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 at the Annual Meeting to be held on September 6, 2016.  The total number of shares of common stock of the Company, par value $0.01 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 May 31, 2016, the Company awarded 1,060,000 options to certain executives and key employees under the plan.

On October 21, 2015, the Board of Directors of the Company approved director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, effective September 1, 2015.  Beginning March 1, 2016, all Directors, excluding Mr. Andrew Sealfon, the Company’s Chief Executive Officer, will receive director compensation.

The per share weighted average fair value of stock options granted during the three months ended May 31, 2016 and May 31, 2015 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 May 31, 2016. 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 $37,542 and zero for the three months ended May 31, 2016 and May 31, 2015, respectively.

The weighted-average grant-date fair value of options granted during three months ended May 31, 2016 and May 31, 2015 was zero for both periods. The total intrinsic value of options exercised during three months ended May 31, 2016 and May 31, 2015, was zero for both periods.

The following table presents information pertaining to options outstanding at May 31, 2016:

As of May 31, 2016, there was $0.1 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 17 months. The total fair value of shares vested during the three months ended May 31, 2016 and May 31, 2015, was zero for both periods.