Note 14 - Equity Incentive Plan and Stock Based Compensation

9 Months Ended

Aug. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

14) Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder.

The 2020 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of 1,000 shares of fully vested common stock annually or initially upon their election to the Board and another 1,000 shares of fully vested common stock on the last business day of each fiscal quarter.

	For the Three Months Ended
	August 31, 2022		August 31, 2021
Shares issued to directors (immediate vesting)		5,000		5,000
Shares issued to directors, employees, and consultants (three-year vesting)		-		-
Total shares issued		5,000		5,000

	For the Nine Months Ended
	August 31, 2022			August 31, 2021
Shares issued to directors (immediate vesting)		20,000			20,000
Shares issued to directors, employees, and consultants (three-year vesting)		94,500			88,500
Unvested shares forfeit upon termination		(8,333	)		-
Total shares issued		106,167			108,500

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. No stock options were granted during the three- and nine-month periods ended August 31, 2022 or in the same respective period of fiscal 2021.

	For the Three Months Ended
	August 31, 2022		August 31, 2021
Stock-based compensation expense		66,826		61,446
Treasury share repurchase expense		-		-
Stock-based compensation expense net of treasury repurchases		66,826		61,446

	For the Nine Months Ended
	August 31, 2022			August 31, 2021
Stock-based compensation expense		224,291			203,245
Treasury share repurchase expense		(92,432	)		(30,471	)
Stock-based compensation expense net of treasury repurchases		131,859			172,774

The Company’s repurchased treasury shares are related to the vesting of employee’s stock compensation. Employees are given the option to pay their share of payroll tax or the Company will buy back the shares and pay the tax on their behalf.