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Stock Based Compensation

6 Months Ended

Jun. 30, 2019

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

Stock Based Compensation

8.

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, 2018 and 2019 as shown in the following table (in $000s):

		Three Months Ended June 30,								Six Months Ended June 30,
		2018				2019				2018				2019
General and administrative		$	63			$	57			$	122			$	112
Research and development			23				35				45				66
Stock-based compensation costs before income taxes		$	86			$	92			$	167			$	178

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 allows 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 allows up to 709,889 additional shares to be issued if awards outstanding under the 2018 Plan are cancelled or expire on or after the date of the Company’s 2018 annual meeting of stockholders.

As of June 30, 2019, the Company has reserved 152,083 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 1,550,270 options granted during the six months ended June 30, 2019. These options had a grant date fair value ranging between $0.52-$0.61 per option.

There were 306,304 options granted during the year ended December 31, 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 objectives. The Company determined that the satisfaction of one criterion, the commencement of the HEM study by December 31, 2018, occurred as of December 31, 2018, but that the other vesting criteria related to these awards were not probable as of December 31, 2018. As such, the Company recognized compensation cost for these grants under the expectation that 25% of these awards (the portion associated with the HEM study) will vest.

There were no stock options exercised during each of the six months ended June 30, 2018 and 2019, 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, 2018			831,611			$	6.68				8.13			$	—
Granted			1,550,270			$	0.71
Cancelled/forfeited			(39,613	)		$	2.76
Options outstanding at June 30, 2019			2,342,268			$	2.80				8.90			$	—
Unvested at June 30, 2019			(1,827,156	)		$	1.25				9.15			$	—
Vested and exercisable at June 30, 2019			515,112			$	8,28				8.02			$	—

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

		Year ended December 31, 2018				Six months ended June 30, 2019
Expected term (years)			6				5 – 6
Risk free interest rate			2.730% – 2.855%				2.105 – 2.610%
Volatility			105% – 107%				103 – 110%
Expected dividend yield over expected term			0.00%				0.00%
Resulting weighted average grant date fair value			$1.25				$0.52 – $0.61