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, 2020 and 2021 as shown in the following table (in $000s):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2021		2020		2021
General and administrative	$	85	$	223	$	192	$	587
Research and development		28	$	96	$	97	$	266
Stock-based compensation costs before income taxes	$	113	$	319	$	289	$	853

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 various types of award grants, including stock options and restricted stock units.

As of September 30, 2021, the Company has reserved 891,015 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.

In October 2020, the Inducement Equity Incentive Plan (the “Inducement Plan”) became effective. Under the Inducement 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 September 30, 2021, 120,000 shares under the Inducement Plan have been issued, leaving a remaining reserve of 80,000 shares.

There were 154,653 options granted during the nine months ended September 30, 2021. These options had a grant date fair value ranging between $3.44-$6.14 per option. 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. 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:



	Nine months ended	Nine months ended
	September 30, 2020	September 30, 2021
Expected term (years)	5 – 6	5 – 6
Risk free interest rate	0.270% – 0.425%	0.420% – 1.000%
Volatility	100% – 114%	96 – 102%
Expected dividend yield over expected term	0.00%	0.00%

There were no stock options exercised during each of the nine months ended September 30, 2020 and 2021, 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.


				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, 2020	602,683	$	11.01	9.39	$	1,861
Granted	154,653	$	6.29	—		—
Exercised	—		—	—		—
Cancelled/forfeited	(36,548)	$	11.03	—		—
Options outstanding at September 30, 2021	720,788	$	10.00	8.47	$	547

Unvested at September 30, 2021	503,910	$	4.72	9.25	$	444
Vested and exercisable at September 30, 2021	216,878	$	22.25	6.65	$	104

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 year ended December 31, 2020, of which 1,491 units have been forfeited. The vesting of the remaining 16,447 outstanding restricted stock units is dependent upon certain clinical performance criteria being met. The Company determined that the satisfaction of the clinical conditions was not probable at September 30, 2021 and, as a result, recorded no compensation expense related to restricted stock units for the quarter ended September 30, 2021.

The Company issued 18,992 restricted stock units to its directors during the nine months ended September 30, 2021. These restricted stock units will vest over a period of one or three years. Each restricted stock unit was valued at $6.69 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 as of September 30, 2021 is as follows:


		Weighted		Weighted
		Average		Average
	Restricted	Grant Date		Remaining
	Stock Units	Value Per Share		Term
Restricted Stock Units outstanding at September 30, 2021	35,439	$	8.82	9.01 years

Unvested at September 30, 2021	35,439	$	8.82	9.01 years
Vested and exercisable at September 30, 2021	—	$	—	9.01 years