11. Stock-Based Compensation

As of March 31, 2016, the Company had 15,928,072 options to purchase common stock outstanding.

At the Company’s Annual Meeting of the Stockholders held on June 10, 2013, the Company’s stockholders voted to approve the Rexahn Pharmaceuticals, Inc. 2013 Stock Option Plan (the “2013 Plan”).  Under the 2013 Plan, the Company grants stock options to key employees, directors and consultants of the Company.  A total of 17,000,000 shares of common stock have been reserved for issuance pursuant to the 2013 Plan.  As of March 31 2016, there were 10,129,572 options outstanding under the 2013 Plan, and 6,862,928 shares were available for issuance.

On August 5, 2003, the Company established a stock option plan (the “2003 Plan”).  Under the 2003 Plan, the Company granted stock options to key employees, directors and consultants of the Company.  With the adoption of the 2013 Plan, no new stock options may be issued under the 2003 Plan, but previously issued options under the 2003 Plan remain outstanding until their expiration.  As of March 31, 2016, there were 5,678,500 outstanding options under the 2003 Plan.    

In March 2016, the Company granted to a third party an option to purchase up to 120,000 shares of the Company’s common stock.  Of the Company’s outstanding options as of March 31, 2016, these were the only options that were not issued pursuant to the 2013 Plan or the 2003 Plan.

For the majority of the grants to employees, the vesting period is either (i) 30%,  30% and 40% on the first,  second and third anniversaries, of the grant date, respectively, or (ii) 25% each on the first four anniversaries.  With the exception of the options granted in March 2016, which have a three-year term, options expire between five and ten years from the date of grant. For the majority of grants to non-employee consultants of the Company, the vesting period is between one and three years, subject to the fulfillment of certain conditions in the individual stock agreements, or 100% upon the occurrence of certain events specified in the individual stock agreements.

Accounting for Awards

Stock option compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite vesting service period for the entire portion of the award. Total stock-based compensation recognized by the Company for the three months ended March 31, 2016 and 2015 is as follows:



No income tax benefit has been recognized in the statement of operations for stock-based compensation arrangements as the Company has provided for a 100% valuation allowance on its deferred tax assets.

Summary of Stock Option Transactions

There were 3,337,090 stock options granted at exercise prices ranging from $0.35 to $0.37 with an aggregate fair value of $732,042 during the three months ended March 31, 2016.  There were 3,426,316 stock options granted at exercise prices ranging from $0.71 to $0.89 with an aggregate fair value of $1,698,737 during the three months ended March 31, 2015. 

The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model.  The Company took into consideration guidance under ASC 718, “Compensation-Stock Compensation” and Staff Accounting Bulletin No. 107 (“SAB 107”) when reviewing and updating assumptions.  The expected volatility is based upon historical volatility of the Company’s stock.  The expected term is based upon the simplified method as allowed under SAB 107.



The assumptions made in calculating the fair values of options are as follows:



   The following table summarizes share-based transactions:







The total intrinsic value of the options exercised was $98,051 for the three months ended March 31, 2015.  There were no stock options exercised during the three months ended March 31, 2016.  The weighted average fair value of the options granted was $0.22 and $0.49 for the three months ended March 31,  2016 and 2015 respectively.

A summary of the Company’s unvested options as of March 31, 2016 and changes during the three months ended March 31, 2016 is presented below:



As of March 31, 2016 there was $2,618,945 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average vesting period of 2.6 years.