Share-Based Compensation

3 Months Ended

Oct. 31, 2022

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

5. Share-Based Compensation

Restricted Stock Units

We issue restricted stock unit awards or RSUs, to key management and as compensation for services to consultants and others. The RSUs typically vest over a one to three-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. We determine that fair value of those awards at the date of grant, and amortize 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. As of July 31, 2022, there were 1,212,500 RSU’s outstanding of which 1,045,833 were issuable.

During the three months ended October 31, 2022 and 2021, we recognized $21,000 of compensation cost relating to the vesting of RSU’s, respectively. As of October 31, 2022, there was $41,000 of unrecognized non-cash compensation cost related to the remaining 166,667 RSUs we expect to vest, which will be recognized over a weighted average period of 0.50 years.

During the three months ended October 31, 2022, no RSUs were granted, issued, or forfeited. Of the 1,212,500 RSUs outstanding as of October 31, 2022, 1,045,833 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”.

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

	Total RSU Shares		Vested and Issuable
Outstanding at July 31, 2022		1,212,500		1,045,833
Granted		—		—
Issued		—		—
Forfeited		—		—
Outstanding at October 31, 2022		1,212,500		1,045,833

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 October 31, 2022, there were approximately 552,000 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 October 31, 2022, there were approximately 3,856,000 shares available for issuance under the 2017 Plan.

During the three months ended October 31, 2022, the Compensation Committee of the Board of Directors granted 1,935,000 stock options to our employees, officers, directors and consultants with a fair value of $241,000 as determined by the Black Scholes option pricing model. The vesting terms of the options vary between one and two years and carry a ten year term.

A summary of our stock option activity is as follows:

	Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 31, 2022		6,079,125	$	0.62	$	—
Granted		1,935,000	$	0.20		—
Exercised		—	$	—		—
Cancelled		—	$	—		—
Outstanding at October 31, 2022		8,014,125	$	0.52	$	—

The weighted-average remaining contractual term of options outstanding at October 31, 2022 was 7.12 years.

At October 31, 2022, options to purchase 5,694,958 shares of common stock were exercisable. These options had a weighted-average exercise price of $0.62 and a weighted average remaining contractual term of 6.07 years. The total unrecognized compensation cost related to unvested stock option grants as of October 31, 2022 was approximately $263,000 and the weighted average period over which these grants are expected to vest is 0.95 years.

For the three months ended October 31, 2022, share-based compensation expense for stock options that vested during the period was $63,000. For the three months ended October 31, 2021, share-based compensation expense for stock options that vested during the period was $169,000.

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,
	2022			2021
Volatility		91.90	%		85.61	%
Risk-free interest rate		4.00	%		0.84	%
Dividend yield		—	%		—	%
Expected life		5.34			5.99

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.