,864			113,212		—			113,212
Net loss		—			—		(227,991	)		(227,991	)
Balances at April 30, 2022		7,894,862		$	14,470,664	$	6,704,520		$	21,175,184

	Six Months Ended April 30, 2021
									Total
	Common Stock					Retained			Shareholders’
	Shares			Amount		Earnings			Equity
Balances at October 31, 2020		7,537,087		$	14,002,130	$	1,257,788		$	15,259,918
Share-based compensation, net		(971	)		40,605		—			40,605
Net loss		—			—		(2,141,480	)		(2,141,480	)
Balances at January 31, 2021		7,536,116		$	14,042,735	$	(883,692	)	$	13,159,043

Share-based compensation, net		—			101,762		—			101,762
Net income		—			—		3,385,159			3,385,159
Balances at April 30, 2021		7,536,116		$	14,144,497	$	2,501,467		$	16,645,964

Fiscal Year	Operating leases			Finance lease
2022 (1)	$	217,366		$	21,434
2023		382,716			42,868
2024		331,438			42,868
2025		55,023			42,868
2026		-			55,715
Total undiscounted lease payments		986,543			205,753
Present value discount		(60,508	)		(21,882	)
Total lease liability	$	926,035		$	183,871

Exhibit No.		Description

3.1		Articles of Amendment filed November 5, 2001 to the Amended and Restated Articles of Incorporation, as amended through November 5, 2001 (incorporated herein by reference to Exhibit 1 to the Company’s Form 8-A12G filed with the Commission on November 5, 2001).
3.2		Articles of Amendment filed July 5, 2002 to the Amended and Restated Articles of Incorporation, as amended through July 5, 2002 (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement on Form 14A filed July 5, 2002).
3.3		Amended and Restated Bylaws of Optical Cable Corporation (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the third quarter ended July 31, 2011).
4.1		Form of certificate representing Common Stock (incorporated herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the third quarter ended July 31, 2004 (file number 0-27022)).
4.2		Form of certificate representing Common Stock (incorporated herein by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the third quarter ended July 31, 2012).
4.3		Corrected Credit Line Deed of Trust dated June 4, 2008 between Optical Cable Corporation as Grantor, LeClairRyan as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina, successor by merger with Valley Bank) as Beneficiary (incorporated herein by reference to Exhibit 4.17 of the Company’s Annual Report on Form 10-K for the period ended October 31, 2008 filed January 29, 2009).
4.4		Corrected Deed of Trust, Security Agreement and Fixtures Filing dated May 30, 2008 by and between Superior Modular Products Incorporated as Grantor, LeClairRyan as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina, successor by merger with Valley Bank) as Beneficiary (incorporated herein by reference to Exhibit 4.18 of the Company’s Annual Report on Form 10-K for the period ended October 31, 2008 filed January 29, 2009).
4.5		Term Loan A Note in the amount of $1,816,609 by Optical Cable Corporation dated April 26, 2016, for the benefit of Northeast Bank as of July 15, 2021, as successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K/A filed May 3, 2016).
4.6		Term Loan B Note in the amount of $5,271,411 by Optical Cable Corporation dated April 26, 2016, for the benefit of Northeast Bank as of July 15, 2021, as successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) (incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K/A filed May 3, 2016).

4.7		Modification of Credit Line Deed of Trust dated April 26, 2016 by and between Optical Cable Corporation (successor by merger to Superior Modular Products Incorporated) as Grantor, Andrew B. Agee (in substitution of LeClairRyan) as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) as Beneficiary, modifying that certain Corrected Credit Line Deed of Trust dated June 4, 2008 (incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K/A filed May 3, 2016).
4.8		Modification of Deed of Trust, Security Agreement, and Assignment of Leases and Rents dated April 26, 2016 by and between Optical Cable Corporation (successor by merger to Superior Modular Products Incorporated) as Grantor, Andrew B. Agee (in substitution of LeClairRyan) as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) as Beneficiary, modifying that certain Corrected Deed of Trust, Security Agreement and Assignment of Leases and Rents dated May 30, 2008 (incorporated herein by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K/A filed May 3, 2016).
4.9		Second Modification of Credit Line Deed of Trust dated May 2, 2018 by and between Optical Cable Corporation (successor by merger to Superior Modular Products Incorporated) as Grantor, W. Todd Ross (in substitution of LeClairRyan) as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) as Beneficiary, modifying that certain Modification of Credit Line Deed of Trust dated April 26, 2016, which previously modified that certain Corrected Credit Line Deed of Trust dated June 4, 2008 (incorporated herein by reference to Exhibit 4.20 to the Company’s Quarterly Report on Form 10-Q for the second quarter ended April 30, 2018).
4.10		Second Modification of Deed of Trust, Security Agreement, and Assignment of Leases and Rents dated May 2, 2018 by and between Optical Cable Corporation (successor by merger to Superior Modular Products Incorporated) as Grantor, W. Todd Ross (in substitution of LeClairRyan) as Trustee and Northeast Bank, successor in interest to Pinnacle Bank (successor by merger with Bank of North Carolina) as Beneficiary, modifying that certain Modification of Deed of Trust, Security Agreement, and Assignment of Leases and Rents dated April 26, 2016, which previously modified that certain Corrected Deed of Trust, Security Agreement and Assignment of Leases and Rents dated May 30, 2008 (incorporated herein by reference to Exhibit 4.21 to the Company’s Quarterly Report on Form 10-Q for the second quarter ended April 30, 2018).
4.11		Loan and Security Agreement dated July 24, 2020 by and among Optical Cable Corporation along with its subsidiaries Applied Optical Systems, Inc., and Centric Solutions LLC, and North Mill Capital LLC (now doing business as SLR Business Credit) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 30, 2020).

4.12		Revolving Credit Master Promissory Note dated July 24, 2020 by Optical Cable Corporation along with its subsidiaries Applied Optical Systems, Inc., and Centric Solutions LLC in favor of North Mill Capital LLC (now doing business as SLR Business Credit) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated July 30, 2020).
4.13		Payoff Letter from Pinnacle Bank to North Mill Capital LLC (now doing business as SLR Business Credit) and Optical Cable Corporation (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated July 30, 2020).
4.14		Amended and Restated Stockholder Protection Rights Agreement, dated as of November 2, 2021, between Optical Cable Corporation and American Stock Transfer & Trust Company, LLC, as rights agent (incorporated herein by reference to Exhibit 4.1 to the Company’s Form 8-A12G filed with the Commission on November 5, 2021).
10.1*		Optical Cable Corporation 2011 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s definitive proxy statement on Form 14A filed February 23, 2011).
10.2*		Optical Cable Corporation Amended and Restated 2011 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s definitive proxy statement on Form 14A filed February 27, 2013).
10.3*		Optical Cable Corporation Second Amended and Restated 2011 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s definitive proxy statement on Form 14A filed March 4, 2015).
10.4*		Optical Cable Corporation 2017 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s definitive proxy statement on Form 14A filed March 13, 2017).
10.5*		Form of time vesting award agreement under the Optical Cable Corporation 2005 Stock Incentive Plan, 2011 Stock Incentive Plan and Amended and Restated 2011 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the period ended April 30, 2006 filed June 14, 2006).
10.6*		Form of operational performance (Company financial performance measure) vesting award agreement under the Optical Cable Corporation 2005 Stock Incentive Plan, 2011 Stock Incentive Plan, Amended and Restated 2011 Stock Incentive Plan and 2017 Stock Incentive Plan (incorporated by reference to Exhibit 10.20 of the Company’s Quarterly Report on Form 10-Q for the period ended April 30, 2009 filed June 12, 2009).
10.7		Redemption Agreement by and between Optical Cable Corporation and BB&T Capital Markets dated July 14, 2015 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 14, 2015).
10.8*		Amended and Restated Employment Agreement by and between Optical Cable Corporation and Neil D. Wilkin, Jr. effective April 11, 2011 (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed April 15, 2011).

10.9*		Amendment, effective December 18, 2012, to Amended and Restated Employment Agreement by and between Optical Cable Corporation and Neil D. Wilkin, Jr. effective April 11, 2011 (incorporated herein by reference to Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2013 filed March 15, 2013).
10.10*		Second Amendment, effective March 14, 2014, to Amended and Restated Employment Agreement by and between Optical Cable Corporation and Neil D. Wilkin, Jr. effective April 11, 2011, as amended December 18, 2012 (incorporated herein by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2014 filed March 17, 2014).
10.11*		Amended and Restated Employment Agreement by and between Optical Cable Corporation and Tracy G. Smith effective April 11, 2011 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed April 15, 2011).
10.12*		Amendment, effective December 18, 2012, to Amended and Restated Employment Agreement by and between Optical Cable Corporation and Tracy G. Smith effective April 11, 2011 (incorporated herein by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2013 filed March 15, 2013).
10.13*		Second Amendment, effective March 14, 2014, to Amended and Restated Employment Agreement by and between Optical Cable Corporation and Tracy G. Smith effective April 11, 2011, as amended December 18, 2012 (incorporated herein by reference to Exhibit 10.22 of the Company’s Quarterly Report on Form 10-Q for the period ended January 31, 2014 filed March 17, 2014).
10.14*		Form of vesting award agreement for non-employee Board members under the Optical Cable Corporation 2017 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.21 of the Company’s Quarterly Report on Form 10-Q for the period ended April 30, 2017 filed June 13, 2017).
10.15*		Form of operational performance (Company financial performance measure) vesting award agreement under the Optical Cable Corporation 2017 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K for the period ended October 31, 2021 filed December20, 2021).
11.1		Statement regarding computation of per share earnings (incorporated by reference to note 9 of the Condensed Notes to Condensed Consolidated Financial Statements contained herein).
31.1		Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. FILED HEREWITH.

31.2		Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. FILED HEREWITH.
32.1		Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. FURNISHED HEREWITH.
32.2		Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. FURNISHED HEREWITH.
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at April 30, 2022 and October 31, 2021, (ii) Condensed Consolidated Statements of Operations for the three months and six months ended April 30, 2022 and 2021, (iii) Condensed Consolidated Statements of Shareholders’ Equity for the three months and six months ended April 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Cash Flows for the three months and six months ended April 30, 2022 and 2021, and (v) Condensed Notes to Condensed Consolidated Financial Statements. FILED HEREWITH.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	Six Months Ended
	April 30,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	(1,163,784	)	$	1,243,679
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		569,257			640,934
Bad debt expense		18,038			4,616
Share-based compensation expense		237,651			142,367
Loss on sale of property and equipment		31,905			3,167
(Increase) decrease in:
Trade accounts receivable		(2,193,887	)		(1,080,026	)
Other receivables		21,647			(3,443,868	)
Inventories		(2,342,183	)		267,156
Prepaid expenses and other assets		100,399			107,166
Income taxes refundable		-			25,003
Other assets		193,872			(119,134	)
Increase (decrease) in:
Accounts payable and accrued expenses		1,932,023			1,538,457
Accrued compensation and payroll taxes		276,170			329,861
Income taxes payable		3,790			3,724
Other noncurrent liabilities		(712,902	)		(55,035	)
Net cash used in operating activities		(3,028,004	)		(391,933	)
Cash flows from investing activities:
Purchase of and deposits for the purchase of property and equipment		(100,313	)		(90,295	)
Investment in intangible assets		(11,669	)		(14,640	)
Net cash used in investing activities		(111,982	)		(104,935	)
Cash flows from financing activities:
Payroll taxes withheld and remitted on share-based payments		(104,636	)		-
Proceeds from note payable, revolver		33,107,669			27,446,179
Payments on note payable, revolver		(29,528,380	)		(26,498,162	)
Principal payments on long-term debt		(161,049	)		(181,040	)
Payments for financing costs		(50,000	)		(50,000	)
Principal payments on financing lease		(16,833	)		-
Net cash provided by financing activities		3,246,771			716,977
Net increase in cash		106,785			220,109
Cash at beginning of period		132,249			140,839
Cash at end of period	$	239,034		$	360,948

	April 30,		October 31,
	2022		2021
Finished goods	$	3,407,081	$	4,211,098
Work in process		4,108,272		4,023,693
Raw materials		10,805,920		7,763,325
Production supplies		324,718		305,692
Total	$	18,645,991	$	16,303,808

	Six Months Ended
	April 30,
	2022			2021
Balance at beginning of period	$	75,000		$	85,000
Liabilities accrued for warranties issued during the period		80,092			77,122
Warranty claims and costs paid during the period		(33,535	)		(46,271	)
Changes in liability for pre-existing warranties during the period		(56,557	)		(20,851	)
Balance at end of period	$	65,000		$	95,000

	April 30,		October 31,
	2022		2021
Virginia Real Estate Loan ($6.5 million original principal) payable in monthly installments of $31,812, including interest (at 3.95%), with final payment of $3,318,029 due May 1, 2024	$	3,785,133	$	3,899,076
North Carolina Real Estate Loan ($2.24 million original principal) payable in monthly installments of $10,963, including interest (at 3.95%), with final payment of $711,773 due May 1, 2024		907,269		954,375
Total long-term debt		4,692,402		4,853,451
Less current installments		331,381		324,840
Long-term debt, excluding current installments	$	4,361,021	$	4,528,611

	OPTICAL CABLE CORPORATION
	(Registrant)


Date: June 13, 2022	/s/ Neil D. Wilkin, Jr.
	Neil D. Wilkin, Jr.
	Chairman of the Board of Directors,
	President and Chief Executive Officer


Date: June 13, 2022	/s/ Tracy G. Smith
	Tracy G. Smith
	Senior Vice President and
	Chief Financial Officer


	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.