Stock-Based Compensation

6 Months Ended

12 Months Ended

Jan. 31, 2012

Jul. 31, 2011

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

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

3. Stock-Based Compensation

As of January 31, 2012, the Company had three stockholder-approved stock incentive plans under which shares and options exercisable for shares of common stock have been or may be granted to employees, directors, consultants and advisors. A total of 2,000,000 shares of common stock are reserved for issuance under the 2000 Stock Option Plan (the “2000 Plan”), a total of 12,000,000 shares of common stock are reserved for issuance under the 2001 Stock Option Plan (the “2001 Plan”) and 30,000,000 shares of common stock are reserved for issuance under the 2006 Stock Plan (the “2006 Plan”). Restricted shares can only be issued under the 2006 Plan. At January 31, 2012, there were 2,000,000, 3,617,194 and 14,576,577 shares of common stock reserved for future awards under the 2000 Plan, 2001 Plan and 2006 Plan, respectively.

The 2000, 2001 and 2006 Plans (the “Plans”) are administered by the Board of Directors (the “Board”). The Board is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom options are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options. The Board is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans. Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder are within the discretion of the Board.

The Plans provide that options may or may not be Incentive Stock Options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code. Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options which are not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in connection with its adoption of the Plans were Non-Qualified Options. In addition, the 2006 Plan also provides for restricted stock grants.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option.

In the case of restricted stock grants under the 2006 Plan, fair market value of the shares is established as the market price on the date of the stock grant.

The following is a summary of the common stock options granted, forfeited or expired and exercised under the Plans for the six months ended January 31, 2012:

			Weighted
			Average
			Exercise		Aggregate
			Price		Intrinsic
	Options		Share		Value
Outstanding, August 1, 2011		7,340,182	$	0.465
Granted		—		n/a
Forfeited or expired		55,000		0.642
Exercised		—		n/a
Outstanding, January 31, 2012		7,285,182	$	0.463	$	93,250
Exercisable, January 31, 2012		6,937,682	$	0.455	$	93,250

The 7,285,182 outstanding options at January 31, 2012 had a weighted average remaining contractual term of 4.0 years.

The following is a summary of the non-vested common stock options granted, vested and forfeited under the Plan:

				Weighted Average
				Grant Date
	Options			Fair Value
Outstanding, August 1, 2011		845,836		$	0.50
Granted		—			0.00
Vested		(470,836	)		0.53
Forfeited		(27,500	)		0.00
Outstanding, January 31, 2012		347,500		$	0.46

As of January 31, 2012, the Company had $135,233 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 1.69 years.

Note 15 – Stock-Based Compensation:

Stock Option Plans

As of July 31, 2011, the Company had three stockholder-approved stock incentive plans under which shares and options exercisable for shares of common stock have been or may be granted to employees, directors, consultants and advisors. A total of 2,000,000 shares of common stock are reserved for issuance under the 2000 Stock Option Plan (the 2000 Plan), a total of 12,000,000 shares of common stock are reserved for issuance under the 2001 Stock Option Plan (the 2001 Plan) and 30,000,000 shares of common stock are reserved for issuance under the 2006 Stock Plan (the 2006 Plan). In July 2009, the 2006 Plan was amended to increase the reserved shares from 10,000,000 to 30,000,000.  Restricted shares can only be issued under the 2006 Plan. At July 31, 2011, there were 2,000,000, 3,617,194 and 15,096,290 shares of common stock reserved for future awards under the 2000 Plan, 2001 Plan and 2006 Plan, respectively.  The Company issues new shares of common stock from the shares reserved under the respective Plans upon conversion or exercise of options and issuance of restricted shares.

\The 2000, 2001 and 2006 Plans (the Plans) are administered by the Board of Directors (the Board). The Board is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom options are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options. The Board is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans. Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Board.

The Plans provide that options may or may not be Incentive Stock Options (ISOs) within the meaning of Section 422 of the Internal Revenue Code. Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options which are not ISOs, i.e. “Non-Qualified Options.” The options granted by the Board in connection with its adoption of the Plans were Non-Qualified Options. In addition, the 2006 Plan also provides for restricted stock grants.

Share-based employee compensation related to stock options for the years ended July 31, 2011, 2010 and 2009 amounted to $936,465, $885,872 and $45,417 for each year and were charged to the consolidated statements of operations.  Share-based employee compensation related to common stock grants for the years ended July 31, 2011, 2010 and 2009 amounted to $100,999 $104,738 and $198,128, respectively, and were charged to the consolidated statements of operations. 

The fair value of each option granted is estimated on grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option.  The following is the average of the data used to calculate the fair value:

	Risk-Free			Expected	Expected			Expected
	Interest Rate			Life (Years)	Volatility			Dividends
July 31, 2011		0.013	%	5.0		101	%		-0-
July 31, 2010		0.14	%	6.5		104	%		-0-
July 31, 2009		0.17	%	5.0		101	%		-0-

The following is a summary of the common stock options granted, forfeited or expired and exercised under the Plan:

				Weighted Average
				Exercise Price
	Options			per Share
Outstanding August 1, 2008		6,246,638		$	0.66
Granted		50,000		$	0.29
Forfeited or expired		(1,129,500	)	$	1.68
Exercised		(100,000	)	$	0.56
Outstanding - July 31, 2009		5,067,138		$	0.44
Granted		2,705,000		$	0.63
Forfeited		(270,000	)	$	0.92
Expired		(36,500	)	$	0.63
Exercised		—		$	0.00
Outstanding - July 31, 2010		7,465,638		$	0.49
Granted		3,300,000		$	0.28
Forfeited or expired		(2,848,704	)	$	0.41
Exercised		(576,752	)	$	0.001
Outstanding - July 31, 2011		7,340,182		$	0.46
Exercisable - July 31, 2011		6,494,346		$	0.44

The 7,340,182 outstanding options at July 31, 2011 had a weighted average remaining contractual term of 4.5 years.

Options typically vest over a period of two to four years and have a contractual life of five to ten years.

The following is a summary of the non-vested common stock options granted, vested and forfeited under the Plan:

				Weighted Average
				Grant Date
	Options			Fair Value
Outstanding - August 1, 2010		2,021,669		$	0.53
Granted		3,300,000		$	0.21
Vested		(4,097,082	)	$	0.28
Forfeited		(378,751	)	$	0.55
Outstanding - July 31, 2011		845,836		$	0.50

As of July 31, 2011, the Company had $190,349 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.  That cost is expected to be recognized over a weighted-average period of 2.2 years.

During the twelve months ended July 31, 2011, the Company granted 3,300,000 options to executives, directors and management employees, as compensation. The total fair value of the options at the date of grant was $692,010. The options vested immediately and a charge of $692,010 was recorded at the date of grant. The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model, taking into account the grant date exercise price and current price of the underlying stock of $0.282, an expected life of the option of 5 years, an expected volatility of 101.3%, expected dividends on the stock of $0 and the risk-free interest rate for the term of the option of 0.13%.

During the twelve months ended July 31, 2010, the Company modified the terms of 4,535,638 outstanding options which resulted in a charge to operations in the amount of $875,773.  The fair value of modification cost is estimated as the difference of options’ fair value before and after modification date.  The estimates employ the Black-Scholes option pricing model, which takes into account the exercise price ($0.001 – $0.94), expected life of the option (5 years), the current price of the underlying stock ($0.59) and its expected volatility (109.05%), expected dividends on the stock ($0) and the risk-free interest rate for the term of the option (0.11%).

The following table summarizes information on stock options outstanding at July 31, 2011:

	Options Outstanding
					Weighted
	Number		Weighted		Average
	Outstanding		Average		Remaining		Aggregate
Range of	at		Exercise		Life		Intrinsic
Exercise Price	July 31, 2011		Price		(Years)		Value
$0.001 - $0.18		542,154	$	0.001		3.24
$0.19 - $0.56		3,450,000	$	0.28		4.60
$0.57 - $0.63		550,000	$	0.59		3.24
$0.64 - $0.65		1,758,250	$	0.64		5.82
$0.66 - $0.96		1,039,778	$	0.94		3.24
		7,340,182	$	0.46		4.50	$	69,938
	Options Exercisable
					Weighted
	Number		Weighted		Average
	Outstanding		Average		Remaining		Aggregate
Range of	at		Exercise		Life		Intrinsic
Exercise Price	July 31, 2011		Price		(Years)		Value
$0.001 - $0.18		542,154	$	0.001		3.24
$0.19 - $0.56		3,450,000	$	0.28		4.60
$0.57 - $0.63		550,000	$	0.59		3.24
$0.64 - $0.65		912,414	$	0.64		6.57
$0.66 - $0.96		1,039,778	$	0.94		3.24
		6,494,346	$	0.44		4.43	$	69,938

	For the Year Ended July 31,
	2011		2010		2009
Weighted Average Grant Date Fair Value of Options Granted	$	0.21	$	0.53	$	0.22
Aggregate Intrinsic Value of Options Exercised	$	166,681	$	—	$	15,111
Cash Received for Exercise of Stock Options	$	577	$	—	$	56,000

The intrinsic value is calculated as the difference between the market value as of July 31, 2011, 2010 and 2009 and the exercise price of the shares on the respective dates.  The market values as of July 31, 2011, 2010 and 2009 were $0.13, $0.40, and $0.65, respectively, based on the high and low bid information for July 31, 2011 and as reported by the NASDAQ Stock Market as of July 31, 2010 and 2009.