11. Stock-Based Compensation

Stock based compensation has been reported within expense line items on the consolidated statement of operations for the years ended 2019 and 2020 as shown in the following table (in thousands):


	Year Ended
	December 31,
	2019		2020
Research and development		166	$	152
General and administrative		300		278
Stock-based compensation costs before income taxes	$	466	$	430

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 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 December 31, 2020, the Company has reserved 328,035 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.

2020 Inducement Equity Incentive Plan

In October 2020, the Inducement Equity Incentive Plan (the “Inducement Plan”), became effective. Under this Plan, Cyclacel may make equity incentive grants to new senior level Employees (persons to whom the Company may issue securities without stockholder approval). The Inducement Plan allows for the issuance of up to 200,000 shares of the Company’s common stock (or the equivalent of such number). As of December 31, 2020, 120,000 shares under the Inducement Plan have been issued, leaving a remaining reserve of 80,000 shares.

Option Grants

There were 77,514 options granted during the year ended December 31, 2019.

There were 511,800 options granted during the year ended December 31, 2020. Of these awards, 391,800 were issued under the 2018 Plan and the remaining 120,000 shares were issued under the Inducement Plan.

The weighted average grant-date fair values of options granted during the years ended December 31, 2019 and 2020 were $11.51 and $3.47, respectively.

As of December 31, 2020, the total remaining unrecognized compensation cost related to the non-vested stock options with service conditions amounted to approximately $1.9 million, which will be amortized over the weighted-average remaining requisite service period of 2.66 years.

During the years ended December 31, 2019 and 2020, the Company did not settle any equity instruments with cash.

There were no stock option exercises during the years ended 2019 and 2020. No income tax benefits were recorded for the years ended December 31, 2019 and 2020. As the Company has accumulated net operating losses for tax purposes, it is not likely to benefit from any deductions associated with future exercises of granted option awards.

In September 2020, the Company modified outstanding stock option awards for two of its directors, whose service terminated in September 2020. Specifically, the Company immediately vested a total of 10,400 options that otherwise would have been forfeited. In addition, the Company extended the period in which all of these directors’ outstanding vested awards could be exercised from one to three years (but not beyond the contractual term of the awards). The Company recognized a charge of approximately $20,000 in the quarter 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, 2018	41,581	$	133.60	8.13	$	—
Granted	77,514	$	14.20	—		—
Exercised	—		—	—		—
Cancelled/forfeited	(18,816)	$	64.60	—		—
Options outstanding at December 31, 2019	100,279	$	54.40	8.62	$	4
Granted	511,800	$	4.17	—		—
Exercised	—		—	—		—
Cancelled/forfeited	(9,396)	$	101.05	—		—
Options outstanding at December 31, 2020	602,683	$	11.01	9.39	$	1,861

Unvested at December 31, 2020	525,010	$	4.64	9.80	$	1,829
Vested and exercisable at December 31, 2020	77,673	$	54.05	6.61	$	32

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	Year Ended
	December 31, 2019	December 31, 2020
Expected term (years)	5 – 6	5 – 6
Risk free interest rate	2.105 – 2.610%	0.410% – 0.570%
Volatility	103 – 110%	96 – 115%
Expected dividend yield over expected term	0.00%	0.00%
Resulting weighted average grant date fair value	$14.20	$3.47

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 1,414 units have been forfeited. The vesting of the remaining 16,524 outstanding restricted stock units is dependent upon the fulfillment of certain clinical conditions. The Company determined that the satisfaction of the clinical conditions was not probable at December 31, 2020 and, as a result, recorded no compensation expense related to restricted stock units for the year ended December 31, 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 units’ activity for the year ended December 31, 2020 is as follows:


		Weighted
	Number of	Average
	Options	Grant Date
	Outstanding	Value Per Share
Restricted Stock Units outstanding at December 31, 2019	14,000	$	10.60
Granted	3,938	$	15.20
Cancelled/forfeited	(1,414)	$
Restricted Stock Units outstanding at December 31, 2020	16,524	$	11.30

Unvested at December 31, 2020	16,524	$	11.30
Vested and exercisable at December 31, 2020	—	$	—