NOTE 6  STOCK-BASED COMPENSATION

 On September 30, 2015, the Board of Directors approved the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan at fair market value, subject to shareholder approval.  The total number of shares of common stock of the Company, par value $.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan shall not exceed 2,000,000 shares.  As of November 30, 2015, the Company awarded 1.2 million options to certain executives and key employees under the plan.

On October 21, 2015, Cyril Narishkin was appointed to the Board of Directors and Interim Chief Operating Officer of the Company.  Also effective October 21, 2015, we entered into a consulting agreement with Mr. Narishkin, to support our expanded management team and accelerate our growth opportunities under his role of Interim Chief Operating Officer.  The agreement provides for payment of $16,000 per month, of which half is to be paid in cash and half is to be paid in shares of common stock.

On October 21, 2015, the Board of Directors of the Company also approved independent director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, effective September 1, 2015.  For purposes of director compensation, Mr. Narishkin will receive $25,000 annually in addition to his payments under his consulting agreement.  As of November 30, 2015, $12,500 was included in accrued expenses.

The per share weighted average fair value of stock options granted during the three months ended November 30, 2015 and November 30, 2014 was $0.19 and zero, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended November 30, 2015. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued: 

The following table summarizes the status of the Company’s stock option plan: 

Total stock-based compensation expense for stock option awards totaled $10,717 and zero for the three months ended November 30, 2015 and November 30, 2014, respectively.

The weighted-average grant-date fair value of options granted during the three months ended November 30, 2015 and November 30, 2014 was $219,000 and zero, respectively. The total intrinsic value of options exercised during the three months ended November 30, 2015 and November 30, 2014, was zero for both periods.

The following table presents information pertaining to options outstanding at November 30, 2015: 

As of November 30, 2015, there was $0.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 19 months. The total fair value of shares vested during the three months ended November 30, 2015 and November 30, 2014, was zero for both periods.