Note

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 fai

r 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.

The Cel

sion Corporation

2007

Stock Incentive Plan (the

2007

Plan), as adopted and amended, permits the granting of

688,531shares

of stock as 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.

2007,

the Company adopted the Celsion Corporation

2007

Stock Incentive Plan (the

2007

Plan) under which

15,873

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,

June 20, 2014,

and

May 16, 2017

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

15,873

to a total of

31,746

shares in

2010,

35,714

to a total of

67,460

shares in

2012,

178,571

to a total of

246,031

shares in

2014

and by

442,500

to a total of

688,531

shares in

2017.

Prior to the

adoption of the

2007

Plan, the Company adopted

two

stock plans for directors, officers and employees (

one

2001

and another in

2004

) under which

21,164

shares collectively were reserved for future issuance under both 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 As these plans have been superseded by the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

nine

months ended

September 30, 2017

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, 2016		210,023		$	59.77		4,785		$	37.42

Equity awards granted		513,464		$	2.69		(3,357	)		42.20

Equity awards forfeited, cancelled or expired		(43,735	)	$	164.12		(1,428	)	$	26.18

Equity awards outstanding at September 30, 2017		679,752		$	9.94		–		$	–		9.40

Aggregate intrinsic value of outstanding awards at September 30, 2017	$	–				$	–

Equity awards exercisable at September 30, 2017		401,920		$	13.83							9.13

Aggregate intrinsic value of awards exercisable at September 30, 2017	$	–

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 fo

r determining the fair value of options granted during the

nine

months ended

September 30, 2017

and

2016

under the Black-Scholes option pricing model:

	Nine Months Ended September 30,
	2017			2016
Risk-free interest rate		2.21	%	1.55	–	1.87%
Expected volatility		90.4	%	87.4	–	89.1%
Expected life (in years)		10.00			10.00
Expected forfeiture rate		─	%		10%
Expected dividend yield		─	%		─%

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 with terms that approximate the expected option lives in effect at the time of grant. The model incorporated exercise, pre-vesting and post-vesting forfeiture assumptions based on analysis of historical data for forfeitures through FY

2016.

Starting in FY

2017,

the Company made the election to account for any forfeitures when they occur. The expiration of each option granted in fiscal

2016

and

2017

was used as the expected life.

Total compensation cost related to employee stock options and restricted stock awards totaled $

146,896

and

$432,573

for the

three

months ended

September 30, 2017

and

2016,

respectively. Total compensation cost related to employee stock options and restricted stock awards totaled

$951,488

and

$1,331,094

for the

nine

months ended

September 30, 2017

and

2016,

respectively.

compensation cost related to share-based payments arrangements was capitalized as part of the cost of any asset as of

September 30, 2017

and

2016.

As of

September 30, 2017,

there was

$0.5

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

1.1

years. The weighted average grant-date fair value was

$2.69

and

16.24

per share for the options granted during the

nine

months ended

September 30, 2017

and

2016,

respectively.

Collectively, for all of the Company

’s stock option plans there were a total of

29,498

equity awards available for future issuance as of

September 30, 2017.