Note 7—Stock-Based Compensation

2016 Stock Incentive Plan

In November 2024, the Company’s Board of Directors amended the Company’s 2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”) to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 100,000 shares to an aggregate of 2,631,000 shares, including 626,000 shares for the GuruShots retention pool. This amendment was ratified by the Company’s stockholders at the Annual Meeting of Stockholders held on January 15, 2025. At April 30, 2025, there were 143,000 shares of Class B common stock available for awards under the 2016 Incentive Plan.

The Company recognizes stock-based compensation for stock-based awards, including stock options, restricted stock and deferred stock units (“DSUs”) based on the estimated fair value of the awards and recognized over the relevant service period and/or market conditions. The Company estimates the fair value of stock options on the measurement date using the Black-Scholes option valuation model. The Company estimates the fair value of the restricted stock and DSU’s with service conditions only using the current market price of the stock. The Company estimates the fair value of the DSU’s with both service and market conditions using the Monte Carlo Simulation valuation model.

The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. The Company recognizes stock-based compensation expense related to options and shares of restricted stock on a straight-line basis over the service period of the award, which is generally 4 years for options and 3 years for shares of restricted stock.

Deferred Stock Units Equity Incentive Programs

In November, 2024, the Company adopted an equity incentive program (under the 2016 Incentive Plan) in the form of grants of DSUs that, upon vesting, will entitle the grantees to receive shares of the Company’s Class B common stock. The number of shares that will be issuable on each vesting date will vary between 33% to 300% of the number of DSUs that vest on that vesting date, depending on the market price for the underlying Class B common stock on the vesting date relative to the grant price approved by the Compensation Committee of the Company’s Board of Directors of $2.76 per share.

The Company estimated that the fair value of the DSUs on the date of grants was $388,000 in aggregate, which is being recognized on a graded vesting basis over the requisite service periods ending in September 2027. The Company used a risk neutral Monte Carlo simulation method in its valuation of the DSUs, which simulated the range of possible future values of the Company’s Class B common stock over the life of the DSUs. The Monte Carlo simulation model incorporates the likelihood of achieving the stock price targets and requires the input of assumptions including the underlying stock price, expected volatility, risk-free rate and dividend yield.

Stock Option Grants

The Company’s option awards generally have a term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant and are pursuant to individual written agreements. Grants generally vest over a three-year or four -year period.

In January 2025 and 2024, the Compensation Committee approved grants of options to purchase 55,100 and 12,450 shares, respectively, of the Company’s Class B common stock to various executives, consultants and employees, vesting mostly over a three-year or four-year period. Unrecognized compensation expense related to these awards were $107,000 and $21,000 respectively based on the estimated fair value of the options on the grant dates.

Stock-based Compensation Expense

In our accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss), the Company recognized stock-based compensation expense for our employees and non-employees as follows (in thousands):

As of April 30, 2025, the Company’s unrecognized stock-based compensation expense was $206,000 for unvested stock options, $259,000 for unvested DSUs and $222,000 for unvested restricted stock.

Vesting and Cancellation of Restricted Stock and DSUs

In the nine months ended April 30, 2025 and 2024, awards of restricted stock and DSUs with respect to 250,000 shares and 246,000 shares, respectively, vested, and in connection with these vesting events, the Company purchased 6,903 shares and 6,328 shares respectively, of our Class B common stock from certain employees for $22,000 and $13,000, respectively, to satisfy tax withholding obligations.

On September 7, 2024, DSUs award with both service and market condition with respect to approximately 170,000 shares were canceled without the reversal of compensation expenses of approximately $1.2 million because the market condition was not achieved.