Stock-Based Compensation

6 Months Ended

Jan. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 11 - Stock-Based Compensation

Stock Option Plans

The Company has two stockholder-approved stock incentive plans under which shares and options exercisable, with a range of vesting between 0 and 48 months, for shares of common stock have been or may be granted to employees, directors, consultants and advisors. All remaining options under the 2006 Stock Plan have expired and no shares of common stock are reserved for issuance under the 2006 Stock Plan as amended (the 2006 Plan) and a total of 240,000,000 shares of common stock reserved for issuance under the 2017 Stock Option Plan (the 2017 Plan). As of January 31, 2021, there were 0 and 227,057,640 shares available 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.

During 2019, the Company established a Direct Stock Purchase Plan (“2019 Plan”) pursuant to which eligible participants may acquire shares of common stock in lieu of certain cash obligations otherwise owed to participants during the 2019 calendar year. The 2019 Plan automatically terminated on December 31, 2019. There was a total of 1,680,000 shares of common stock reserved under the plan of which no shares have been issued.

The 2017 Plan (the Plan) is 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 Plan. Generally, the interpretation and construction of any provision of the Plan 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.

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.

During August and September 2020, the Company granted 6,242,210 stock options to buy common stock, at $0.45 per share and $0.31 per share, to various officers, board members, employees and consultants.

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		Weighted Average Remaining Life (Years)		Aggregate Intrinsic Value		Non-vested Awards
Outstanding - July 31, 2020		8,847,025		$	0.90		5.96	$	508,206	$	—
Granted		6,242,210		$	0.35		9.57		—		—
Forfeited or expired		(2,146,875	)	$	0.82		6.50		—		—
Outstanding – January 31, 2021		12,942,360		$	0.65		7.26	$	916,842	$	3,895,463

The intrinsic value is calculated as the difference between the market value and the exercise price of the shares on January 31, 2021. The market value was $0.43 based on the closing bid price as of January 31, 2021.

A summary of the status of the Company’s non-vested stock options the six  months ended January 31, 2021 is as follows: 

Non-vested Options	Options			Weighted Average Grant Date Fair Value
Non-vested on July 31, 2020		4,082,767		$	1.06
Granted		6,242,210			0.35
Expired		—			—
Canceled		(366,667	)		0.79
Vested		(2,947,803	)		0.59
Non-vested on January 31, 2021		7,010,507		$	0.64

There were 5,931,853 vested common stock options under the Plan as of January 31, 2021. The compensation expense was $531,043 and $1,742,050 for the three and six   months ended January 31, 2021. The Company had $3,936,129 of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan on January 31, 2021 to be recognized over an average of 2.09 years.

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:

	Six Months Ended January 31, 2021
Exercise price	$0.31 – $0.45
Time to expiration	10 years
Risk-free interest rate	0.16% - 0.18%
Estimated volatility	148.3% - 148.8%
Expected dividend	—
Stock price at valuation date	$0.31 – $0.45