8. Share-Based Compensation

Restricted Stock Units

The Company issues restricted stock unit awards, or RSUs, to key management and as compensation for services to consultants and others. The RSUs typically vest over a one1 to three-year3 period and carry a ten-year10 term. Each RSU represents the right to receive one share of common stock, issuable at the time the RSU subsequently settles, as set forth in the Restricted Stock Unit Agreement. The Company determines the fair value of those awards at the date of grant, and amortizes those awards as an expense over the vesting period of the award. The shares earned under the grant are usually issued when the award settles at the end of the term.

During the fiscal year ended July 31, 2025, the Company granted 30,000 RSUs to a third-party consultant for manufacturing services. The RSU’s vested 100% on the date of grant. As a result, the Company recognized the entire fair value of $3,000 of compensation cost relating to the vesting of the RSUs. There was no RSU compensation cost recognized during the fiscal year ended July 31, 2026.

During the fiscal year ended July 31, 2025, 30,000 RSUs were delivered. All of the remaining 712,500 RSUs outstanding are vested and issuable as of July 31, 2026. These RSUs are issued upon settlement date which is defined as “for each Vested Unit, the earliest of (i) the ten-year anniversary of the grant date; (ii) sixty days after the date the grantee’s service ceases for any reason and such cessation constitutes a “separation from service” within the meaning of Section 409A of the Code; (iii) the date of Grantee’s death or (iv) the date of a change in control that constitutes a “change in control event” within the meaning of Section 409A of the Code”.

A summary of our restricted stock unit activity and related data is as follows:

Schedule of Restricted Stock Activity

Stock Option Plans

2024 Equity Incentive Plan

The Company’s shareholders approved its 2024 Equity Incentive Plan, or the 2024 Plan, in February 2024, which has a share reserve of 10,000,000 shares of common stock that were registered under a Form S-8 filed with the SEC in August 2024. The 2024 Plan provides for the grant of incentive and non-qualified stock options, as well as other share-based payment awards, to its employees, directors, consultants and advisors. These awards have up to a 10-year contractual life and are subject to various vesting periods, as determined by the Compensation Committee of the Board. The 2024 Plan replaced the prior amended and restated 2007 and 2017 shareholder approved equity plans. As of July 31, 2026, there were 7,470,000 shares available for issuance under the 2024 Plan.

Stock Option Activity

During the fiscal year ended July 31, 2026, the Compensation Committee of the Board of Directors granted 3,395,000 stock options to the Company’s employees, officers, directors and consultants with a fair value of $218,000 as determined by the Black Scholes option pricing model. The vesting terms of the options vary between one and two years and carry a ten-year term.

During the fiscal year ended July 31, 2025, the Compensation Committee of the Board of Directors granted 2,665,000 stock options to the Company’s employees, officers, directors and consultants with a fair value of $158,000 as determined by the Black Scholes option pricing model. The vesting terms of the options varied between one and two years and carry a ten-year term.

A summary of the Company’s stock option activity for the fiscal years ended July 31, 2026 and 2025 is as follows:

 Schedule of Stock Option Activity

 Schedule of Stock Option Outstanding and Exercisable

The weighted average remaining contractual life of options outstanding at July 31, 2026 was 6.59 years.

For the fiscal year ended July 31, 2026 share-based compensation expense for stock options vesting during the period was $197,000. For the fiscal year ended July 31, 2025 share-based compensation expense for stock options vesting during the period was $144,000.

At July 31, 2026, options to purchase 12,258,750 shares of common stock were exercisable. These options had a weighted-average exercise price of $0.27 and a weighted average remaining contractual term of 6.35 years. The weighted average grant date fair value for options granted during the fiscal year ended July 31, 2026 was $0.07. The total unrecognized compensation cost related to unvested stock option grants as of July 31, 2026 was approximately $47,000 and the weighted average period over which these grants are expected to vest is 0.49 years. The intrinsic value of options outstanding at July 31, 2026 and 2025 was zero and $50,000, respectively.

The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. Share-based compensation expense is recognized over the vesting period using the straight-line method. The fair value of stock options was estimated at the grant date using the following weighted average assumptions:

 Schedule of Fair Value Assumptions

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.

The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, it has assumed no dividend yield for purposes of estimating the fair value of its share-based compensation.

The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options.