SHARE-BASED COMPENSATION

6 Months Ended

May 01, 2022

NOTE 8 - SHARE-BASED COMPENSATION

In March 2016, shareholders approved our current equity incentive compensation plan (the “Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by us (in the open market or in private transactions), or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan is four million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. The table below presents information on our share-based compensation expenses for the three and six-month periods ended May 1, 2022, and May 2, 2021.

	Three Months Ended				Six Months Ended
	May 1, 2022		May 2, 2021		May 1, 2022		May 2, 2021

Expense reported in:
Cost of goods sold	$	182	$	97	$	324	$	208
Selling, general and administrative		1,243		1,207		2,424		2,304
Research and development		159		118		293		211

Total expense incurred	$	1,584	$	1,422	$	3,041	$	2,723


Expense by award type:
Restricted stock awards	$	1,316	$	1,313	$	2,683	$	2,484
Stock options		221		54		259		138
ESPP		47		55		99		101

Total expense incurred	$	1,584	$	1,422	$	3,041	$	2,723


Income tax benefits of share-based compensation	$	104	$	62	$	188	$	108
Share-based compensation cost capitalized	$	-	$	-	$	-	$	-

Restricted Stock Awards

We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of our common stock. The table below presents information on our restricted stock awards for the three and six-months ended May 1, 2022, and May 2, 2021.

	Three Months Ended				Six Months Ended
	May 1, 2022		May 2, 2021		May 1, 2022		May 2, 2021
Number of shares granted in period		-		15,000		535,400		556,200
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	12.65	$	19.28	$	11.17
Compensation cost not yet recognized	$	10,779	$	9,762	$	10,779	$	9,762
Weighted-average amortization period for cost not yet recognized (in years)		2.8		2.9		2.8		2.9
Shares outstanding at balance sheet date		891,429		1,022,327		891,429		1,022,327

Stock Options

Option awards generally vest in one to four years, and have a ten-year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant-date fair values of options are based on closing prices of our common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of our common stock. We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on our stock options for the three and six-months ended May 1, 2022, and May 2, 2021.

	Three Months Ended				Six Months Ended
	May 1, 2022		May 2, 2021		May 1, 2022		May 2, 2021
Number of options granted in period		-		-		-		-
Cash received from option exercised	$	438	$	309	$	4,149	$	967
Compensation cost not yet recognized	$	52	$	232	$	52	$	232
Weighted-average amortization period for cost not yet recognized (in years)		0.7		1.4		0.7		1.4

Information on outstanding and exercisable option awards as of May 1, 2022, is presented below.

Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value

Outstanding at May 1, 2022	718,213	$	9.90	3.5	$	3,657
Exercisable at May 1, 2022	693,987	$	9.90	3.4	$	3,531