11. STOCK BASED COMPENSATION

Employee Stock Options

The Company has long-term compensation plans that permit the granting of incentive awards in the form of stock options. Generally, the terms of these plans require that the exercise price of the options may not be less than the fair market value of Celsion's Common Stock on the date the options are granted. Options generally vest over various time frames or upon milestone accomplishments. Some vest immediately. Others vest over a period between one and five years. The options generally expire ten years from the date of the grant.

2001 Stock Option Plan

In 2001, the Board of Directors adopted a stock plan for directors, officers and employees (the “2001 Plan”) under which 666,667 shares were reserved for future issuance. The purpose of the 2001 Plan was to promote long-term growth and profitability of Celsion by providing key people with incentives to improve stockholder value and contribute to the growth and financial success of Celsion, and to enable the company to attract, retain and reward the best available persons for positions of substantial responsibility.

2004 Stock Incentive Plan

In 2004, the Board of Directors adopted a stock plan for directors, officers and employees (the “2004 Plan”) under which 666,667 shares were reserved for future issuance. The plan provides for stock instruments to be issued enabling the holder thereof to acquire Common stock of the Company at prices determined by the Company's Board of Directors. The purpose of the 2004 Plan was to promote the long-term growth and financial success of the Company and enable the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The 2004 Plan permitted the granting of awards in the form of incentive stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, and performance awards, or in any combination of the foregoing. The 2004 Plan terminates in 2014, 10 years from the date of the Plan's adoption by the Company's stockholders.

Any options forfeited or terminated under the 2001 Plan and 2004 Plan are rolled into the 2007 Stock Incentive Plan for future issuance. At December 31, 2010, 590,994 and 455,195 of available options from these two plans respectively are available for future issuance under the 2007 Stock Incentive Plan.

2007 Stock Incentive Plan

On June 13, 2007, the Company adopted the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”) under which 1,000,000 were shares available for issuance. The purpose of the 2007 Plan is to promote the long-term growth and profitability of the Company by providing incentives to improve stockholder value and enable the Company to attract, retain and reward the best available persons for positions of substantial responsibility. The 2007 Plan permits the granting of awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, and performance awards, or in any combination of the foregoing. At the Celsion Corporation 2010 Annual Meeting of Stockholders, the 2007 Plan was amended to increase the number of shares available from 1,000,000 to 2,000,000.

The Company has issued stock options and warrants to employees, directors, vendors and debt holders. Options and warrants are generally granted at market value on the date of the grant.

Incentive stock options may be granted to purchase shares of Common Stock at a price not less than 100% of the fair market value of the underlying shares on the date of grant, provided that the exercise price of any incentive option granted to an eligible employee owning more than 10% of the outstanding stock must be at least 110% of the such fair market value on the date of grant. Only officers and key employees may receive incentive stock options; all other qualified participants may receive non-qualified stock options.

Option awards vest upon terms determined by the Board of Directors. Restricted stock awards, performance stock awards and stock options are subject to accelerated vesting in the event of a change of control. The Company issues new shares to satisfy its obligations from the exercise of options.

During the year ended December 31, 2011 and 2010, 1,246,667 and 769,743 equity awards, respectively, were issued under the 2007 Plan. During 2011 and 2010, a total of 256,002 and 92,276 options were canceled or expired under the plans collectively.

As of December 31, 2011, for all stock options plans there were a total of 3,443,388 shares reserved and there were a total of 274,877 shares available for future issuance.

In February 2012, the Company's board of directors approved the recommendations and ratified the determinations of its compensation committee and granted stock options to all of the Company's executive officers and directors. Collectively, directors and executive officers were granted options to purchase 135,000 and 77,000 options respectively to purchase our common stock, respectively.

Total compensation cost charged related to employee stock options and non-vested restricted stock awards amounted to $1.2 million and $1.7 million for the years ended December 31, 2011 and 2010, respectively. No compensation cost related to share-based payments arrangements was capitalized as part of the cost of any asset at December 31, 2011 and 2010.

As of December 31, 2011, there was $1.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.0 years. The weighted average grant-date fair values of the equity awards granted during the years ended December 31, 2011 and 2010 were $1.81 and $2.19, respectively.

Equity Awards Issued to Consultants for Services

The Company periodically issues equity awards to consultants in exchange for services provided. The fair value of options granted is measured in accordance with ASC 718, Compensation – Stock Compensation, using the Black-Scholes option pricing model and recorded as an expense in the period in which such services are received. Generally, the terms of these plans require that the exercise price of such awards may not be less than the fair market value of the Company's Common Stock on the date the equity awards are granted. Consultant equity awards generally vest over various time frames or upon milestone accomplishments. Some vest immediately upon issuance. The equity awards generally expire 10 years from the date of grant. There were 22,500 and 176,000 awards issued to consultants during the year ended December 31, 2011 and 2010, respectively.

The following is a summary of stock option activity for the two years ended December 31, 2011:

Stock Options	Number Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2010		1,641,979		$	3.96
Granted		656,500			3.04
Exercised		-			-
Canceled or expired		(130,833	)		3.03
Outstanding at December 31, 2010		2,167,646			3.96
Granted		1,195,667			3.67
Exercised		-			-
Canceled or expired		(250,169	)		3.23
Outstanding at December 31, 2011		3,113,144		$	3.75		6.68	$	-
Exercisable at December 31, 2011		1,755,606		$	4.45		5.16	$	-

A summary of stock options outstanding at December 31, 2011 by price range is as follows:

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price
$	2.00 - $3.00		1,923,168		7.51	$	2.61		846,878		6.03	$	2.61
$	3.01 - $5.00		470,864		7.42		3.72		230,364		5.81		4.04
$	5.01 - $7.00		401,905		5.37		5.74		361,155		5.32		5.76
$	7.01 - $10.00		293,666		1.46		7.21		293,666		1.46		7.21
$	10.01 - $30.00		23,333		1.75		18.10		23,333		1.75		8.29
$	30.01 - $150.75		208		2.44		150.75		208		2.44		150.75
			3,113,144						1,755,606

Restricted Stock

A summary of the status of the Company's non-vested restricted stock awards as of December 31, 2011 and changes during the two years ended December 31, 2011, is presented below:

Restricted Stock	Number Outstanding			Weighted Average Exercise Price
Non-vested stock awards outstanding at January 1, 2010		78,599		$	3.06
Granted		113,243			3.16
Vested and issued		(92,276	)		2.84
Forfeited		(22,166	)		3.06
Non-vested stock awards outstanding at December 31, 2010		77,400		$	3.47
Granted		51,000			2.73
Vested and issued		(67,200	)		3.12
Forfeited		(6,333	)		3.96
Non-vested stock awards outstanding at December 31, 2011		54,867		$	3.16

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was originally developed for use in estimating the fair value of traded options, which have different characteristics from Celsion's nonqualified stock options. The model is also sensitive to changes in assumptions, which can materially affect the fair value estimate. The Company used the following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

	Year ended December 31,
	2011	2010
Risk-free interest rate	2.29 to 2.97%	0.80 to 3.24%
Expected volatility	72.15% - 81.06%	71.52% - 85.75%
Expected life (in years)	6.25	2.9 - 6.5
Expected dividend yield	0.00%	0.00%

Expected volatilities utilized in the model are based on historical volatility of the Company's stock price. The risk free interest rate is derived from values assigned to U.S. Treasury strips as published in the Wall Street Journal in effect at the time of grant. The model incorporates exercise, pre-vesting and post-vesting forfeiture assumptions based on analysis of historical data. The expected life of the fiscal 2011 and 2010 grants was generated using the simplified method as allowed under Securities and Exchange Commission Staff Accounting Bulletin No. 107.