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Stock-Based Compensation | 12 Months Ended
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Jul. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note 12—Stock-Based Compensation 2016 Stock Option and Incentive Plan The Company adopted the Zedge, Inc. 2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”). The 2016 Incentive Plan is intended to provide incentives to executive officers, employees, directors and consultants of the Company. Incentives available under the 2016 Incentive Plan include restricted stock, deferred stock unit, stock options and stock appreciation rights. The 2016 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors. In November, 2020, the Company’s Board of Directors amended the Company’s the 2016 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 250,000 shares to an aggregate of 1,521,000 shares. This amendment was ratified by the Company’s stockholders at the Annual Meeting of Stockholders held on January 11, 2021. At July 31, 2021, there were 212,000 shares of Class B Stock available for awards under the 2016 Incentive Plan. In November 2019, the Company’s Board of Directors amended the 2016 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 230,000 shares to an aggregate of 1,271,000 shares. This amendment was ratified by the Company’s stockholders during Annual Meeting held on January 13, 2020. Pursuant to the 2016 Incentive Plan, the option exercise price for all stock option awards that are designated as “Incentive Stock Options” must not be less than the Fair Market Value of the shares of Class B Common Stock covered by the option award on the date of grant. In general, Fair Market Value means the closing sale price per share of Class B Common Stock on the exchange on which the Class B Common Stock is principally traded for the last preceding date on which there was a sale of Class B Common Stock on such exchange. In the fiscal years ended July 31, 2021 and 2020 there were $105,000 and $0, respectively, income tax benefit resulting from tax deductions in excess of the compensation cost recognized for the Company’s stock-based compensation. Stock Options The Company’s option awards generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant and are pursuant to individual written agreements. Grants generally vest over a three-year or four -year period. Certain option agreements provide for accelerated vesting of options upon the effective date of an initial public offering or a change in control of the Company. In fiscal years 2021 and 2020, the Compensation Committee approved equity grants of options to purchase 188,849 and 207,996 shares respectively of the Company’s Class B common stock to various executives, consultants and employees, vesting mostly over a three-year or four-year period. Unrecognized compensation expense related to these grants were $774,000 and $265,000 in fiscal 2021 and 2020 respectively based on the estimated fair value of the options on the grant dates. In fiscal 2021, the Company received proceeds of $873,261 from the exercise of stock options for which the Company issued 559,840 shares of its Class B common stock. In fiscal 2020, the Company received proceeds of $11,571 from the exercise of stock options for which the Company issued 86,197 shares of its Class B common stock. The Company cancelled or forfeited options grants of 13,000 shares and 126,000 shares in fiscal 2021 and fiscal 2020 respectively primarily due to employee resignations or layoffs. The fair value of stock options was estimated on the date of the grant using a Black-Scholes valuation model (“BSM”) and the assumptions in the following table. Expected volatility is based on historical volatility of the Company’s Class B common stock. The Company uses the simplified method to estimate the expected term of the stock-based payments granted due to the limited history of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company used the following weighted average assumptions in its BSM pricing model:
Fiscal year ended July 31, |  | 2021 |  |  | 2020 |
Expected term |  |  | 6.0 years |  |  |  | 6.0 years |
Volatility |  |  | 92.3 | % |  |  | 82.9 | %
Risk free interest rate |  |  | 0.7 | % |  |  | 1.6 | %
Dividends |  |  | — |  |  |  | — |
The following represents option activity for the fiscal years ended July 31, 2021 and 2020, including options granted prior to our separation from our former parent in a spin-off on June 1, 2016 and options granted under the 2016 Incentive Plan adopted on June 2, 2016:
|  | 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 |  |  | 1,231 |  |  | $ | 1.60 |  |  |  | 6.32 |  |  | $ | 642 |
Granted |  |  | 208 |  |  |  | 1.82 |  |  |  |  |  |  |  |  |
Exercised |  |  | (86 | ) |  |  | 0.13 |  |  |  |  |  |  |  |  |
Cancelled / forfeited |  |  | (126 | ) |  |  | 1.35 |  |  |  |  |  |  |  |  |
Outstanding at July 31, 2020 |  |  | 1,227 |  |  | $ | 1.76 |  |  |  | 5.95 |  |  | $ | 402 |
Granted |  |  | 189 |  |  |  | 5.40 |  |  |  |  |  |  |  |  |
Exercised |  |  | (560 | ) |  |  | 1.56 |  |  |  |  |  |  |  |  |
Cancelled / forfeited |  |  | (13 | ) |  |  | 1.48 |  |  |  |  |  |  |  |  |
Outstanding at July 31, 2021 |  |  | 843 |  |  | $ | 2.72 |  |  |  | 6.76 |  |  | $ | 10,657 |
Exercisable at July 31, 2021 |  |  | 548 |  |  | $ | 1.95 |  |  |  | 5.59 |  |  | $ | 7,351 |
The following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the periods indicated:
July 31, (in thousands except per share amounts) |  | 2021 |  |  | 2020 |
Weighted average grant date fair value of options granted |  | $ | 4.09 |  |  | $ | 1.28 |
Intrinsic value of options exercised |  |  | 3,978 |  |  |  | 109 |
Fair value of awards vested |  |  | 135 |  |  |  | 197 |
At July 31, 2021, there was $774,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.2 years. Restricted Stock In fiscal 2021, the Compensation Committee and the Corporate Governance Committee of our Board of Directors approved a grant of 92,593 restricted shares of the Company’s Class B Common Stock to our Executive Chairman Michael Jonas. Mr. Jonas agreed to accept all of his compensation for his service as Executive Chairman during fiscal 2021 in the form of equity in the Company and to make receipt of such equity compensation contingent on the Company achieving certain milestones relative to its fiscal 2021 budget. The grant was made at that time because the milestones previously set were achieved. These shares shall vest in equal amounts on February 7, 2022, 2023 and 2024.These shares had an aggregate grant date fair value of $350,000 which is being amortized on a straight-line basis over the vesting period. In fiscal 2021, the Compensation Committee approved a grant of 10,619 restricted shares of Class B Common Stock to each of Mr. Elliot Gibber and Mr. Howard Jonas which were fully vested upon grant. These shares had an aggregate grant date fair value of $30,000 and have been fully amortized accordingly. In fiscal 2020, the Company granted 30,534 restricted shares of its Class B common stock, which vested over a six-month period, to its interim Chief Executive Officer at a grant date fair value of $1.97 per share. The Company also granted 1,411 restricted shares of its Class B common stock, which vested over three years, to Chairman of the Board at a grant date fair value of $1.97 per share. In fiscal 2021, the Company granted 10,869 restricted shares of its Class B common stock, which vested immediately, to its non-employee Board of Directors at an average grant date fair value of $8.22 per share. In fiscal 2020, the Company granted 34,066 restricted shares of its Class B common stock, which vested immediately, to its non-employee Board of Directors at an average grant date fair value of $1.41 per share. These shares were awarded pursuant to the non-employee Board of Director’s semi-annual grant. At July 31, 2021, there were 127,300 non-vested restricted shares of the Company’s Class B common stock. At July 31, 2021, there was $288,000 of total unrecognized compensation cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period of 2.4 years. In fiscal 2021 and fiscal 2020, the Company purchased 12,005 shares and 18,441 shares respectively of Class B Stock from certain employees for $18,000 and $29,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock The following represents restricted shares activity for the fiscal years ended July 31, 2021 and 2020:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Non-vested stock award as of July 31, 2019 |  |  | 195,375 |  |  | $ | 2.33 |
Granted |  |  | 31,945 |  |  |  | 1.97 |
Vested |  |  | (122,192 | ) |  |  | 2.26 |
Forfeited |  |  | - |  |  |  | - |
Non-vested stock award as of July 31, 2020 |  |  | 105,128 |  |  |  | 2.30 |
Granted |  |  | 113,831 |  |  |  | 3.34 |
Vested |  |  | (91,659 | ) |  |  | 2.24 |
Forfeited |  |  | - |  |  |  | - |
Non-vested stock award as of July 31, 2021 |  |  | 127,300 |  |  | $ | 3.27 |
Deferred Stock Units In fiscal 2020, the Compensation Committee approved the grant of 92,544 Deferred Stock Units (DSUs) to 13 of its non-executive employees based in Norway and Lithuania. Each DSU represents a right to receive one share of Class B Common Stock. The DSUs primarily vest over a four-year period from grant. On the grant date, unrecognized compensation expense related to this grant was an aggregate of $144,000 based on the estimated fair value of the DSUs on the grant date. The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period. At July 31, 2021, unrecognized compensation expense related to unvested DSUs was an aggregate of $39,000 which is expected to be recognized over a weighted-average period of 2.0 years. In fiscal 2021, the Company purchased 5,625 shares of Class B Stock from various employees for $8,000 to satisfy tax withholding obligations in connection with the vesting of DSUs. The following represents restricted shares activity for the fiscal years ended July 31, 2021 and 2020:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Non-vested DSU award as of July 31, 2019 |  |  | - |  |  |  | - |
Granted |  |  | 92,544 |  |  |  | 1.55 |
Vested |  |  | - |  |  |  | - |
Forfeited |  |  | (32,000 | ) |  |  | 1.54 |
Non-vested DSU award as of July 31, 2020 |  |  | 60,544 |  |  | $ | 1.56 |
Granted |  |  | - |  |  |  | - |
Vested |  |  | (17,044 | ) |  |  | 1.60 |
Forfeited |  |  | (6,000 | ) |  |  | 1.54 |
Non-vested DSU award as of July 31, 2021 |  |  | 37,500 |  |  | $ | 1.54 |

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