Share-Based Compensation

6 Months Ended

Jan. 31, 2014

Share-based Compensation [Abstract]

Share-Based Compensation

12.Share-Based Compensation

On October 23, 2013 the Board authorized the issuance of 5,100,000 Restricted Stock Units (“RSUs”) to our directors and officers. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU vests, as set forth in the Restricted Stock Unit Agreement.  The breakdown is as follows:

· Chairman RSU Award:  We granted Mr. Pfanzelter an award consisting of two million eight hundred thousand (2,800,000)  RSUs. The RSUs vest 25% on February 15, 2014, 25% on February 15, 2015 and 50% on February 15, 2016.

· Henry Lambert RSU Award:  We granted Mr. Lambert an award consisting of five hundred thousand (500,000) RSUs.  The RSUs vest 60% on September 10, 2014 and the vesting of the remaining 40%depends on the achievement of certain quarterly sales goals over a two year period.  If the sales goals are not achieved, 40% of the award will be forfeited.

· Peter Wulff RSU Award:  We granted Mr. Wulff an award consisting of one million (1,000,000) RSUs.The RSUs vest 25% on March 15, 2014, 25% on March 15, 2015 and 50% on March 15, 2016. 

· Director RSU Awards:  We granted Messrs. Cohee,  Culver,  Otis and Dr. Theno, awards consisting of two hundred thousand (200,000) RSUs, respectively. The RSUs vest (i) 50% on the earlier ofthe date of the annual meeting in 2015 or January 15, 2015 and (ii)50% on the earlier ofthe date of the annual meeting in 2016 or January 15, 2016. 

None of the RSUs granted to our directors and officers were granted pursuant to any compensatory, bonus, or similar plan maintained or otherwise sponsored by the Company.  Additionally, during the six months ended January 31, 2014, none of these RSUs vested.

On October 30, 2013 the Company authorized the issuance of 900,000 RSUs to key employees.  The RSUs vest based on performance conditions.  If the performance conditions are not met or expected to be met, no compensation cost will be recognized on the underlying RSUs.  In addition, if the performance conditions are not achieved, then the corresponding RSUs will be forfeited.

On December 16, 2013 the Company authorized the issuance of 30,000 RSUs to key employees.  The RSUs vest quarterly over a one year period.

During the quarter ended January 31, 2014, 87,500 restricted stock units vested based on performance conditions. Of the remaining 5,942,500RSUs granted during the six months ended January 31, 2014, we currently expect 4,992,500 to vest.  As of January 31, 2014, there was $5,732,000 of unrecognized non-cash compensation cost related to the RSUs, which will be recognized over a weighted average period of 2.0 years. 

During the three months ended January 31, 2014, we issued options to purchase 300,000 shares of our common stock to key employees, at an exercise price of $1.40, valued at $216,000 (based on the Black-Scholes Option Pricing Model assuming no dividend yield, volatility of 108% and a risk-free interest rate of 0.45%).  The options vest quarterly over three years with the first two quarter vesting after six months. In addition, during the three months ended January 31, 2014, 195,000 options were forfeited or canceled.

As of January 31, 2014, there was $237,000 of unrecognized non-cash compensation cost related to unvested options, which will be recognized over a weighted average period of 2.54 years.

For the three months ended January 31, 2014 and 2013, share-based compensation expense was $1,332,000 and $242,000, respectively.  For the six months ended January 31, 2014 and 2013, share-based compensation expense was $1,421,000 and $430,000, respectively.