Share-Based Compensation

3 Months Ended

Oct. 31, 2017

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

Share-Based Compensation

10. Share-Based Compensation

Restricted Stock Units

During the three months ended October 31, 2017, the Compensation Committee of the Board of Directors authorized the issuance of 150,000 Restricted Stock Units (“RSUs”) to Janet Risi Field, a member of our board of directors. 50% of the RSUs will vest on the earlier of the date of our annual meeting of stockholders held in 2018 or January 15, 2018 and 50% of the RSUs will vest on the earlier of the date of our annual meeting of stockholders held in 2019 or January 15, 2019. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU subsequently settles, as set forth in the Restricted Stock Unit Agreement.

During the three months ended October 31, 2017, we issued 300,000 RSUs to purchase common stock to third-party consultants for business development services. The RSUs vest based on performance conditions if sales milestones are achieved. We currently do not expect the 300,000 RSUs to vest.

Of the 2,485,000 RSUs outstanding, we currently expect 1,300,000 to vest. As of October 31, 2017, there was $1,278,000 of unrecognized non-cash compensation cost related to RSUs we expect to vest, which will be recognized over a weighted average period of 3.02 years.

For the three months ended October 31, 2017 and 2016, share-based compensation expense for RSUs was $312,000 and $52,000, respectively.

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 of 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, 2017, there were approximately 561,000 shares available for issuance under the Plan.

During the three months ended October 31, 2017, the Compensation Committee of the Board of Directors authorized the issuance of 200,000 options to purchase common stock to Janet Risi Field, a member of our board of directors. 50% of the options will vest on the earlier of the date of our annual meeting of stockholders held in 2018 or January 15, 2018 and 50% of the options will vest on the earlier of the date of our annual meeting of stockholders held in 2019 or January 15, 2019.

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 vested quarterly over one year and carry a five-year term.

None of the options granted to our directors were granted pursuant to any compensatory, bonus, or similar plan maintained or otherwise sponsored by the Company.

A summary of our stock option activity is as follows:

	Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 31, 2017		5,759,843	$	1.25	$	1,120,000
Granted		200,000	$	1.21
Exercised		—	$	—
Cancelled		—	$	—
Outstanding at October 31, 2017		5,959,843	$	1.25	$	544,000

The weighted-average remaining contractual term of options outstanding at October 31, 2017 was 5.55 years.

At October 31, 2017, options to purchase 3,163,593 shares of common stock were exercisable. These options had a weighted-average exercise price of $1.35, an aggregate intrinsic value of $432,000, and a weighted average remaining contractual term of 3.15 years. The weighted average grant date fair value for options granted during the three months ended October 31, 2017 was $0.85. The total unrecognized compensation cost related to unvested stock option grants as of October 31, 2017 was approximately $1,675,000 and the weighted average period over which these grants are expected to vest is 3.04 years.

For the three months ended October 31, 2017 and 2016, share-based compensation expense for stock options was $395,000 and $226,000 respectively.

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:

	For the three months ended October 31,
	2017			2016
Volatility		86.98	%		74.71	%
Risk-free interest rate		1.80	%		0.93	%
Dividend yield		0.0	%		0.0	%
Expected life		5.45	years		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.