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Stock Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure Of Compensation Related Costs Share-Based Payments [Abstract]

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 one to four years and have a maximum life of ten years from the date of grant.

Effective January 1, 2016, the Company recognizes all share-based awards under the straight-line attribution method, assuming that all granted awards will vest. Forfeitures will be recognized in the periods when they occur. The actual expense recognized over the vesting period is based on only those shares that vest.

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three and nine months ended September 30, 2016 and 2017 as shown in the following table (in $000s):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2016				2017				2016				2017
General and administrative		$	113			$	48			$	376			$	146
Research and development			79				17				238				54
Stock-based compensation costs before income taxes		$	192			$	65			$	614			$	200

On May 22, 2015, the Company’s stockholders approved the 2015 Equity Incentive Plan (the “2015 Plan”), under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. On May 30, 2017, the Company’s stockholders approved the amendment of the 2015 Plan to increase the number of shares of common stock available for such equity incentive grants. The 2015 Plan replaces the 2006 Equity Incentive Plan. As of September 30, 2017, there were approximately 612,500 reserved awards available to be granted under the 2015 plan.

There were 12,000 options granted during the nine months ended September 30, 2017.

In 2016, the Company granted certain performance based options. As of September 30, 2017, 184,924 such options remain outstanding. These options will vest upon the fulfillment of certain clinical outcome conditions and will terminate automatically if they have not vested by December 31, 2020. The Company determined that the satisfaction of the vesting criteria was not probable as of September 30, 2017 and, as a result, did not record any expense related to these awards for the three and nine months ended September 30, 2017.

There were no stock options exercised during the nine months ended September 30, 2016 and 2017, respectively. The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur during the year ended December 31, 2017 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, 2017.

Outstanding Options

A summary of the share option activity and related information is as follows:

		Number of Options Outstanding				Weighted Average Exercise Price Per Share				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value ($000)
Options outstanding at December 31, 2016			389,379			$	25.80				5.83			$	121
Granted			12,000			$	4.38
Cancelled/forfeited			(19,593	)		$	108.73
Options outstanding at September 30, 2017			381,786			$	20.87				5.24			$	—
Unvested at September 30, 2017			(236,962	)		$	5.06				4.41			$	—
Vested and exercisable at September 30, 2017			144,824			$	46.73				6.60			$	—

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.

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.

Volatility is based on the Company’s historical volatility over the same period as the expected term for a given award.