Stock-Based Compensation

6 Months Ended

Jun. 30, 2018

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

Stock-Based Compensation

Note 12. Stock-Based Compensation

The Company has long-term compensation plans that permit the granting of equity based-awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, and performance awards.

At the 2018 Annual Stockholders Meeting of the Company held on May 15, 2018, stockholders approved the Celsion Corporation 2018 Stock Incentive Plan (the 2018 Plan). The 2018 Plan, as adopted, permits the granting of 2,700,000 shares of Celsion common stock as equity awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, performance awards, or in any combination of the foregoing. Prior to the adoption of the 2018 Plan, the Company had maintained the Celsion Corporation 2007 Stock Incentive Plan (the 2007 Plan). The 2007 Plan permitted the granting of 688,531 shares of Celsion common stock as equity awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, performance awards, or in any combination of the foregoing.  The 2018 Plan replaced the 2007 Plan although the 2007 Plan remains in effect for awards previously granted under the 2007 Plan. Under the terms of the 2018 Plan, any shares subject to an award under the 2007 Plan which are not delivered because of the expiration, forfeiture, termination or cash settlement of the award will become available for grant under the 2018 Plan.

The Company has issued stock awards to employees and directors in the form of stock options and restricted stock. Options are generally granted with strike prices equal to the fair market value of a share of Celsion common stock on the date of 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 stock option granted to an eligible employee owning more than 10% of the outstanding stock of Celsion must be at least 110% of such fair market value on the date of grant. Only officers and key employees may receive incentive stock options.

Option and restricted stock awards vest upon terms determined by the Compensation Committee of the Board of Directors and are subject to accelerated vesting in the event of a change of control or certain terminations of employment. The Company issues new shares to satisfy its obligations from the exercise of options or the grant of restricted stock awards.

As of June 30, 2018, there were a total of 3,399,893 shares reserved, which were comprised of 3,034,741 shares subject to equity awards previously granted under the 2018 Plan and 2007 Plan and 365,152 shares available for future issuance under the 2018 Plan.

Total compensation cost charged related to employee stock options and restricted stock awards amounted to $3,217,633 and $676,918 for the three-month periods ended June 30, 2018 and 2017, respectively. Total compensation cost charged related to employee stock options and restricted stock awards amounted to $3,371,301 and $804,592 for the six-month periods ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was $2.7 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.3 years. The weighted average grant date fair values of the stock option awards granted during six-month periods ended June 30, 2018 and 2017 was $2.23 and $2.32, respectively.

A summary of stock option awards and restricted stock grants for the six-months ended June 30, 2018 is presented below:

	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 January 1, 2018		703,442		$	10.34		–		$	–
Equity awards granted		2,440,000		$	2.22		11,000		$	2.64
Vested and issued		–		$	–		(6,000	)	$	2.64
Equity awards forfeited, cancelled or expired		(113,701	)	$	40.23		–		$	–
Equity awards outstanding at June 30, 2018		3,029,741		$	4.48		5,000		$	2.61		9.6
Aggregate intrinsic value of outstanding awards at June 30, 2018	$	1,913,490				$	1,700
Equity awards exercisable at June 30, 2018		1,657,820		$	2.95							9.6
Aggregate intrinsic value of awards exercisable at June 30, 2018	$	983,522

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing 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:

	Six Months Ended June 30,
	2018			2017
Risk-free interest rate		3.08	%		2.21	%
Expected volatility		100.0	%		90.4	%
Expected life (in years)		9.5 - 10.0			10.00
Expected forfeiture rate		–	%		–	%
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. Starting in 2017, the Company elected to account for any forfeitures when they occur.