XML 39 R25.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

12 Months Ended

Jul. 31, 2020

Share-based Payment Arrangement [Abstract]

Note 18—Stock-Based Compensation

Stock-Based Compensation Plan

The 2015 Stock Option and Incentive Plan is intended to provide incentives to officers, employees, directors and consultants of the Company, including stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. On December 12, 2019 and December 13, 2018, the Company’s stockholders approved amendments to the 2015 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 0.4 million and 0.1 million shares, respectively. At July 31, 2020, the Company had 1.6 million shares of Class B common stock reserved for awards made under the 2015 Stock Option and Incentive Plan and 0.6 million shares were available for future grants.

In fiscal 2020 and fiscal 2019, there was no income tax benefit resulting from tax deductions in excess of the compensation cost recognized for the Company’s stock-based compensation.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company’s stock on the date of grant. Option awards generally vest on a graded basis over three years of service and have ten-year contractual terms. No option awards were granted in fiscal 2020 or fiscal 2019. The fair value of stock options was estimated on the date of the grant using a Black-Scholes valuation model. Expected volatility is based on historical volatility of the Company’s Class B common stock and other factors. The Company uses historical data on exercise of stock options, post vesting forfeitures and other factors to estimate the expected term of the stock-based payments granted. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of stock option activity for the Company is as follows:

	Number of Options (in thousands)			Weighted- Average Exercise Price			Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at July 31, 2019		1,223		$	14.23
Granted		—			—
Exercised		(33	)		(8.48	)
Cancelled / Forfeited		(64	)		(13.93	)
OUTSTANDING AT JULY 31, 2020		1,126		$	14.42			2.0	$	—
EXERCISABLE AT JULY 31, 2020		1,126		$	14.42			2.0	$	—

The total intrinsic value of options exercised during fiscal 2020 and fiscal 2019 was $16,000 and nil, respectively. At July 31, 2020, there was no unrecognized compensation cost related to non-vested stock options.

Restricted Stock

The fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.

A summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:

(in thousands)	Number of Non-vested Shares			Weighted- Average Grant- Date Fair Value
Non-vested shares at July 31, 2019		206		$	4.84
Granted		26			7.01
Vested		(32	)		(8.91	)
Forfeited		(1	)		(13.50	)
NON-VESTED SHARES AT JULY 31, 2020		199		$	4.41

At July 31, 2020, there was $0.5 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of 0.8 years. The total grant date fair value of shares vested in fiscal 2020 and fiscal 2019 was $0.3 million and $0.7 million, respectively.

Deferred Stock Units Equity Incentive Program

The Company has an existing equity incentive program in the form of DSUs that, upon vesting, will entitle the grantees to receive shares of the Company’s Class B common stock. Subject to continued full time employment or other service to the Company, the DSUs will vest in three equal amounts on each of January 6, 2020, January 5, 2021, and January 5, 2022. The number of shares that will be issuable on each vesting date will vary between 50% to 200% of the number of DSUs that vest on that vesting date, depending on the market price for the underlying Class B common stock on the vesting date relative to the market price at the time of the grant.

On January 6, 2020, the first vesting date under the program, in accordance with the program and based on certain elections made by grantees, the Company issued 100,284 shares of its Class B common stock for vested DSUs. Based on those elections, vesting for 38,024 DSUs was delayed until January 5, 2021.

A summary of the status of the Company’s grants of DSUs under this program is presented below:

(in thousands)	Number of Non-vested DSUs			Weighted- Average Grant- Date Fair Value
Non-vested shares at July 31, 2019		411		$	10.35
Granted		7			11.19
Vested		(100	)		(10.68	)
Forfeited		(3	)		(11.19	)
NON-VESTED SHARES AT JULY 31, 2020		315		$	10.26

At July 31, 2020, there was $1.3 million of total unrecognized compensation cost related to non-vested DSUs, which is expected to be recognized over a weighted-average period of 0.7 years. The total grant date fair value of DSUs vested in fiscal 2020 was $1.1 million. There were no DSUs that vested in fiscal 2019.

Subsequent Event—Proposed Grant of Restricted Equity

On September 30, 2020, the Compensation Committee of the Company’s Board of Directors approved a compensatory arrangement with Howard S. Jonas and Shmuel Jonas, the Company’s Chief Executive Officer, subject to finalization of the terms of the grants, documentation, and approval of the Corporate Governance Committee of the Board of Directors. The arrangement would provide for grants to each of Howard Jonas and Shmuel Jonas of restricted equity interests in an entity that will operate the UCaaS business of the Company’s net2phone segment (the “Business Unit”). The restricted equity will vest only on the satisfaction of both a doubling of the quarterly revenue run rate and achieving a value for the Business Unit of $100 million or more. The restricted equity would entitle the grantees to proceeds only on a sale, spin-off, initial public offering, or other monetization of the Business Unit and have certain protection from dilution.