Note 10 - Stock Based Compensation

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

10. 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, 2012, 616,667 and 515,871 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 shares was 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 Annual Meetings of Stockholders of Celsion held on June 25, 2010 and June 7, 2012, the stockholders approved amendments to the Plan.  The only material difference between the existing Plan and the amended Plan was the number of shares of common stock available for issuance under the amended Plan which was increased by 1,000,000 to a total of 2,000,000 shares in 2010 and by 2,250,000 to a total of 4,250,000 shares in 2012.

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, 2012 and 2011, 668,494 and 246,667 equity awards, respectively, were issued under the 2007 Plan. During 2012 and 2011, a total of 297,091 and 256,002 options were canceled or expired under the plans collectively.  During 2012, options to purchase 214,091 shares of the Company’s common stock were exercised and the Company received approximately $0.7 million in net proceeds.

As of December 31, 2012, for all stock options plans there were a total of 3,284,214 shares reserved and there were a total of 2,153,974 shares available for future issuance.  

Total compensation cost charged related to employee stock options and non-vested restricted stock awards amounted to 1.1 million, $1.2 million and $1.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.  No compensation cost related to share-based payments arrangements was capitalized as part of the cost of any asset at these same periods.

As of December 31, 2012, there was $1.4 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, 2012 and 2011 were $1.57 and $1.81, 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 within 10 years from the date of grant.  There were 21,241, 5,000 and 22,500 awards issued to consultants during the years ended December 31, 2012, 2011 and 2010, respectively.

A summary of stock option awards as of December 31, 2012 and changes during the three years ended December 31, 2012, is presented below:

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
Granted		655,251			2.24
Exercised		(214,091	)		3.26
Canceled or expired		(289,424	)		6.54
Outstanding at December 31, 2012		3,264,880		$	3.25		6.7	$	16,168,796
Exercisable at December 31, 2012		1,910,025		$	3.76		5.4	$	8,487,064

A summary of stock options outstanding at December 31, 2012 by price range is as follows:

				Options Outstanding						Options Exercisable
Range of Exercise Prices				Number		Weighted Average Remaining Contractual Term (in years)		Weighted Average  Exercise Price		Number		Weighted  Average Remaining Contractual Term (in years)		Weighted Average Exercise  Price
$	1.00	-	$3.00		2,279,918		7.3	$	2.47		1,108,562		5.9	$	2.59
$	3.01	-	$5.00		547,704		6.3		3.85		364,205		5.3		3.93
$	5.01	-	$7.00		388,631		4.4		5.77		388,631		4.4		5.77
$	7.01	-	$10.00		22,167		2.0		8.06		22,167		2.0		8.06
$	Above $10.00				26,460		1.2		17.04		26,460		1.2		17.04
					3,264,880						1,910,025

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2012 and changes during the two years ended December 31, 2012, is presented below:

Restricted Stock	Number  Outstanding			Weighted Average Exercise  Price
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
Granted		13,243			3.66
Vested and issued		(41,109	)		3.37
Forfeited		(7,667	)		2.79
Non-vested stock awards outstanding at December 31, 2012		19,334		$	3.20

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,
	2012				2011				2010
Risk-free interest rate		1.09	to	2.97%		2.29	to	2.97%	0.80	to	3.24%
Expected volatility		80.8%	-	82.3%		72.2%	-	81.0%	71.5%	-	85.8%
Expected life (in years)		5.00	to	6.25				6.25	2.9	–	6.5
Expected forfeiture rate		0.00	to	7.50%				0.00%			0.00%
Expected dividend yield				0.00%				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 2012 and 2011 grants was generated using the simplified method as allowed under Securities and Exchange Commission Staff Accounting Bulletin No. 107.