11. Stock-Based Compensation

As of March 31, 2015, the Company had 12,513,315 options 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, 2015, there were 6,404,815 options outstanding under the 2013 Plan, and 10,595,185 shares were available for issuance from the 2013 Plan.

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, 2015, there were 6,108,500 outstanding options under the 2003 Plan.

For the majority of the grants to employees under both the 2003 Plan and 2013 Plan, 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.  Options expire between five and ten years from the date of grant. For 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 Employee Awards

The Company’s results of operations for the three months ended March 31, 2015 and 2014 include stock-based employee compensation expense totaling $269,110 and $109,442 respectively. Such amounts have been included in the statement of operations in general and administrative and research and development expenses.  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.

Employee 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.

Accounting for Non-Employee Awards

Stock-based compensation expenses related to non-employee options were $3,276 and $18,908 for the three months ended March 31, 2015 and 2014, respectively.  Such amounts have been included in the statement of operations in research and development expenses.

 

Summary of Stock Compensation Expense Recognized

Total stock-based compensation recognized by the Company in the three months ended March 31, 2015 and 2014 is as follows:

 

 

Summary of Stock Option Transactions

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.  There were 975,999 stock options granted at exercise prices ranging from $1.14 to $1.35 with an aggregate fair value of $794,670 during the three months ended March 31, 2014.

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 the employee and non-employee share-based transactions:

 

 

The following table summarizes information about stock options outstanding as of March 31, 2015 and December 31, 2014:

 

 

The total intrinsic value of the options exercised was $98,051 and $48,125 for the three months ended March 31, 2015 and 2014, respectively.  The weighted average fair value of the options granted was $0.49 and $0.81 for the three months ended March 31, 2015 and 2014, respectively.

A summary of the Company’s unvested options as of March 31, 2015 and changes during the three months ended March 31, 2015 is presented below:

 

As of March 31, 2015 and December 31, 2014, there was $2,850,341 and  $1,423,150 of total unrecognized compensation cost, respectively, related to all unvested stock options, which is expected to be recognized over a weighted average vesting period of 3.2 years and 2.2 years, respectively.