Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

·

Educational Institutions.    Colleges, universities, high schools and grade schools are continually upgrading and improving their networks, with existing LANs being expanded and upgraded for higher data

---

Table of Contents

·

Financial Institutions, Insurance Companies and Other Large Businesses.    Banks, stock trading companies, insurance companies, and other large businesses often need to distribute time critical data among a large number of workstations. Businesses are increasingly using fiber optic backbones to cable their enterprise networks to meet these needs.

·

Government Agencies.    Government agencies tend to have large buildings or complexes, many people, and the need to access and process large quantities of data. Like commercial institutions, these routinely include high performance LANs with fiber optic segments in the backbone. Security also may be desired, and therefore, optical fiber to the desk or workstation may be implemented.

·

Industrial and Manufacturing Facilities.    Industrial and manufacturing facilities typically have a more severe environment than other types of businesses with heavy electrical equipment. Fiber optic cable in this environment offers immunity to electrical noise, ruggedness, high information carrying capacity and greater distance capability. Our products are installed in automotive assembly plants, steel plants, chemical and drug facilities, petrochemical facilities and petroleum refineries, mines and other similar environments.

·

Original Equipment Manufacturers.    Original equipment manufacturers typically manufacture fiber optic cable assemblies, which are short lengths of fiber optic cable pre-terminated with connectors. Supporting virtually all segments of the market, these manufacturers consume large quantities of fiber optic cables, which are often privately labeled.

·

Military.    Our core technologies enable us to develop and efficiently produce fiber optic cables for military tactical applications that survive extreme mechanical and environmental conditions.

·

Internet Infrastructure Companies.    Fiber optic cables are favored in many Internet infrastructure applications, including storage area networks and riser management systems that feed data to multiple clients in a facility by means of a fiber optic network. Distribution of high bandwidth to support growing clusters of DSL users and high speed fiber optic cable modems require fiber optic cables.

---

Table of Contents

---

Table of Contents

·

breadth of product features;

·

quality;

·

ability to meet delivery schedules;

·

technical support and service; and

·

total cost of installation and ownership.

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

---

Table of Contents

(a)

List of documents filed as part of this report:

1.

Financial statements: The Company’s financial statements and related information are hereby incorporated by reference to pages 23 to 45 of the Company’s Annual Report filed as Exhibit 13.1 to this Form 10-K.

2.

Financial statement schedules: All schedules are omitted, as the required information is inapplicable or the information is presented in financial statements or related notes thereto.

3.

Exhibits to this Form 10-K pursuant to Item 601 of Regulation S-K are as follows:

(b)

Reports on Form 8-K:

---

Table of Contents

---

Table of Contents

1.

I have reviewed this annual report on Form 10-K of Optical Cable Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)

presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

5.

I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

---

Table of Contents

---

---

---

---

---

---

---

(1)

The Company recorded a charge during fiscal year 2002 in the amount of $997,112, representing the estimated cost of the settlement of a consolidated shareholder class action lawsuit and related professional fees incurred, net of insurance proceeds. See note 13 of the notes to the financial statements for further information on the litigation settlement.

(2)

In January 2000, at the direction of our former Chairman, President and Chief Executive Officer, we began actively buying and selling shares in the Nasdaq 100 Trust, which is designed to closely track the price and yield performance of the Nasdaq 100 stock index. Our active trading in the Nasdaq 100 Trust continued through May 14, 2001, the date of the last purchase of these shares. On October 3, 2001, as part of a policy to invest future excess funds only in short-term interest-bearing investments, we sold all of our remaining investment in the Nasdaq 100 Trust and paid off the outstanding margin borrowings. For accounting purposes, we categorized our past investment in the Nasdaq 100 Trust as trading securities, and we recorded the investment on our balance sheet at fair value, which was based on quoted market prices. Realized and unrealized net gains or losses were included in other gains (losses) on trading securities, net, under the other income (expense) section of the statement of operations.

---

(3)

The effect of establishing a valuation allowance against our deferred tax assets relating to the capital loss carryforward generated by the sale of our trading securities during fiscal year 2001 resulted in an increase in income tax expense of approximately $4.1 million for fiscal year 2001. See note 9 of the notes to the financial statements for further information on income taxes.

(4)

At a Special Meeting of Shareholders held on July 30, 2002, the Company’s shareholders approved a 1-for-8 reverse stock split of all outstanding shares of common stock and a change in the number of authorized shares of the Company's common stock from 100 million (pre-reverse split) to 50 million. The reverse split was effective at 12:01 a.m. (eastern daylight time) on July 31, 2002, at which time each eight shares of issued and outstanding common stock was converted into one issued and outstanding share of common stock. All references to share and per share data contained elsewhere in this annual report have been retroactively adjusted to reflect the impact of the approved reverse stock split.

---

•

We settled a substantial EEOC lawsuit for alleged prior discriminatory practices and related claims (the $902,000 related charge was recorded in fiscal year 2001). More importantly, we have rebuilt our human resources department during 2002 with new hires, provided extensive training for our employees and supervisors, and have made a demonstrated commitment from the top down, that discrimination, of any kind, will not be tolerated at Optical Cable Corporation.

•

We renegotiated our expiring bank lines at a time when the industry was in difficulty, and when the positive developments at the Company behind the scenes might not have been readily apparent to our bank. At the time, we had over $8.1 million in bank debt. At the end of fiscal year 2002, that debt was zero. As of January 22, 2003, our bank debt had increased to $1.5 million, but only after repurchasing over 21% of our issued and outstanding shares for $2.95 million on January 10, 2003.

•

We negotiated and finalized a settlement in the shareholder class action litigation that began in November 2001. The terms of the settlement were agreed to, the court had reviewed and approved the settlement, and the settlement had become final before the end of fiscal year 2002. The cost: $200,000 in cash, net of insurance proceeds, our attorney costs, and an agreement to issue warrants to the plaintiffs for the purchase of 250,000 shares of our common stock with an exercise price of $4.88 per share. The settlement resulted in a net charge of $997,000 in fiscal year 2002, with additional significant non-cash charge for warrant expenses expected during the first half of fiscal year 2003.

•

We renegotiated two burdensome “take-or-pay” raw fiber supply agreements that were entered into by our former President during more optimistic times. The final result, a $10.6 million reduction in our future fiber purchase commitments, significantly increases our financial flexibility.

•

We successfully navigated in an industry market environment that continues to be sluggish—operating profitably in the process. Although net sales decreased 29.5% during fiscal year 2002 compared to fiscal year 2001, we were able to show net income of $284,000, or $0.04 per share, in a market that has been essentially decimated during the last year and a half.

•

We reached an agreement with a major national distributor to begin stocking our products as part of their regular offering. I believe it is safe to say this distributor would never have seriously entertained the idea of offering Optical Cable Corporation’s products in the past.

•

We received a MVP award from one of our major distributors for our outstanding sales efforts and contributions to their success.

•

We are undergoing a major project to further improve our manufacturing processes, thereby increasing efficiency and consistency of our already high-quality products.

•

We underwent a workforce reduction in June 2002, cutting approximately 15% of our personnel in an continuing effort to control costs—a most difficult, but necessary move.

---

•

We repurchased over 21% of our issued and outstanding shares of stock for a purchase price of $2.00 per share. The shares were purchased from a large mid-west investment bank, effectively eliminating the overhang in the market created by our former President pledging substantially all of his 96% interest in the Company to seven different brokerage firms to secure personal margin loans.

•

We added significant professional resources to our support staff by hiring a new Controller, a new Director of Human Resources, and most recently, an addition to our Information Technology department.

•

We reorganized our sales staff to make it even more responsive to customer needs. This reorganization included hiring a new Vice President of Sales—Western USA when Ted Leonard was promoted to Vice President of Sales—USA, and promoting Michael Newman, from his position as regional sales manager for Latin America, to Vice President of International Sales.

•

We hired Charlie Carson as our new Senior Vice President of Marketing and Strategy. Charlie joins Optical Cable Corporation from Pirelli Cable. Charlie’s decision to join Optical Cable demonstrated to long-time industry veterans just how dramatically our Company had changed since December 2001.

•

We hired Bob Sebesto as our new Vice President of Business Development. Bob is a long-time player in the fiber optic industry. Among his many duties, Bob is charged with exploring new opportunities outside the traditional Optical Cable Corporation relationships.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

(1)

Description of Business and Summary of Significant Accounting Policies

(a)

Description of Business

(b)

Cash and Cash Equivalents

(c)

Trading Securities

---

(d)

Inventories

(e)

Property and Equipment

(f)

Revenue Recognition

(g)

Shipping and Handling Costs

---

(h)

Income Taxes

(i)

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

(j)

Stock Option Plan

(k)

Net Income (Loss) Per Share

---

(l)

Comprehensive Income

(m)

Commitments and Contingencies

(n)

Use of Estimates

(2)

Allowance for Doubtful Accounts for Trade Accounts Receivable

---

(3)

Inventories

---

(4)

Property and Equipment, Net

(5)

Notes Payable to Bank

---

(6)

Related Party Transactions

(7)

Employee Benefits

---

---

---

(8)

Business and Credit Concentrations, Major Customers and Geographic Information

---

(9)

Income Taxes

---

---

---

(10)

Fair Value of Financial Instruments

(11)

Net Income (Loss) Per Share

(12)

Shareholders’ Equity

---

(13)

Contingencies

---

---

(14)

New Accounting Standards

---

(15)

Quarterly Results of Operations (Unaudited)

(16)

Significant Fourth Quarter Adjustments

(17)

Subsequent Repurchase of Common Stock

---

---

---

---

---

Neil D. Wilkin, Jr.

President and Chief Financial Officer

Luke J. Huybrechts

Senior Vice President of Sales

Charles W. Carson

Senior Vice President of Marketing and Strategy

Kenneth W. Harber

Vice President of Administration and Secretary

Randall H. Frazier

President and Founder

R. Frazier, Incorporated

Kenneth W. Harber

Vice President of Administration and Secretary

Optical Cable Corporation

John M. Holland

President and Founder

Cybermotion

Luke J. Huybrechts

Senior Vice President of Sales

Optical Cable Corporation

Craig H. Weber

President

Whitlockebs

Neil D. Wilkin, Jr.

President and Chief Financial Officer

Optical Cable Corporation

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly represents, in all material aspects, the financial condition and results of operations of the Company.