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Stock Based Compensation

6 Months Ended

Jun. 30, 2018

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

Stock Based Compensation

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 and six months ended June 30, 2017 and 2018 as shown in the following table (in $000s):

		Three Months Ended June 30,								Six Months Ended June 30,
		2017				2018				2017				2018
General and administrative			49				63				99				122
Research and development			17				23				36				45
Stock-based compensation costs before income taxes			66				86				135				167

2018 Plan

In May 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”), under which Cyclacel may make equity incentive grants to its officers, employees, directors and consultants. The 2018 Plan replaces the 2015 Equity Incentive Plan (the “2015 Plan”).

The 2018 Plan will allow for the issuance of up to 1,500,000 shares of the Company’s common stock pursuant to various types of award grants, including stock options and restricted stock units. In addition, the 2018 Plan will allow up to 709,889 additional shares to be issued if awards outstanding under the 2015 Plan are cancelled or expire on or after the date of the annual meeting of stockholders.

As of June 30, 2018, the Company has reserved 1,697,493 shares of the Company’s common stock under the 2018 Plan, including shares that were available under the 2015 Plan and carried forward to the 2018 Plan. 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 262,728 options granted during the six months ended June 30, 2018. These options had grant date fair values ranging between $1.17-$1.29 per option. Of these options, approximately 174,272 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 June 30, 2018, but that the other vesting criteria related to these awards were not probable as of June 30, 2018. As such, the Company recognized compensation cost for these grants under the expectation that 25% of these awards will vest.

There were 170,853 options granted during the year ended December 31, 2017. Of these options, 158,853 are performance based, which 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 six months ended June 30, 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			262,728				1.51
Cancelled/forfeited			(1,488	)			362.04
Options outstanding at June 30, 2018			796,857				7.28				8.41				—
Unvested at June 30, 2018			(620,804	)			2.64				8.95				—
Vested and exercisable at June 30, 2018			176,053				23.66				6.53				—

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