Stock-Based Compensation

3 Months Ended

Oct. 31, 2018

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

Stock-Based Compensation

Note 7- Stock-Based Compensation:

Stock Option Plans

As of October 31, 2018, the Company had two 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 2,835,000 shares of common stock are reserved for issuance under the 2006 Stock Plan as amended (the 2006 Plan) and 5,040,000,000 shares of common stock reserved for issuance under the 2017 Stock Option Plan (the 2017 Plan). At October 31, 2018, there were 1,354,185 and 5,037,270,000 shares of common stock reserved for future awards under the 2006 Plan and 2017 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 2006 and 2017 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.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model or the value of the services provided, whichever is more readily determinable. The Black-Scholes option pricing model 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 a summary of the common stock options granted, forfeited or expired and exercised under the Plan:

	Options			Weighted Average Exercise Price per Share
Outstanding - July 31, 2018		232,218		$	1.46
Granted		2,730,000			0.11
Forfeited or expired		(214,638	)		(0.05	)
Exercised		—			—
Outstanding - October 31, 2018		2,747,580		$	0.28

The 2,747,850 outstanding options at October 31, 2018 had a weighted average remaining contractual term of 9.88 years. 

There were 927,850 vested common stock options under the Plan for the period ended October 31, 2018. As of October 31, 2018, the Company had $182,573 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.

The Company granted 2,730,000 options during the three months ended October 31, 2018 and none during the year ended July 31, 2018. . The Company did not grant any options during the three months ended October 31, 2017

The Company estimated the fair value of each stock option on the grant date using a Black-Scholes option-pricing model. Black-Scholes option-pricing models requires the Company to make predictive assumptions regarding future stock price volatility, recipient exercise behavior, and dividend yield. The Company estimated the future stock price volatility using the historical volatility over the expected term of the option. The following assumptions were used in the Black-Scholes option-pricing model:

	October 31, 2018
Exercise price		0.106
Time to expiration		10 years
Risk-free interest rate		3.15	%
Estimated volatility		151.3	%
Dividend		—
Stock price at valuation date	$	0.106

The following table summarizes information on stock options outstanding at October 31, 2018:

		Options Outstanding and Options Exercisable
	Range of Exercise Price	Number Outstanding at October 31, 2018		Weighted Average Exercise Price	Weighted Average Remaining Life (Years)		Aggregate Intrinsic Value
$	0.11	2,730,000	$	0.11	9.93	$	1,119,400
$	30.48	17,850	$	30.48	1.35		—
		2,747,850		5.95	9.88	$	1,119,400

The intrinsic value is calculated as the difference between the market value and the exercise price of the shares on October 31, 2018. The market values as of October 31, 2018 was $0.47 based on the closing bid price for October 31, 2018.