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 service based 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 $214,000 and $260,000 during the three months ended January 31, 2018 and 2017, respectively.

For service based stock options granted to consultants we estimate the fair value of the stock options and recognize expense at each reporting period using the Black-Scholes pricing model.  We recorded stock-based compensation expense related to stock options granted to consultants of approximately $53,000 and $-0- during the three months ended January 31, 2018 and 2017, respectively.

Stock Option Activity

During the three months ended January 31, 2018 and 2017, we granted options to purchase 50,000 shares and 106,000 shares of common stock, respectively, to employees, directors and consultants at weighted average exercise prices of $2.30 and $5.00 per share, respectively, pursuant to the ITUS Corporation 2010 Share Incentive Plan (the "2010 Share Plan”).  During the three months ended January 31, 2018 and 2017, stock options to purchase 28,600 and 2,200 shares of common stock, respectively, were exercised with aggregate proceeds of approximately $-0- and $6,000, respectively.  Under certain circumstances, stock options may be exercised on a cashless basis.  During the three months ended January 31, 2018 and 2017, 5,515 and -0- shares of common stock, respectively, were withheld in connection with cashless exercises of stock options.

Stock Option Plans

As of January 31, 2018, 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 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 three months ended January 31, 2018 is as follows:

			Weighted Average Exercise  Price Per Share
						Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2017	30,600		$	3.16
Exercised	(10,600)		$	0.67
Forfeited	(5,600)		$	3.63
Options Outstanding and exercisable at     January 31, 2018	14,400		$	4.81		$	17,280

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of January 31, 2018:

		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life (in years)
							Weighted Average Exercise Price
Range of Exercise Prices
$ 0.67 - $17.50		14,400		1.31		$	4.81
							.

The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants.  As of January 31, 2018, the 2010 Share Plan had 802,450 shares available for future grants.  Information regarding the 2010 Share Plan for the three months ended January 31, 2018 is as follows:

			Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2017	1,637,246		$	1.50
Granted	50,000		$	2.30
Exercised	(18,000)		$	0.67
Forfeited	(4,800)		$	3.80
Options Outstanding at January 31, 2018	1,664,446		$	1.52		$	3,752,696
Options Exercisable at January 31, 2018	1,013,106		$	1.72		$	2,120,876

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of January 31, 2018:

		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
$0.67		983,000	7.40	$	0.67		556,754	6.18	$	0.67
$ 2.27 - $ 7.00		681,446	6.00	$	2.75		456,352	4.61	$	2.99

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 three months ended January 31, 2018 is as follows:

			Weighted Average  Exercise Price Per Share			Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2017	1,780,000		$	1.58
Options Outstanding and exercisable at     January 31, 2018	1,780,000		$	1.58		$	3,953,820

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 January 31, 2018:

		Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life (in years)
							Weighted Average Exercise  Price
Range of Exercise Prices
$0.67		1,046,000		4.66		$	0.67
$ 2.58-$ 5.56		734,000		4.11		$	2.88

Stock Awards

We account for stock awards granted to employees, directors and consultants based on the grant date market price of the underlying common stock.  During the three months ended January 31, 2018 and 2017, we issued 5,347 shares and 3,463 shares, respectively, of common stock to consultants for services rendered.  We recorded consulting expense for the three months ended January 31, 2018 and 2017 of approximately $15,000 and $18,000, respectively, for the shares of common stock issued to consultants.