Share-Based Compensation

3 Months Ended

Oct. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

11. Share-Based Compensation

Restricted Stock Units

For the three months ended October 31, 2016 and 2015, share-based compensation expense for outstanding restricted stock units (“RSUs”) was $52,000 and $656,000 respectively. Of the 1,285,000 RSUs outstanding, we currently expect 250,000 to vest based on service conditions. As of October 31, 2016, there was $94,000 of unrecognized non-cash compensation cost related to RSUs we expect to vest, which will be recognized over a weighted average period of 0.53 years.

Stock Option Plans

In February 2016, we amended and restated our 2007 Equity Incentive Plan, or the Plan, to, among other changes, increase the number of shares of common stock issuable under the Plan by 4,000,000 shares and extend the term of the Plan until February 4, 2026. The Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to our employees, directors, consultants and advisors. These awards have up to a 10-year contractual life and are subject to various vesting periods, as determined by the Compensation Committee or the Board of Directors. Our 2007 Equity Incentive Plan is the only active plan pursuant to which options to acquire common stock or restricted stock awards can be granted and are currently outstanding. As of October 31, 2016, there were approximately 1.9 million shares available for issuance under the Plan.

During the three months ended October 31, 2016, we issued 100,000 options to purchase common stock to a member of our Scientific Advisory Board. The options vest quarterly over one year and carry a five-year term. No options were granted during the three months ended October 31, 2015.

A summary of our stock option activity is as follows:

	Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 31, 2015		434,218		$	4.07	$	—
Granted		1,850,000		$	1.07
Exercised		—		$	—
Cancelled		(6,250	)	$	14.72
Outstanding at July 31, 2016		2,277,968		$	1.60	$	48,000
Granted		100,000		$	1.02
Exercised		—		$	—
Cancelled		—		$	—
Outstanding at October 31, 2016		2,377,968		$	1.58	$	124,000

At October 31, 2016, options to purchase 1,415,135 shares of common stock were exercisable. These options had a weighted-average exercise price of $1.91, an aggregate intrinsic value of $93,000, and a weighted average remaining contractual term of 3.04 years. The weighted average grant date fair value for options granted during the year ended October 31, 2016 was $0.49.

We use the Black-Scholes valuation model to calculate the fair value of stock options. Stock-based compensation expense is recognized over the vesting period using the straight-line method. The fair value of stock options was estimated at the grant date using the following weighted average assumptions:

	October 31, 2016
Volatility		74.71	%
Risk-free interest rate		0.93	%
Dividend yield		0.0	%
Expected life		2.81 years

Volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. Volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.

The risk-free interest rates used in the Black-Scholes calculations are based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve.

We have never paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. Accordingly, we have assumed no dividend yield for purposes of estimating the fair value of our share-based compensation.

The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options. Certain options granted to consultants are subject to variable accounting treatment and are required to be revalued until vested.

Stock-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures. We have not had significant forfeitures of stock options granted to employees and directors as a significant number of our historical stock option grants were fully vested at issuance or were issued with short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

The total unrecognized compensation cost related to unvested stock option grants as of October 31, 2016 was approximately $280,000 and the weighted average period over which these grants are expected to vest is 0.44 years.

For the three months ended October 31, 2016 and 2015, share-based compensation expense for stock options was $226,000 and $16,000 respectively.