In December 2023, our stockholders approved the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (the “2023 Plan”), which replaced the Amended and Restated 2000 Stock Incentive Plan. Under the 2023 Plan, the initial number of shares of common stock available for all awards, other than substitute awards granted in connection with a corporate transaction, was 1,669,683 shares of common stock plus certain expired or cancelled awards recycled back into the 2023 Plan. Also, on November 25, 2024, our Board of Directors approved an amendment to the 2023 Plan to increase the number of available shares of common stock authorized for issuance under the 2023 Plan by 2,195,000 shares. Stockholders approved the amendment to the 2023 Plan at the 2024 Annual Meeting on January 13, 2025.

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 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 July 31, 2025, the aggregate number of shares of common stock which may be issued may not exceed 15,757,500. 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 July 31, 2025, we had granted stock-based awards representing the right to purchase and/or acquire an aggregate of 12,182,430 shares (net of 7,643,074 expired and canceled awards), of which an aggregate of 10,382,855 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 July 31, 2025, we have cumulatively issued 1,104,911 shares of our common stock to participating employees in connection with our ESPP.


	Fiscal Years Ended July 31,
	2025		2024	2023
Cost of sales	$	392,000	778,000	1,110,000
Selling, general and administrative expenses	2,479,000		4,777,000	7,960,000
Research and development expenses	249,000		541,000	1,037,000
Stock-based compensation expense before CEO transition costs	3,120,000		6,096,000	10,107,000
CEO transition costs related to equity-classified stock-based awards	—		—	3,764,000
Total stock-based compensation expense before income tax benefit	3,120,000		6,096,000	13,871,000
Estimated income tax benefit	—		(1,298,000)	(2,552,000)
Net stock-based compensation expense	$	3,120,000	4,798,000	11,319,000

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 July 31, 2025, unrecognized stock-based compensation of $4,778,000, net of estimated forfeitures of $342,000, is expected to be recognized over a weighted average period of 1.7 years. Total stock-based compensation capitalized and included in ending inventory at both July 31, 2025 and 2024 was $198,000. There are no liability-classified stock-based awards outstanding as of July 31, 2025 or 2024.


	Fiscal Years Ended July 31,
	2025		2024	2023
Stock options	$	29,000	60,000	87,000
Performance shares	72,000		480,000	973,000
RSUs, restricted stock, share units and other stock-based awards	2,973,000		5,477,000	8,926,000
ESPP	46,000		79,000	121,000
Stock based compensation expense before CEO transition costs	3,120,000		6,096,000	10,107,000
CEO transition costs related to equity-classified stock-based awards	—		—	3,764,000
Total stock-based compensation expense before income tax benefit	3,120,000		6,096,000	13,871,000
Estimated income tax benefit	—		(1,298,000)	(2,552,000)
Net stock-based compensation expense	$	3,120,000	4,798,000	11,319,000

During fiscal 2025, we reversed a portion of our stock-based compensation expense related to performance shares due to lower-than-estimated achievement of fiscal 2022 and 2023 performance share goals. Stock-based compensation expense for the more recent period also reflects the forfeiture of awards related to our former Chief Operating Officer and Chief Executive Officer, whose employment were both terminated during fiscal 2025. With respect to stock-based compensation expense reported in the prior year period, we had determined to settle fiscal 2024 non-equity annual incentive awards accrued during such period with stock-based awards in lieu of cash. Also, contributing to the higher stock-based compensation expense in the prior year period was our annual grant of stock-based awards to non-executive employees. Such grants of stock-based awards to non-executive employees did not occur during fiscal 2025.

The estimated income tax benefit as shown in the above tables 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 Consolidated Balance Sheet as of July 31, 2025 and 2024. 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. There is no estimated income tax benefit recognized for fiscal 2025 in light of the valuation allowance established on all U.S. deferred tax assets.


	Awards (in Shares)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2022	483,480	$	24.43
Expired/canceled	(242,970)	24.89

Outstanding at July 31, 2023	240,510	23.96
Expired/canceled	(99,320)	28.72

Outstanding at July 31, 2024	141,190	20.61
Expired/canceled	(16,720)	21.77

Outstanding at July 31, 2025	124,470	$	20.45	3.57	$	—

Exercisable at July 31, 2025	124,470	$	20.45	3.57	$	—

Vested and expected to vest at July 31, 2025	124,470	$	20.45	3.57	$	—

Stock options outstanding as of July 31, 2025 have exercise prices ranging from $17.88 - $28.35, 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, 2022	1,110,750	$	19.05
Granted	1,550,951	10.79
Settled	(632,267)	16.69
Canceled/Forfeited	(153,204)	16.67
Outstanding at July 31, 2023	1,876,230	13.21
Granted	1,731,760	6.71
Settled	(1,042,860)	9.77
Canceled/Forfeited	(764,842)	9.28
Outstanding at July 31, 2024	1,800,288	10.61
Granted	1,677,677	4.57
Settled	(855,870)	9.37
Canceled/Forfeited	(946,990)	6.54
Outstanding at July 31, 2025	1,675,105	$	6.53	$	3,635,000

Vested at July 31, 2025	122,554	$	13.03	$	266,000

Vested and expected to vest at July 31, 2025	1,632,321	$	6.61	$	3,542,000

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 July 31, 2025, 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 performance shares granted in fiscal 2023 which reflect lower-than-estimated achievement.

RSUs and restricted stock granted to non-employee directors prior to August 2022 had a vesting period of five years and were 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 2024 and 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, share units and other stock-based awards 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 fiscal 2025 and 2024, we reversed $42,000 and $107,000 of previously accrued dividend equivalents due to forfeitures and paid out $157,000 and $268,000, respectively. During fiscal 2023, we accrued $315,000 of dividend equivalents (net of forfeitures) and paid out $366,000. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of July 31, 2025 and 2024, accrued dividend equivalents were $117,000 and $316,000, respectively.

With respect to the actual settlement of stock-based awards for income tax reporting, for the fiscal year ended July 31, 2025, we have not recognized any tax benefit or expense in light of the valuation allowance established for all U.S. deferred tax assets. For fiscal years ended July 31, 2024 and 2023, we recorded an income tax expense of $723,000 and $591,000, respectively.

In the first quarter of fiscal 2026, our Board of Directors authorized the issuance of stock-based awards with a total unrecognized compensation expense, net of estimated forfeitures, of approximately $6,700,000.