Note 10 - Stockholders’ equity

Controlled Equity Offering

The Company has a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., as sales agent (“Cantor”). Under the Sales Agreement, the Company may offer and sell, from time to time, through Cantor, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”). The Company pays Cantor a commission of 3.0% of the aggregate gross proceeds received under the Sale Agreement. The Company is not obligated to make any sales of the Shares under the Sales Agreement. The offering of Shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the Shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Cantor or the Company, as permitted therein. The initial agreement contemplated the sale of shares of the Company’s common stock having an aggregate offering price of up to $20.0 million. In December 2014, the Sales Agreement was amended in order for the Company to offer and sell additional shares of Common Stock having an aggregate offering price of $20.0 million.

On September 1, 2017, the Company filed with the SEC a “shelf” registration and sales agreement prospectus covering the offering, issuance and sale of our Common Stock that may be issued and sold under the existing Sales Agreement in an aggregate amount of up to $19.15 million. A total of $150 million of securities may be sold under this shelf registration, which was declared effective September 15, 2017.

For the years ended July 31, 2017 and 2016, the Company did not sell any shares of common stock under the Sales Agreement.

Common stock

In fiscal 2017, the Company issued 91,541 shares of common stock for its employees’ 401(k) matching contributions obligation. The Company recorded an expense of $724 for the match representing the fair value of the shares at the date of issuance.

In fiscal 2016, the Company issued 160,352 shares of common stock for its employees’ 401(k) matching contributions obligation. The Company recorded an expense of $709 for the match representing the fair value of the shares at the date of issuance.

In fiscal 2015, the Company issued 214,984 shares of common for its employees’ 401(k) matching contributions obligation. The Company recorded an expense of $662 for the match, representing the fair value of the shares at the date of issuance.

Incentive stock plans

The Company has an incentive stock option and restricted (non-vested) stock award plan (the “2005 Plan”), under which the Company could grant options and restricted stock (non-vested) awards for up to 1,000,000 common shares under the 2005 Plan. No additional awards may be granted under the 2005 Plan. On January 14, 2011, the Company’s stockholders approved the adoption of the 2011 Incentive Plan (the “2011 Plan”) which provides for the issuance of equity awards, including among others, options, restricted stock and restricted stock units for up to 3,000,000 Common Shares. The exercise price of options granted under the 2011 Plan, and consistent with other Plans, is equal to or greater than fair market value of the Common Stock on the date of grant. Unless terminated earlier by the Board of Directors, the 2011 Plan will terminate at the earliest of; (a) such time as no shares of Common Stock remain available for issuance under the 2011 Plan or (b) tenth anniversary of the effective date of the 2011 Plan. Awards outstanding upon expiration of the 2011 Plan shall remain in effect until they have been exercised, terminated, or have expired. As of July 31, 2017, there were approximately 350,000 shares available for grant under the 2011 Plan.

The Company estimates the fair value of each stock option award on the measurement date using a Black-Scholes option pricing model. The fair value of awards is amortized to expense on a straight line basis over the requisite service period. The Company expenses restricted stock awards based on vesting requirements, primarily time elapsed.

Options granted pursuant to the plans may be either incentive stock options or non-statutory options The 2011 Plan provides for the issuance of stock options, restricted stock and restricted stock unit awards which generally vest over a two to four year period. A summary of the activity pursuant to the Company’s stock option plans for the years ended July 31, 2017, 2016, and 2015 is as follows:

The intrinsic value of stock option awards that vested during the fiscal year represents the value of the Company’s closing stock price on the last trading day of the fiscal year in excess of the exercise price multiplied by the number of options that vested. Total intrinsic value of options that vested and were exercisable during the fiscal years ended July 31, 2017, 2016, and 2015 was $10,530, $4,399 and $97, respectively. The intrinsic value of options outstanding at July 31, 2017, 2016, and 2015 was $14,510, $6,451 and $154, respectively. The intrinsic value of the options exercised in fiscal 2017 and 2016 was $1,388 and $64, respectively.

On January 5, 2017, the Company awarded 264,896 options to the board of directors and senior officers with an exercise price of $7.07 and a five-year term, which vest annually over two years. The fair value of the options granted was $2.40 per share. The assumption used to fair value these options were as follow: expected life of 3.25 years, expected volatility 46.28%, a risk free interest rate of 1.48% and no dividend yield. As of July 31, 2017 none of these options were vested.

On January 5, 2017, the Company also awarded 229,100 options to senior management and employees with an exercise price of $7.07 and a five-year term, which vest annually over three years. The fair value of the options granted was $2.48 per share. The assumption used to fair value these options were as follows: expected life of 3.50 years, expected volatility 45.85%, a risk free interest rate of 1.54% and no dividend yield. As of July 31, 2017 none of these options were vested.

On March 14, 2016, the Company awarded 110,000 options to senior officers with an exercise price of $4.35 and a five-year term, which vest annually over two years. The fair value of the options granted was $1.46 per share. The assumption used to fair value these options were as follow: expected life of 3.25 years, expected volatility 46.13%, a risk free interest rate of 1.19% and no dividend yield. As of July 31, 2017, approximately 55,000 of these options were vested.

On March 14, 2016, the Company also awarded 191,600 options to senior management and employees with an exercise price of $4.35 and a five-year term, which vest annually over three years. The fair value of the options granted was $1.57 per share. The assumption used to fair value these options were as follow: expected life of 3.5 years, expected volatility 48.14%, a risk free interest rate of 1.24% and no dividend yield. As of July 31, 2017, approximately 61,366 of these options were vested and 6,167 forfeited.

On June 16, 2016, the Company awarded 2,000 options to an employee with an exercise price of $5.61 per share and a five-year term, which vest annually over two years. The fair value of the options granted was $1.88 per share. The assumption used to fair value these options were as follows: expected life of 3.25 years, expected volatility 46.64%, a risk free interest rate of 0.846% and no dividend yield. As of July 31, 2017, approximately 1,000 of these options were vested.

On January 6, 2016, the Company awarded 189,873 options to the board of directors with an exercise price of $4.66 and a five-year term, which vest annually over two years. The fair value of the options granted was $1.65 per share. The assumption used to fair value these options were as follow: expected life of 3.25 years, expected volatility 48.6%, a risk free interest rate of 1.31% and no dividend yield. As of July 31, 2017, approximately 126,582 of these options were vested.

On January 21, 2015, the Company awarded 293,373 options to two senior officers and the board of directors with an exercise price of $3.40 and a five-year term, which vest annually over two years. The fair value of the options granted was $1.27 per share. The assumptions used to fair value these option awards were as follows: expected life of 3.25 years, expected volatility 52.25%, a risk free interest rate of 0.93% and no dividend yield. As of July 31, 2017, all of these options were vested. Further on January 21, 2015, the Company awarded 40,000 options to executive officers with an exercise price of $3.40 and a five-year term, which vest annually over three years. The fair value of the options granted was $1.39 per share. The assumptions used to fair value these option awards were as follows: expected life of 3.5 years, expected volatility 55.63%, a risk free interest rate of 1.00% and no dividend yield. As of July 31, 2017, approximately 23,334 of these options were vested and 5,000 were forfeited.

The following table summarizes information for stock options outstanding at July 31, 2017:

Restricted Stock Awards

During fiscal 2017, 2016 and 2015, the compensation committee of the Company’s board of directors approved grants of restricted stock and restricted stock unit awards (the “Awards”) to certain officers and certain employees under the 2011 or 2005 Plans. The Awards vest upon the recipient’s continued employment service rateably over either two, three or four years. Share-based compensation expense is based on the fair value of the award as measured on the grant date and is recorded over the vesting period on a straight-line basis. The Awards will be forfeited if the recipient ceases to be employed by the Company, as defined in the Plans’ terms. The Awards settle in shares of the Company’s common stock on a one-for-one basis.

The following table summarizes the activity pursuant to restricted stock awards for the years ended July 31,

The fair value of the awards that vested during the years ended July 31, 2017, 2016 and 2015 was $44, $46 and $79, respectively.