7.	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. The Company recognizes all share-based awards under the straight-line attribution method, assuming that all granted awards will vest. Forfeitures are recognized in the periods when they occur.

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the three months ended March 31, 2017 and 2018 as shown in the following table (in $000s):

	Three Months Ended March 31,
	2017		2018
General and administrative	$	50	$	59
Research and development		19		22
Stock-based compensation costs before income taxes	$	69	$	81

2015 Plan

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. As of March 31, 2018, the Company has reserved 285,949 shares of the Company’s common stock under the 2015 Plan. The 2015 Plan replaces the 2006 Equity Incentive Plan (the “2006 Plan”), under which there were no remaining reserved shares to be granted. Stock option awards granted under the Company’s equity incentive plans have a maximum life of 10 years and generally vest over a one to four-year period from the date of grant.

There were 174,272 options granted during the three months ended March 31, 2018. These options had a grant date fair value of $1.29 per option. All of these options are performance based and will vest upon the fulfillment of certain clinical conditions. The Company determined that the satisfaction of one of the conditions was probable as of March 31, 2018, but that the other vesting criteria related to these awards were not probable as of March 31, 2018. As such, the Company recognized compensation cost for these grants under the expectation that 25% of these awards will vest.

There were no stock options exercised during each of the three months ended March 31, 2017 and 2018, respectively. The Company does not expect to be able to benefit from the deduction for stock option exercises that may occur because the company has tax loss carryforwards from prior periods that would be expected to offset any potential taxable income.

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, 2017		535,617		$	11.10		8.23	$	—
Granted		174,272		$	1.56
Cancelled/forfeited		(1,488	)	$	362.04
Options outstanding at March 31, 2018		708,401		$	8.02		8.47	$	—
Unvested at March 31, 2018		(552,654	)	$	2.93		9.02	$	—
Vested and exercisable at March 31, 2018		155,748		$	26.06		6.53	$	—

The fair value of stock options granted is calculated using the Black-Scholes pricing model as prescribed by ASC 718.