11. Stock-Based Compensation

As of December 31, 2016, the Company had 16,900,415 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 December 31, 2016, there were 12,461,915 options outstanding under the 2013 Plan, and 4,530,585 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 December 31, 2016, there were 4,318,500 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 December 31, 2016, these were the only options that were not issued pursuant to the 2013 Plan or the 2003 Plan.

At the Company’s Annual Meeting of the Stockholders held on June 9, 2016, the Company’s stockholders voted to approve an amendment to the 2013 Plan, including to provide for awards of restricted stock and restricted stock units.  As of December 31, 2016, no awards of restricted stock or restricted stock units had been granted

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.  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 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 years ended December 31, 2016, 2015 and 2014 is as follows:



Summary of Stock Option Transactions

There were 5,926,391 stock options granted at exercise prices ranging from $0.18 to $0.37 with an aggregate fair value of $1,156,273 during the year ended December 31, 2016.  There were 4,201,316 stock options granted at exercise prices ranging from $0.54 to $0.89 with an aggregate fair value of $1,994,893 during the year ended December 31, 2015.  There were 2,528,499 stock options granted at exercise prices ranging from $0.68 to $1.35 with an aggregate fair value of $1,737,087 during the year ended December 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. 

Significant assumptions are determined as follows:

Expected Term-the expected term was estimated using the simplified method whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

Volatility-historical trading volatility of the Company’s stock on the date of grant for a period consistent with the expected term.

Risk-Free Interest Rate-the risk-free interest rate is based on the zero-coupon U.S. Treasury instruments on the date of grant with a maturity date consistent with the expected term of the Company’s stock option grants.

Expected Dividend -to date, the Company has not declared or paid any cash dividends and do not have any plans to do so in the future. Therefore, the Company used an expected dividend yield of zero.



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





The following table summarizes share-based transactions:







There were no stock options exercised during the year ended December 31, 2016.  The total intrinsic value of the options exercised was $99,895 and $115,528 for the years ended December 31, 2015 and 2014, respectively.  The weighted average fair value of the options granted was $0.20,  $0.47, and $0.69 for the years ended December 31,  2016, 2015 and 2014, respectively.

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



As of December 31, 2016 there was $1,882,605 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average vesting period of 2.0 years.