In December 2023, our stockholders approved the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (the “2023 Plan”). The 2023 Plan replaced the Comtech Telecommunications Corp. Amended and Restated 2000 Stock Incentive Plan (the "Prior Plan" and collectively, the "Plans"). Under the 2023 Plan, the number of shares of common stock initially available for all awards, other than substitute awards granted in connection with a corporate transaction, will be (i) 1,600,000 shares plus (ii) 69,683 shares of common stock that were available for awards under the Prior Plan, as of the effective date of the 2023 Plan and (iii) certain expired or cancelled awards recycled back into the 2023 Plan.

We issue stock-based awards to certain of our employees and our Board of Directors pursuant to the 2023 Plan, as amended and/or restated from time to time and our 2001 Employee Stock Purchase Plan, as amended and/or restated from time to time (the "ESPP"), and recognize related stock-based compensation in our condensed consolidated financial statements. The 2023 Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, "share units") and (vi) stock appreciation rights ("SARs"), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations.

As of April 30, 2024, the aggregate number of shares of common stock which may be issued may not exceed 13,562,500. Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0% of the voting power, no more than five years. We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock.

As of April 30, 2024, we had granted stock-based awards pursuant to the Plans representing the right to purchase and/or acquire an aggregate of 10,735,517 shares (net of 6,594,458 expired and canceled awards), of which an aggregate of 9,173,530 have been exercised or settled.

Our ESPP provides for the issuance of up to 1,300,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value on the first or last day of each calendar quarter, whichever is lower. Through April 30, 2024, we have cumulatively issued 1,037,060 shares of our common stock to participating employees in connection with our ESPP.


	Three months ended April 30,			Nine months ended April 30,
	2024		2023	2024		2023
Cost of sales	$	67,000	141,000	$	480,000	452,000
Selling, general and administrative expenses	313,000		3,896,000	4,480,000		5,559,000
Research and development expenses	24,000		89,000	278,000		287,000
Stock-based compensation expense before CEO transition costs	404,000		4,126,000	5,238,000		6,298,000
CEO transition costs related to equity-classified stock-based awards	—		—	—		3,764,000
Total stock-based compensation expense before income tax benefit	404,000		4,126,000	5,238,000		10,062,000
Estimated income tax benefit	(81,000)		(915,000)	(1,149,000)		(1,701,000)
Net stock-based compensation expense	$	323,000	3,211,000	$	4,089,000	8,361,000

Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At April 30, 2024, unrecognized stock-based compensation of $6,819,000, net of estimated forfeitures of $833,000, is expected to be recognized over a weighted average period of 1.9 years. Total stock-based compensation capitalized and included in ending inventory at both April 30, 2024 and July 31, 2023 was $198,000.


	Three months ended April 30,			Nine months ended April 30,
	2024		2023	2024		2023
Stock options	$	11,000	22,000	$	42,000	66,000
Performance shares	(662,000)		335,000	280,000		690,000
RSUs, restricted stock and share units	1,040,000		3,738,000	4,850,000		5,449,000
ESPP	15,000		31,000	66,000		93,000

Stock-based compensation expense before CEO transition costs	404,000		4,126,000	5,238,000		6,298,000
CEO transition costs related to equity-classified stock-based awards	—		—	—		3,764,000
Total stock-based compensation expense before income tax benefit	404,000		4,126,000	5,238,000		10,062,000
Estimated income tax benefit	(81,000)		(915,000)	(1,149,000)		(1,701,000)
Net stock-based compensation expense	$	323,000	3,211,000	$	4,089,000	8,361,000

The estimated income tax benefit as shown in the above table was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability on our Condensed Consolidated Balance Sheets as of April 30, 2024 and July 31, 2023. The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting.


	Awards (in Shares)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2023	240,510	$	23.96

Expired/canceled	(6,250)	24.31

Outstanding at October 31, 2023	234,260	23.95

Expired/canceled	(9,680)	24.25

Outstanding at January 31, 2024	224,580	23.93

Expired/canceled	(54,430)	28.68

Outstanding at April 30, 2024	170,150	$	22.42	3.97	$	—

Exercisable at April 30, 2024	147,450	$	23.11	3.65	$	—

Vested and expected to vest at April 30, 2024	168,498	$	22.46	3.95	$	—

Stock options outstanding as of April 30, 2024 have exercise prices ranging from $17.88 - $31.44, representing the fair market value of our common stock on the date of grant, a contractual term of ten years and a vesting period of five years.


	Awards (in Shares)	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at July 31, 2023	1,876,230	$	13.21
Granted	913,908	9.93
Settled	(296,198)	16.03
Canceled/Forfeited	(41,814)	15.80
Outstanding at October 31, 2023	2,452,126	11.60

Settled	(383,565)	10.64
Canceled/Forfeited	(41,927)	12.78
Outstanding at January 31, 2024	2,026,634	11.76

Settled	(9,642)	14.10
Canceled/Forfeited	(625,155)	8.47
Outstanding at April 30, 2024	1,391,837	$	13.22	$	2,616,653

Vested at April 30, 2024	451,975	$	14.99	$	849,713

Vested and expected to vest at April 30, 2024	1,333,129	$	13.19	$	2,506,283

The total intrinsic value relating to fully-vested awards settled during the three and nine months ended April 30, 2024 was $33,000 and $7,478,000, respectively. The total intrinsic value relating to fully-vested awards settled during the three and nine months ended April 30, 2023 was $669,000 and $3,633,000, respectively.

The performance shares granted to employees principally vest over a three-year performance period, if pre-established performance goals are attained, or as specified pursuant to the Plan and related agreements. As of April 30, 2024, the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level, except for two of our former CEOs, whose achievement was based on maximum performance pursuant to their pre-existing change-in-control agreements.

RSUs and restricted stock granted to non-employee directors prior to August 2022 had a vesting period of five years and are convertible into shares of our common stock generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Commencing in August 2022, such awards have a vesting period of one year.

RSUs granted to employees prior to August 2022 have a vesting period of five years and are convertible into shares of our common stock generally at the time of vesting, on a one-for-one basis for no cash consideration. Commencing in August 2022, such RSUs have a vesting period of three years.

Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock, generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of non-equity incentive compensation and are convertible into shares of our common stock on the one-year anniversary of the respective grant date. In July 2023, we granted shares of our common stock to certain employees in lieu of non-equity incentive compensation.

The fair value of performance shares, RSUs, restricted stock and share units is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for any post-vesting transfer restrictions. RSUs, performance shares and restricted stock are entitled to dividend equivalents, as applicable, unless forfeited before vesting occurs. Share units and other stock-based awards would be entitled to dividend equivalents while the underlying shares are unissued.

Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying award. During the three and nine months ended April 30, 2024, we reversed $68,000 and $104,000, respectively, of previously accrued dividend equivalents due to forfeitures and paid out $2,000 and $267,000, respectively. During the three months ended April 30, 2023, we reversed $22,000 of previously accrued dividend equivalents due to forfeitures and paid out $13,000. During the nine months ended April 30, 2023, we accrued $342,000 of dividend equivalents (net of forfeitures) and paid out $363,000. Accrued dividend equivalents were recorded as a reduction to retained earnings; whereas, reversals of accrued dividend equivalents were recorded as an increase to retained earnings. As of April 30, 2024 and July 31, 2023, accrued dividend equivalents were $320,000 and $691,000, respectively.