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Stock-Based Compensation

9 Months Ended

Oct. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

6. Stock-Based Compensation

The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (the “2016 Plan”). The initial share reserve under the 2016 Plan was 5,725,538 shares of common stock. A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. The Company’s shareholders approved amendments to increase the share reserve by 2,800,000 shares on August 8, 2019 and by an additional 1,740,000 shares on August 12, 2020. At October 31, 2020, the Company had 2,087,111 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At October 31, 2020, 464,016 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the Company’s 2006 Plan, 2016 Plan and inducement awards, on a combined basis, for the first nine months of fiscal 2020:

	RSUs ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Performance Share Units ⁽⁴⁾		Total number of shares			Weighted-average grant-date fair value
Shares
Outstanding non-vested shares at beginning of year		1,420,803			295,604			—			720,000		2,436,407		$	1.95
Shares granted		—			134,999			240,868			—		375,867		$	0.57
Shares vested/issued		(567,586	)		(113,900	)		(240,868	)		—		(922,354	)	$	1.75
Shares canceled		(17,443	)		—			—			—		(17,443	)	$	2.11
Outstanding non-vested shares at end of quarter		835,774			316,703			—			720,000		1,872,477		$	1.77

(1)

During the first nine months of fiscal 2020, the vesting of RSUs was primarily related to the time-based awards under the Company’s LTIP plans, see Note 5, Long-Term Incentive Plans.

(2)

The 134,999 shares of deferred stock, with a grant date fair value of $80,621, represent compensation to certain directors in lieu of cash, in accordance with their irrevocable elections. The shares of deferred stock will vest three years from the date of grant or at separation of service, based on the irrevocable election of each director pursuant to the Company’s Fourth Amended and Restated Non-Employee Director Compensation Plan (“Non-Employee Director Compensation Plan”).

(3)

During the first nine months of fiscal 2020, the Company granted 240,868 shares of stock, with a fair value of approximately $134,995, to certain directors as compensation in lieu of cash, in accordance with their irrevocable elections. Directors are required to elect 50% of their quarterly retainer in equity. Any shares in excess of the minimum required election are issued from the Non-Employee Director Compensation Plan.

(4)

The 720,000 shares of performance stock units (“PSUs”), with a fair value of $1.0 million, represent a sign-on grant to Mr. Kanter. The PSUs vest in installments when the following milestones are met: one-third of the PSUs vest when the trailing 90-day volume-weighted average closing stock price (“VWAP”) is $4.00, one-third of the PSUs vest when the VWAP is $6.00 and one-third when the VWAP is $8.00. All PSUs will expire on April 1, 2023 if no performance metric is achieved. The $1.0 million is being expensed over the respective derived service periods of each tranche of 16 months, 25 months and 30 months, respectively. The respective fair value and derived service periods assigned to the PSUs were determined using a

Monte Carlo model based on: the Company’s historical volatility of 55.9%, a term of 4.1 years, stock price on the date of grant of $2.50 per share, a risk-free rate of 2.5% and a cost of equity of 9.5%.

	Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term		Aggregate intrinsic value (in 000's)
Stock Options
Outstanding options at beginning of year		754,833		$	4.84	2.3 years		$	—
Options granted ⁽¹⁾		3,185,542		$	0.55		—		—
Options expired and canceled		(264,146	)	$	4.85		—		—
Options exercised		—			—		—		—
Outstanding options at end of quarter		3,676,229		$	1.12	8.7 years		$	—
Options exercisable at end of quarter		490,687		$	4.83	2.8 years		$	—

(1)

In the second quarter of fiscal 2020, the Company granted to Mr. Kanter a stock option to purchase 450,000 shares of the Company’s common stock, at an exercise price of $0.64 per share, which will vest over 34 months. The Company also granted stock options to purchase an aggregate of 2,735,542 shares of the Company’s common stock, at an exercise price of $0.53 per share, in connection with the time-based grant of awards under its 2020-2022 LTIP, see Note 5, Long-Term Incentive Plans.

For the first nine months of fiscal 2020, the Company granted stock options to purchase an aggregate of 3,185,542 shares of common stock and 134,999 shares of deferred stock. For the first nine months of fiscal 2019, the Company granted 720,000 PSUs, 1,234,439 RSUs and 72,668 shares of deferred stock. The Company’s non-employee directors voted to suspend their compensation for the second quarter of fiscal 2020. Subsequently, such compensation resumed in the third quarter of fiscal 2020.

Non-Employee Director Compensation Plan

The Company granted 103,669 shares of common stock, with a fair value of approximately $52,921, to certain of its non-employee directors as compensation in lieu of cash in the first nine months of fiscal 2020. As mentioned above, the non-employee directors voted to suspend their second quarter compensation.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $1.1 million and $1.4 million for the first nine months of fiscal 2020 and fiscal 2019, respectively. The total compensation cost related to time-vested stock options, RSU and PSU awards not yet recognized as of October 31, 2020 was approximately $2.4 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 30 months.