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STOCK BASED COMPENSATION | 3 Months Ended
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Mar. 31, 2013
STOCK BASED COMPENSATION |
STOCK BASED COMPENSATION | 6. STOCK BASED COMPENSATION ASC 718 requires compensation expense associated with share-based awards to be recognized over the requisite service period, which for the Company is the period between the grant date and the date the award vests or becomes exercisable. Most of the awards granted by the Company (and still outstanding), vest ratably over four years, with ¼ of the award vesting one year from the date of grant and 1/48 of the award granted vesting each month thereafter. Annual awards granted in December 2010 vest 1/48 of the award each month after the grant date. Certain awards made to executive officers vest over three to five years, depending on the terms of their employment with the Company. The Company recognizes all share-based awards issued after the adoption of ASC 718 under the straight-line attribution method. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company evaluates its forfeiture assumptions quarterly and the expected forfeiture rate is adjusted when necessary. Ultimately, the actual expense recognized over the vesting period is based solely on those shares that vest. Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three months ended March 31, 2012 and 2013 as shown in the following table (in $000s):
|  | For the three months ended March 31, |
|  | 2012 |  | 2013 |
General and administrative |  | 77 |  | 57 |
Research and development |  | 17 |  | 15 |
Discontinued operations |  | 8 |  | — |
Stock-based compensation costs before income taxes |  | 102 |  | 72 |
2006 Plan On March 16, 2006, the 2006 Plan was adopted, under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. At the Company’s annual shareholder meeting on May 23, 2012, the stockholders approved and amended the number of shares reserved under the 2006 Plan to 1,428,571 shares of the Company’s common stock, up from 742,857 shares. Stock option awards granted under the 2006 Plan have a maximum life of 10 years and generally vest over a four-year period from the date of grant. There were no options granted during the three months ended March 31, 2012 and 2013. During the three months ended March 31, 2012, 77,062 options were exercised for proceeds of approximately $34,000. There were no stock options exercised during the three months ended March 31, 2013. The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur during the year ending December 31, 2013 because the Company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income for the year ended December 31, 2013. Outstanding Options A summary of the share option activity and related information is as follows:
Cyclacel Pharmaceuticals, Inc. |  | Number of options outstanding |  | Weighted average exercise price |  | Weighted average remaining contractual term (years) |  | Aggregate intrinsic value |
Options outstanding at December 31, 2012 |  | 463,023 |  | $ | 26.61 |  | 5.58 |  | $ | 347 |
Granted |  | — |  | $ | — |  |  |  |  |
Exercised |  | — |  | $ | — |  |  |  |  |
Cancelled/forfeited |  | — |  | $ | — |  |  |  |  |
Options outstanding at March 31, 2013 |  | 463,023 |  | $ | 26.61 |  | 5.33 |  | 292 |
Unvested at March 31, 2013 |  | 62,024 |  | $ | 8.66 |  | 8.22 |  | 52 |
Vested and exercisable at March 31, 2013 |  | 400,999 |  | $ | 29.39 |  | 4.88 |  | 240 |
The fair value of the stock options granted is calculated using the Black-Scholes option-pricing model as prescribed by ASC 718. The expected term assumption is estimated using past history of early exercise behavior and expectations about future behaviors Estimates of pre-vesting option forfeitures are based on the Company’s experience. Currently the Company uses a forfeiture rate of 0 — 30% depending on when and to whom the options are granted. The Company adjusts its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment in the period of change and may impact the amount of compensation expense to be recognized in future periods. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. During the three months ended March 31, 2012 the Company recognized an expense of approximately $1,000 as a result of revised forfeiture rates. There was no change in forfeiture rates during the three months ended March 31, 2013. The weighted average risk-free interest rate represents interest rate for treasury constant maturities published by the Federal Reserve Board. If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, Cyclacel uses the weighted average of the two Federal Reserve securities closest to the expected term of the employee option. Restricted Stock Units The Company issued 12,281 and 85,097 restricted stock units to employees during the three months ended March 31, 2012 and 2013, respectively. A restricted stock unit grant is accounted for at fair value at the date of grant which is equivalent to the market price of a share of the Company’s common stock, and an expense is recognized over the vesting term. The 2013 restricted stock units will vest upon the fulfillment of certain clinical and financial conditions and will terminate if they have not vested by December 31, 2014. The Company determined that the satisfaction of the vesting criteria was not probable at March 31, 2013 and, as a result, did not record any expense related to these awards for the three months ended March 31, 2013. Summarized information for restricted stock unit activity for the three months ended March 31, 2013 is as follows:
|  | Restricted Stock Units |  | Weighted Average Grant Date Value Per Share |
Non-vested at December 31, 2012 |  | 39,377 |  | $ | 5.34 |
Granted |  | 85,097 |  | $ | 5.71 |
Non-vested at March 31, 2013 |  | 124,474 |  | $ | 5.60 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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