Share-Based Compensation

9 Months Ended

Apr. 30, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

7. Share-Based Compensation

Restricted Stock Units

The Company issues restricted stock unit awards (“RSUs”) to key management and as compensation for services to consultants and others. The RSUs typically vest over a two-year period and carry a ten-year term. 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. The Company determines that fair value of those awards at the date of grant, and amortizes those awards as an expense over the vesting period of the award. The shares earned under the grant are usually issued when the award settles at the end of the term.

During the nine months ended April 30, 2021, the Company recognized $62,000 of compensation cost relating to the shares vesting during the period. During the nine month period ended April 30, 2020, the Company recognized $49,000 of compensation cost relating to the shares vesting during the period. In addition, the Company accelerated the vesting of 400,000 shares of stock issued to Henry R. Lambert with a remaining value of $162,000 upon his retirement during the period. In total, the Company recognized $211,000 from the vesting of these restricted stock units.

Of the 2,012,500 RSUs outstanding as of April 30, 2021, 1,512,500 RSUs are vested and issuable. These RSUs are issued upon settlement date which is defined as “for each Vested Unit, the earliest of (i) the ten-year anniversary of the Grant Date; (ii) sixty days after the date the Grantee’s Service ceases for any reason and such cessation constitutes a “separation from service” within the meaning of Section 409A of the Code; (iii) the date of Grantee’s death or (iv) the date of a Change in Control that constitutes a “change in control event” within the meaning of Section 409A of the Code”.

During the nine months ended April 30, 2021 there were no Restricted Stock Units granted. As of April 30, 2021, there was $165,000 of unrecognized non-cash compensation cost related to the remaining 500,000 RSUs we expect to vest, which will be recognized over a weighted average period of 2.0 years.

A summary of our restricted stock unit activity and related data is as follows:

Outstanding at July 31, 2020	2,012,500
Granted	—
Issued	—
Forfeited	—
Outstanding at April 30, 2021 (of which 1,512,500 have vested and are issuable)	2,012,500

Stock Option Plans

2007 Equity Incentive Plan

In February 2016, we amended and restated our 2007 Equity Incentive Plan, the (“2007 Plan”), to, among other changes, increase the number of shares of common stock issuable under the 2007 Plan by 4,000,000 shares and extend the term of the 2007 Plan until February 4, 2026. The 2007 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. As of April 30, 2021, there were approximately 483,000 shares available for issuance under the 2007 Plan.

2017 Equity Incentive Plan

In January 2021, we amended and restated our 2017 Equity Incentive Plan, the (“2017 Plan”), to, among other changes, increase the number of shares of common stock issuable under the 2017 Plan by 5,000,000 shares and extend the term of the 2007 Plan until January 2031. The 2017 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. As of April 30, 2021, there were approximately 5,321,000 shares available for issuance under the 2017 Plan.

During the nine months ended April 30, 2021, the Compensation Committee of the Board of Directors authorized the issuance of 60,000 stock options to a consultant with a fair value of $48,000 as determined by the Black Scholes option pricing model. The options vest quarterly over one year and carry a five year term.

A summary of our stock option activity is as follows:

	Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 31, 2020		9,432,875		$	0.88	$	5,255,000
Granted		60,000		$	1.30		—
Exercised		(624,375	)	$	0.88		170,000
Expired		(450,000	)	$	1.10		33,000
Cancelled		(400,000	)	$	1.19		—
Outstanding at April 30, 2021		8,018,500		$	0.86	$	401,000

The weighted-average remaining contractual term of options outstanding at April 30, 2021 was 5.0 years.

At April 30, 2021, options to purchase 7,059,125 shares of common stock were exercisable. These options had a weighted-average exercise price of $0.88 and a weighted average remaining contractual term of 4.68 years. The total unrecognized compensation cost related to unvested stock option grants as of April 30, 2021 was approximately $205,000 and the weighted average period over which these grants are expected to vest is 1.03 years.

For the nine months ended April 30, 2021 share-based compensation expense for stock options was $621,000. For the nine months ended April 30, 2020 share-based compensation expense for stock options was $382,000.

During the nine months ended April 30, 2021, there was a net exercise on 624,375 stock options which resulted in the issuance of 150,190 shares of our common stock. As these options were net exercised on a cashless basis, as permitted under the respective option agreements, we did not receive any cash proceeds.

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:

	Nine Months Ended April 30, 2021			Nine Months Ended April 30, 2020
Volatility		104.93.	%		79.48	%
Risk-free interest rate		0.18	%		1.46	%
Dividend yield		0.0	%		0.0	%
Expected life		2.81 years			5.50 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 expected life of options was estimated using the average between the contractual term and the vesting term of the options.