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Stock-Based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Note 13. 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. At the 2019 Annual Stockholders Meeting of the Company held on May 14, 2019, stockholders approved an amendment to the 2018 Plan whereby the Company increased the number of common stock shares available by 1,200,000 to a total of 3,900,000 under the 2018 Plan, as amended. Prior to the adoption of the 2018 Plan, the Company had maintained the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”). At the 2020 Annual Stockholders Meeting of the Company held on June 15, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 2,500,000 to a total of 6,400,000 under the 2018 Plan, as amended. At the 2021 Annual Stockholders Meeting of the Company held on June 10, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 7,700,000 to a total of 14,100,000 under the 2018 Plan, as amended.

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.

On September 28, 2018, and again on February 19, 2019, the Compensation Committee of the Board of Directors approved the grant of (i) inducement stock options (the “Inducement Option Grants”) to purchase a total of 164,004 and 140,004 shares of Celsion common stock, respectively and (ii) inducement restricted stock awards (the “Inducement Stock Grants”) totaling 19,000 and 13,000 shares of Celsion common stock to five new employees collectively. Each award has a grant date of the date of grant. Each Inducement Option Grant has an exercise price per share equal to $2.77 and $2.18 which represents the closing price of Celsion’s common stock as reported by Nasdaq on September 28, 2018 and February 19, 2019, respectively. Each Inducement Option Grant will vest over three years, with one-third vesting on the one-year anniversary of the employee’s first day of employment with the Company and one-third vesting on the second and third anniversaries thereafter, subject to the new employee’s continued service relationship with the Company on each such date. Each Inducement Option Grant has a ten-year term and is subject to the terms and conditions of the applicable stock option agreement. Each of Inducement Stock Grant vested on the one-year anniversary of the employee’s first day of employment with the Company is subject to the new employee’s continued service relationship with the Company through such date and is subject to the terms and conditions of the applicable restricted stock agreement.

As of June 30, 2021, there were a total of 14,198,424 shares of Celsion common stock reserved for issuance under the 2018 Plan, which were comprised of 6,548,325 shares of Celsion common stock subject to equity awards previously granted under the 2018 Plan and 2007 Plan and 7,650,099 shares of Celsion common stock available for future issuance under the 2018 Plan. As of June 30, 2021, there were a total of 140,004 shares of Celsion common stock subject to outstanding inducement awards.

Total compensation cost related to stock options and restricted stock awards amounted to $793,619 and $578,761 for the three-month periods ended June 30, 2021 and 2020, respectively. Of these amounts, $299,581 and $200,186 was charged to research and development during the three-month periods ended June 30, 2021 and 2020, respectively, and $494,038 and $378,575 was charged to general and administrative expenses during the three-month periods ended June 30, 2021 and 2020, respectively.

Total compensation cost related to stock options and restricted stock awards amounted to $2,372,945 and $1,030,726 for the six-month periods ended June 30, 2021 and 2020, respectively. Of these amounts, $882,088 and $378,122 was charged to research and development during the six-month periods ended June 30, 2021 and 2020, respectively, and $1,490,857 and $652,604 was charged to general and administrative expenses during the six-month periods ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, there was $3.2 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 1.2 years. The weighted average grant date fair values of the stock options granted was $1.98 and $3.10 during the six-month periods ended June 30, 2021 and 2020, respectively. A summary of stock option awards and restricted stock grants for the three-months ended June 30, 2021 is presented below:

	Stock Options					Restricted Stock Awards				Weighted Average
	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, 2021		4,624,725		$	2.77		2,750	$	0.89

Equity awards granted		2,154,000		$	2.18		7,000	$	1.38

Equity awards exercised or vested and issued		(7,500	)	$	0.63		-	$	-

Equity awards forfeited, cancelled or expired		(92,646	)	$	2.69		-	$	-

Equity awards outstanding at June 30, 2021		6,678,579		$	2.58		9,750	$	1.27		8.0

Aggregate intrinsic value of outstanding equity awards at June 30, 2021	$	12,145				$	12,383

Equity awards exercisable at June 30, 2021		4,329,286		$	2.73						7.8

Aggregate intrinsic value of equity awards exercisable at June 30, 2021	$	1,650

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:

Six Months Ended June 30,

2021 2020

Risk-free interest rate 1.56 to 1.74 % 0.71 to 1.33 %

Expected volatility 106.8 to 113.0 % 100.4 to 104.2 %

Expected life (in years) 7.5 to 10.0 8.5 to 10.0

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.