2.   STOCK BASED COMPENSATION

The Company maintains stock equity incentive plans under which the Company grants incentive stock options, 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 $473,000 and $452,000 during the six months ended April 30, 2018 and 2017, respectively, and approximately $258,000 and $192,000 during the three months ended April 30, 2018 and 2017, respectively.

We estimate the fair value of service based and performance based stock options granted to consultants 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 $126,000 and $-0- during the six months ended April 30, 2018 and 2017, respectively, and approximately $74,000 and $-0- during the three months ended April 30, 2018 and 2017, respectively.

Stock Option Activity

During the six months ended April 30, 2018 and 2017, we granted options to purchase 497,000 shares and 106,000 shares of common stock, respectively, to employees, directors and consultants at weighted average exercise prices of $3.48 and $5.00 per share, respectively, pursuant to the ITUS Corporation 2010 Share Incentive Plan (the "2010 Share Plan”) and the ITUS Corporation 2018 Share Incentive Plan (the "2018 Share Plan”).  During the six months ended April 30, 2018 and 2017, stock options to purchase 48,600 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 six months ended April 30, 2018 and 2017, 8,784 and -0- shares of common stock, respectively, were withheld in connection with cashless exercises of stock options.

Stock Option Plans

As of April 30, 2018, we have three stock option plans:  the ITUS Corporation 2003 Share Incentive Plan (the "2003 Share Plan"), the 2010 Share Plan and 2018 Share Plan, which were adopted by our Board of Directors on April 21, 2003, July 14, 2010 and January 25, 2018, respectively.  The 2018 Share Plan was approved by our shareholders on March 29, 2018.

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 six months ended April 30, 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 April 30, 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 April 30, 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		1.06		$	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 April 30, 2018, the 2010 Share Plan had 725,719 shares available for future grants.  Information regarding the 2010 Share Plan for the six months ended April 30, 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	175,000		$	2.81
Exercised	(38,000)		$	0.67
Forfeited	(49,800)		$	2.15
Options Outstanding at April 30, 2018	1,724,446		$	1.63		$	3,702,296
Options Exercisable at April 30, 2018	1,122,259		$	1.77		$	2,276,255

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 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	943,000	7.09	$	0.67		566,059	5.96	$	0.67
$ 2.27 -$ 7.00	781,446	5.13	$	2.79		556,200	4.78	$	2.90

The 2018 Share Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to employees, directors and consultants.  As of April 30, 2018, the 2018 Share Plan had 4,678,000 shares available for future grants.  Information regarding options outstanding under the 2018 Share Plan for the six months ended April 30, 2018 is as follows:

			Weighted Average Exercise Price Per Share			Aggregate Intrinsic Value
	Shares
Options Outstanding at October 31, 2017	-0-
Granted	322,000		$	3.84
Options Outstanding at April 30 2018	322,000		$	3.84		$	-0-
Options Exercisable at April 30, 2018	8,608		$	3.84		$	-0-

The following table summarizes information about stock options outstanding under the 2018 Share Plan as of April 30, 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
$3.84	322,000	9.92	$	3.84		8,608	9.92	$	3.84
.

In addition to options granted under the 2003 Share Plan, the 2010 Share Plan and the 2018 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 Share Plan, the 2010 Share Plan or the 2018 Share Plan for the six months ended April 30, 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  April 30, 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, the 2010 Share Plan or the 2018 Plan as of April 30, 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		4.41	$	0.67
$ 2.58-$ 5.56		734,000		3.87	$	2.88

On May 8, 2018, stock options to purchase 3,100,000 shares were granted under the 2018 Share Plan.  Our Chairman, President and Chief Executive Officer was awarded options for 600,000 shares that were time based options and options for 1,500,000 shares that were performance based options.  Our Chief Operating Officer and Chief Financial Officer was awarded options for 500,000 shares that were time based options.  The remaining options were awarded to other employees of the Company.  The time based options vest over three years and the performance based options vest in three equal installments upon achievement of three stock price targets before May 31, 2021.

 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 six months ended April 30, 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 six months ended April 30, 2018 and 2017 of approximately $15,000 and $18,000, respectively, for the shares of common stock issued to consultants.

On May 8, 2018, a restricted stock award for 1,500,000 shares was granted under the 2018 Share Plan to our Chairman, President and Chief Executive Officer.  The restricted stock award vests in its entirety upon achievement of a stock price target before May 31, 2021.