Note 1

. 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 222,222 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, June 7, 2012 and June 20, 2014, 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 222,222 to a total of 444,444 shares in 2010, by 500,000 to a total of 944,444 shares in 2012 and by 2,500,000 to a total of 3,444,444 shares in 2014.

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 148,148 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 As these plans have been superseded by the 2007 Plan, any options previously granted which expire, forfeit, or cancel under these plans will be rolled into the 2007 Plan.

A summary of the Company’s stock option and restricted stock awards for the three months ended March 31, 2016 is as follows:

	Stock Options					Restricted Stock Awards					Weighted Average
Equity Awards	Options Outstanding			Weighted Average Exercise Price		Non-vested Restricted Stock Outstanding			Weighted Average Grant Date Fair Value		Contractual Terms of Equity Awards (in years)

Equity awards outstanding at December 31, 2015		2,139,822		$	5.64		81,518		$	2.64
Equity awards granted		551,250		$	1.33		94,500		$	1.33
Equity awards exercised		–			–		(94,500	)	$	1.33
Equity awards forfeited, cancelled or expired		(39,433	)	$	12.24		–			–

Equity awards outstanding at March 31, 2016		2,651,639		$	4.64		81,518		$	2.64		7.7

Aggregate intrinsic value of outstanding awards at March 31, 2016	$	71,662				$	119,016

Equity awards exercisable at March 31, 2016		1,704,188		$	5.63							7.0

Aggregate intrinsic value of awards exercisable at March 31, 2016	$	23,888

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,
	2016			2015
Risk-free interest rate		1.87	%		2.06	%
Expected volatility		89.1	%		93.0	%
Expected life (in years)		10.00			10.00
Expected forfeiture rate		10	%		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 2016 and 2015 grants was generated using the simplified method.

Total compensation cost related to employee stock options and restricted stock awards totaled $615,014 and $848,843 for the three months ended March 31, 2016 and 2015, respectively. No compensation cost related to share-based payments arrangements was capitalized as part of the cost of any asset as of March 31, 2016 and 2015.

As of March 31, 2016, there was $0.9 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 1.2 years. The weighted average grant-date fair value was $1.14 and $2.17 per share for the options granted during the three months ended March 31, 2016 and 2015, respectively. The weighted average grant-date fair value was $1.33 and $3.50 for the restricted stock awards granted during the three months ended March 31, 2016 and 2015, respectively.

Collectively, for all of the Company’s stock option plans as of March 31, 2016, there were a total of 3,565,770 shares reserved with 2,733,157 equity awards granted and 832,613 equity awards available for future issuance.