Note 10 - Stock Based Compensation

3 Months Ended

Mar. 31, 2013

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

Note 10. Stock Based Compensation

Stock Options Plans

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 granted generally vest over various time frames or upon milestone accomplishments.  The Company’s options generally expire ten years from the date of the grant.

In 2007, the Company adopted the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”) under which 1,000,000 shares were authorized 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 equity 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 original 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.

Prior to the  adoption of the 2007 Plan, the Company adopted two stock plans for directors, officers and employees (one in 2001 and another in 2004) under which 666,667 shares were reserved for future issuance under each of these plans.  As these plans have been superseded by the 2007 Plan, any options previously granted which expire, forfeit, or cancel under these plans will be rolled into the 2007 Plan.

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 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:

	Three Months ended March 31,
	2013	2012
Risk-free interest rate	0.85%	2.97%
Expected volatility	83.41%	80.8-81.3%
Expected life (in years)	5.25	6.00 – 6.30
Expected forfeiture rate	5%	7.5%
Expected dividend yield	0.0%	0.0%

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 bonds 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 2013 and 2012 grants was generated using the simplified method.

A summary of the Company’s stock option and restricted stock awards for the three month period ended March 31, 2013 is as follows:

	Stock Options					Restricted Stock Awards				Weighted
Equity Awards	Options Outstanding			Weighted Average Exercise Price		Non-vested Restricted Stock Outstanding		Weighted Average Grant Date Fair Value		Average Contractual Terms of Equity Awards (in years)
Equity awards outstanding at December 31, 2012		3,264,880		$	3.25		19,337	$	3.2
Equity awards granted		15,000		$	1.30		–	$	–
Equity awards exercised		(49,266	)	$	3.57		–	$	–
Equity awards forfeited, cancelled or expired		(3,333	)	$	6.45		–	$	–
Equity awards outstanding at March 31, 2013		3,227,281		$	3.25		19,337	$	3.2		6.6
Aggregate intrinsic value of outstanding awards March 31, 2013	$	–				$	61,813
Equity awards exercisable at March 31, 2013		2,306,490		$	3.52						5.7
Aggregate intrinsic value of awards exercisable at March 31, 2013	$	–

Total compensation cost related to employee stock options and restricted stock awards amounted to $263,192 and $305,127 for the three months ended March 31, 2013 and 2012, respectively.   No compensation cost related to share-based payments arrangements was capitalized as part of the cost of any asset as of March 31, 2013 and 2012.

As of March 31, 2013, there was $1.3 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 1.8 years. The weighted average grant-date fair value was $0.87 and $1.46 per share for the options granted during the three months ended March 31, 2013 and 2012, respectively.  The weighted average grant-date fair value was $2.09 for the restricted stock awards granted during the three months ended March 31, 2012.  No restricted stock awards were granted during the first three months of 2013.

During the first quarter of 2013, the Company received gross proceeds of approximately $0.2 million from the exercise of options to purchase 49,266 shares of common stock. Collectively, for all the stock option plans as of March 31, 2013, there were a total of 5,388,922 shares reserved, which were comprised of 3,246,615 equity awards granted and 2,142,307 equity awards available for future issuance.