2.         STOCK BASED COMPENSATION

The Company maintains stock equity incentive plans under which the Company grants non-qualified stock options, stock appreciation rights, stock awards, performance awards, or stock units to employees, directors and consultants.

Stock Option Compensation Expense

The compensation cost for stock options granted to employees and directors is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is recognized as an expense, on a straight-line basis, over the requisite service period (the vesting period of the stock option) which is one to ten years. We recorded stock-based compensation expense, related to stock options granted to employees and directors, of approximately $933,000 and $570,000 during the nine months ended July 31, 2017 and 2016, respectively, and approximately $481,000 and $240,000 during the three months ended July 31, 2017 and 2016, respectively.  Associated with the resignation of the Company’s former chief executive officer (the “Executive”), all unvested options held by the Executive became fully vested upon Executive’s resignation.  This acceleration of vesting terms resulted in an expense of approximately $285,000 during the three and nine month periods ended July 31, 2017.

Stock Option Activity

During the nine months ended July 31, 2017 and 2016, we granted options to purchase 352,000 shares and 545,000 shares of common stock, respectively, to employees and directors at weighted average exercise prices of $2.18 and $2.92 per share, respectively, pursuant to the ITUS Corporation 2010 Share Incentive Plan (the "2010 Share Plan”).  During the nine months ended July 31, 2017 and 2016, stock options to purchase 2,200 and 9,080 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $6,000 and $23,000, respectively.  

Stock Option Plans

As of July 31, 2017, we have two stock option plans:  the ITUS Corporation 2003 Share Incentive Plan (the "2003 Share Plan") and the 2010 Share Plan, which were adopted by our Board of Directors on April 21, 2003 and July 14, 2010, respectively. 

The 2003 Share Plan provided for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to key employees, directors and consultants.  In accordance with the provisions of the 2003 Share Plan, the plan terminated with respect to the ability to grant future options on April 21, 2013.  Information regarding the 2003 Share Plan for the nine months ended July 31, 2017 is as follows:

			Weighted Average Exercise  Price Per Share
						Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2016	225,600		$	18.69
Exercised	(2,200)		$	2.58
Forfeited	(34,400)		$	17.85
Options Outstanding and exercisable at       July 31, 2017	189,000		$	19.03		$	-

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of July 31, 2017:

		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life (in years)
							Weighted Average Exercise Price
Range of Exercise Prices
$  1.79 - $  7.75		39,000		1.06		$	2.92
$13.50 - $17.50		21,400		.20		$	16.46
$18.75 - $23.00		88,600		.11		$	22.13
$29.25		40,000		.06		$	29.25

The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to key employees, directors and consultants.  As of July 31, 2017, the 2010 Share Plan had 541,266 shares available for future grants.  Information regarding the 2010 Share Plan for the nine months ended July 31, 2017 is as follows:

			Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2016	1,080,872		$	3.12
Granted	352,000		$	2.18
Forfeited	(23,266)		$	4.68
Options Outstanding  at July 31, 2017	1,409,606		$	2.86		$	-
Options Exercisable at July 31, 2017	950,467		$	3.13		$	-

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of July 31, 2017:

		Options Outstanding					Options Exercisable
			Weighted Average Remaining Contractual  Life (in years)					Weighted Average Remaining Contractual  Life  (in years)
										Weighted Average Exercise  Price
					Weighted Average Exercise Price
Range of Exercise Prices		Number Outstanding					Number Exercisable
$0.82 - $0.96		246,000	9.94	$	0.96		-	-	$	-
$2.58 - $9.25		1,163,606	6.45	$	3.26		950,467	5.92	$	3.13

In addition to options granted under the 2003 Share Plan and the 2010 Share Plan, the Board of Directors approved the grant of stock options to purchase 1,780,000 shares.  Information regarding stock options outstanding that were not granted under the 2003 Plan or the 2010 Plan for the nine months ended July 31, 2017 is as follows:

			Weighted Average  Exercise Price Per Share			Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2016	1,780,000		$	2.70
Options Outstanding  and exercisable at      July 31, 2017	1,780,000		$	2.70		$	-

The following table summarizes information about stock options outstanding and exercisable that were not granted under the 2003 Share Plan or the 2010 Share Plan as of July 31, 2017:

		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life (in years)
							Weighted Average Exercise  Price
Range of Exercise Prices
$2.58 - $5.56		1,780,000		4.94		$	2.70
							.

Stock Awards

We account for stock awards granted to employees and consultants based on the grant date market price of the underlying common stock.  During the nine months ended July 31, 2017 and 2016, we issued 3,463 shares and 9,795 shares, respectively, of common stock to consultants for services rendered.  We recorded consulting expense for the nine months ended July 31, 2017 and 2016 of approximately $18,000 and $28,000, respectively, for the shares of common stock issued to consultants.