We issue stock-based awards to certain of our employees and our Board of Directors pursuant to our 2000 Stock Incentive Plan, as amended and/or restated from time to time (the "Plan") 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 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, excluding our non-executive Chairman, are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations.

As of January 31, 2022, the aggregate number of shares of common stock which may be issued, pursuant to the Plan, may not exceed 10,962,500. 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 January 31, 2022, we had granted stock-based awards pursuant to the Plan representing the right to purchase and/or acquire an aggregate of 9,644,199 shares (net of 4,838,965 expired and canceled awards), of which an aggregate of 7,591,659 have been exercised or settled.

Our ESPP provides for the issuance of up to 1,050,000 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 January 31, 2022, we have cumulatively issued 916,447 shares of our common stock to participating employees in connection with our ESPP.


	Three months ended January 31,			Six months ended January 31,
	2022		2021	2022		2021
Cost of sales	$	76,000	59,000	$	149,000	132,000
Selling, general and administrative expenses	1,836,000		1,158,000	2,608,000		1,700,000
Research and development expenses	71,000		70,000	147,000		154,000
Stock-based compensation expense	1,983,000		1,287,000	2,904,000		1,986,000
CEO transition costs related to equity-classified stock-based awards	7,388,000		—	7,388,000		—
Total stock-based compensation expense before income tax benefit	9,371,000		1,287,000	10,292,000		1,986,000
Estimated income tax benefit	(1,030,000)		(280,000)	(1,223,000)		(424,000)
Net stock-based compensation expense	$	8,341,000	1,007,000	$	9,069,000	1,562,000

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 January 31, 2022, unrecognized stock-based compensation of $10,024,000, net of estimated forfeitures of $895,000, is expected to be recognized over a weighted average period of 3.3 years. Total stock-based compensation capitalized and included in ending inventory at both January 31, 2022 and July 31, 2021 was $48,000. There are no liability-classified stock-based awards outstanding as of January 31, 2022 or July 31, 2021.

Of the selling, general and administrative expenses included in the table above, for both the three and six months ended January 31, 2022, $827,000 represents the amortization of stock-based compensation related to the retirement, in December 2021, of three, long-standing members of our Board of Directors.


	Three months ended January 31,			Six months ended January 31,
	2022		2021	2022		2021
Stock options	$	364,000	97,000	$	442,000	217,000
Performance shares	364,000		443,000	713,000		665,000
RSUs, restricted stock and share units	1,200,000		699,000	1,639,000		1,005,000
ESPP	55,000		48,000	110,000		99,000

Stock-based compensation expense	1,983,000		1,287,000	2,904,000		1,986,000
CEO transition costs related to equity-classified stock-based awards	7,388,000		—	7,388,000		—
Total stock-based compensation expense before income tax benefit	9,371,000		1,287,000	10,292,000		1,986,000
Estimated income tax benefit	(1,030,000)		(280,000)	(1,223,000)		(424,000)
Net stock-based compensation expense	$	8,341,000	1,007,000	$	9,069,000	1,562,000

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 Sheet as of January 31, 2022 and July 31, 2021. 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, 2021	1,073,435	$	25.76

Expired/canceled	(56,250)	27.59
Exercised	(1,220)	17.88
Outstanding at October 31, 2021	1,015,965	25.66
Expired/canceled	(10,030)	27.14





Outstanding at January 31, 2022	1,005,935	$	25.65	2.46	$	716,000

Exercisable at January 31, 2022	888,575	$	26.68	1.68	$	429,000

Vested and expected to vest at January 31, 2022	999,147	$	25.70	2.42	$	699,000

Stock options outstanding as of January 31, 2022 have exercise prices ranging from $17.88 - $33.94, 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. The total intrinsic value relating to stock options exercised during the six months ended January 31, 2022 was $7,000. There were no stock options exercised during the six months ended January 31, 2021.


	Awards (in Shares)	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at July 31, 2021	1,068,370	$	21.93
Granted	228,161	26.81
Settled	(190,310)	23.97
Canceled/Forfeited	(40,880)	23.15
Outstanding at October 31, 2021	1,065,341	22.56
Granted	187,658	23.35
Settled	(191,238)	22.47
Canceled/Forfeited	(15,156)	21.88




Outstanding at January 31, 2022	1,046,605	$	22.73	$	21,277,000

Vested at January 31, 2022	444,490	$	22.12	$	9,036,000

Vested and expected to vest at January 31, 2022	1,009,648	$	22.71	$	20,526,000

The total intrinsic value relating to fully-vested awards settled during the three and six months ended January 31, 2022 was $4,569,000 and $9,464,000, respectively. The total intrinsic value relating to fully-vested awards settled during the three and six months ended January 31, 2021 was $9,000 and $2,905,000, 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 January 31, 2022, 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.

RSUs and restricted stock granted to non-employee directors prior to July 31, 2019 had a vesting period of three 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. After July 31, 2019, such awards have a vesting period of five years. Also, restricted stock granted to our non-executive Chairman of the Board of Directors, pursuant to his Senior Technology Advisor consulting agreement, vests 1/12 on the date of grant and in eleven equal monthly installments thereafter.

RSUs granted to employees 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. Also, certain RSUs granted to our newly appointed CEO, pursuant to his employment agreement, vest over 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. Cumulatively, through January 31, 2022, 956,576 share units granted have been settled.

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 granted since fiscal 2013 are entitled to dividend equivalents unless forfeited before vesting occurs. Share units granted since fiscal 2014 are 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 six months ended January 31, 2022, we accrued $129,000 and $217,000, respectively, of dividend equivalents (net of forfeitures) and paid out $210,000 and $525,000, respectively. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of January 31, 2022 and July 31, 2021, accrued dividend equivalents were $577,000 and $884,000, respectively.