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 nine months ended September 30, 2019 and 2020 as shown in the following table (in $000s):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2020		2019		2020
Research and development	$	61	$	28	$	126	$	97
General and administrative		123		85		235		192
Stock-based compensation costs before income taxes	$	184	$	113	$	361	$	289

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 replaced the 2015 Equity Incentive Plan (the “2015 Plan”).

The 2018 Plan allows for the issuance of up to 775,000 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 35,494 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 September 30, 2020, the Company has reserved 656,124 shares of the Company’s common stock under the 2018 Plan for future issuances, 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 56,400 options granted during the nine months ended September 30, 2020. These options had a grant date fair value ranging between $2.48-$3.95 per option. There were 77,513 options granted during the nine months ended September 30, 2019. These options had a grant date fair value ranging between $10.36-$12.13 per option.

There were no stock options exercised during each of the nine months ended September 30, 2019 and 2020, 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.

In September 2020, the Company modified certain outstanding stock option awards for two of its former longstanding directors, both of whose service terminated in September 2020. Specifically, a total of 10,400 options that otherwise would have been forfeited were accelerated. In addition, the Company extended the period during which these directors’ outstanding vested awards could be exercised from ninety (90) days to three years (but not beyond the contractual term of the awards). The Company recognized a charge of approximately $20,000 during the three months ended September 30, 2020 related to these modifications.

Outstanding Options

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


				Weighted
		Weighted		Average
	Number of	Average		Remaining	Aggregate
	Options	Exercise		Contractual	Intrinsic
	Outstanding	Price Per Share		Term (Years)	Value ($000)
Options outstanding at December 31, 2019	100,278	$	54.40	—	$	—
Granted	56,400	$	4.22
Cancelled/forfeited	(2,084)	$	176.56
Options outstanding at September 30, 2020	154,594	$	34.41	8.01	$	6

Unvested at September 30, 2020	78,114	$	8.65	9.19	$	6
Vested and exercisable at September 30, 2020	76,480	$	60.72	6.82	$	—

Restricted Stock Units

The Company issued 14,000 restricted stock units to employees during the year ended December 31, 2019. The Company issued 3,938 additional restricted stock units to employees during the quarter ended March 31, 2020, of which 850 units have been forfeited. The vesting of the remaining 17,088 outstanding restricted stock units is dependent upon the fulfillment of certain clinical study objectives. The Company determined that the satisfaction of the clinical conditions was not probable at September 30, 2020 and, as a result, recorded no compensation expense related to restricted stock units for the quarter ended September 30, 2020. The restricted stock units were valued based on their fair value at the date of grant, which is equivalent to the market price of a share of the Company’s common stock. Summarized information for restricted stock unit activity for the quarter ended September 30, 2020 is as follows:

	Restricted Stock Units		Weighted Average Grant Date Value Per Share
Restricted Stock Units outstanding at September 30, 2020		17,088	$	11.43
Unvested at September 30, 2020		17,088	$	11.43
Vested and exercisable at September 30, 2020		0	$	11.43