9. Share-Based Compensation

Stock Options

We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period, with the exception of options granted subject to a consulting agreement, whereby the option vesting period and the service period defined pursuant to the terms of the consulting agreement may be different. Stock options issued to consultants are revalued quarterly until fully vested, with any change in fair value expensed. The following weighted-average assumptions were used to calculate share based compensation for the years ended July 31, 2015 and 2014:


	For the years ended July 31,
	2015		2014
Volatility	—	%	108.00	%
Risk-free interest rate	—	%	0.45	%
Dividend yield	0.0	%	0.0	%
Expected life	—	years	2.32	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 our options is determined following the guidance of Staff Accounting Bulletin No. 107 and Staff Accounting Bulletin No. 110. We follow the simplified method to determine the expected term of options issued to employees and directors. Under the simplified method, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term. The expected term for options issued to consultants is the contractual term. We periodically evaluate our historical data as a basis for determining the expected terms of such options.

Stock-based compensation expense is based on awards ultimately expected to vest, and therefore is reduced by expected forfeitures.

Total stock option expense recognized during the fiscal year ended July 31, 2015 and 2014, was $63,000 and $80,000, respectively.

As of July 31, 2015, there was $82,000 of unrecognized non-cash compensation cost related to unvested options, which will be recognized over a weighted average period of 1.38 years.

Restricted Stock Units

During the fiscal year ended July 31, 2015, the Board of Directors authorized the issuance of 575,000 Restricted Stock Units (“RSUs”) to certain Directors and officers. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU vests and subsequently settles, as set forth in the Restricted Stock Unit Agreement. The breakdown is as follows:

Henry R. Lambert RSU Award: We granted Mr. Lambert an award consisting of three hundred thousand (300,000) RSUs. The RSUs vest 50% on July 31, 2016 and 50% on July 31, 2017.

Mark S. Elliott RSU Award: We granted Mr. Elliott an award consisting of seventy five thousand (75,000) RSUs. 50% of the RSUs vested on July 31, 2015, 25% will vest upon filing of the Company’s Annual Report on Form 10-K for the year ended July 31, 2015 and 25% will vest upon the filing of the Company's proxy statement for the 2016 annual meeting of stockholders.

Director RSU Awards: On October 24, 2014, we appointed Tom Y. Lee, CPA, to the Board. In accordance with the Company’s non-employee director compensation program, the Board granted Mr. Lee an award consisting of two hundred thousand (200,000) RSU’s. The agreement for the RSUs is the same as the RSU agreement form entered into with other non-employee Company directors. The RSUs vest as follows: fifty percent (50%) of the shares of Common Stock vest on the earlier of (i) the date of the Company’s Annual Meeting of Stockholders in 2016 or January 15, 2016 and (ii) the remaining fifty percent (50%) of the shares of Common Stock vest on the earlier of the date of the annual meeting in 2017 or January 15, 2017.

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.

On July 31, 2015, Peter C. Wulff resigned his position as Chief Financial Officer, Chief Operating Officer and Corporate Secretary. As a result, 500,000 of the RSUs granted to Mr. Wulff in the prior fiscal year were forfeited and $88,000 of pre-vest expense associated with the RSU award was reversed.

During the fiscal year ended July 31, 2015, we issued 25,000 RSUs to a key employee. The RSUs fully vested on the grant date.

During the fiscal year ended July 31, 2015, 1,715,000 RSUs vested, based on performance and service conditions, which were satisfied during the year. Of the 3,210,000 RSUs outstanding we currently expect 2,238,000 to vest. As of July 31, 2015, there was $1,628,000 of unrecognized non-cash compensation cost related to RSUs we expect to vest, which will be recognized over a weighted average period of .81 years.

Total expense recognized for RSU’s granted during the fiscal years ended July 31, 2015 and 2014 was, $2,319,000 and $2,878,000, respectively.