| Share-based Compensation |
| 23. | Share-based
Compensation |
The Company measures
employee share-based compensation expense for all share-based compensation awards based on the grant-date fair value and
recognizes the cost in the financial statements over the employee requisite service period.
During the year ended
December 31, 2018, 2017 and 2016, the total share-based compensation expense was $2,756, $798, and $1,929, respectively. Among
them, $2,726, $1,174, and $1,301 were attributable to continuing operations, respectively. The following table summarizes the
consolidated share-based compensation expense from continuing operations, by type of awards:
| | |
For the Years Ended | |
| | |
December 31, | | |
December 31, | | |
December 31, | |
| | |
2018 | | |
2017 | | |
2016 | |
| Employee stock options | |
$ | 1,799 | | |
$ | 886 | | |
$ | 962 | |
| Restricted stock grants | |
| 927 | | |
| 288 | | |
| 339 | |
| Total share-based compensation
expense | |
$ | 2,726 | | |
$ | 1,174 | | |
$ | 1,301 | |
The following table summarizes
the consolidated share-based compensation by line items from continuing operations:
| | |
For the Years Ended | |
| |
December
31, 2018 | | |
December
31, 2017 | | |
December
31,
2016 | |
| General and administrative | |
$ | 2,579 | | |
$ | 1,131 | | |
$ | 1,274 | |
| Sales, marketing and customer
service | |
| 147 | | |
| 43 | | |
| 27 | |
| Total share-based compensation
expense | |
| 2,726 | | |
| 1,174 | | |
| 1,301 | |
| Total share-based compensation
expense after income taxes | |
$ | 2,726 | | |
$ | 1,174 | | |
$ | 1,301 | |
As share-based compensation
expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced
for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
Determining Fair Value
Valuation and Amortization
Method —The Company estimates the fair value of service-based and performance-based stock options granted using the
Black-Scholes option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods
of the awards, which is generally the vesting period. In the case of performance-based stock options, amortization does not begin
until it is determined that meeting the performance criteria is probable. Service-based and performance-based options typically
have a five to ten-year life from date of grant and vesting periods of one to four years.
Expected Term —The
Company’s expected term represents the period that the Company’s share-based awards are expected to be outstanding.
For awards granted subject only to service vesting requirements, the Group utilizes the simplified method for estimating the expected
term of the share-based award, instead of historical exercise data. For its performance-based awards, the Group has determined
the expected term life to be 4 to 6.25 years based on contractual life and the seniority of the recipient.
Expected Volatility
—The Company uses historical volatility of the price of its ordinary shares to calculate the volatility for its granted
options.
Expected Dividend —The
Company has never paid dividends on its ordinary shares and currently does not intend to do so, and accordingly, the dividend
yield percentage is zero for all periods.
Risk-Free Interest Rate
— The Company bases the risk-free interest rate used in the Black-Scholes valuation model upon the implied yield curve
currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption
in the model.
Assumptions used in the determination
of the fair value of share-based payment awards using the Black-Scholes model for stock option grants were as follows:
| | |
For the Years Ended | |
| |
December
31, 2018 | | |
December
31, 2017 | | |
December
31,
2016 | |
| Expected term | |
| 6.25 | | |
| 6.25 | | |
| 4 | |
| Risk-free interest rate | |
| 2.54%-3.03% | | |
| 1.81%-2.30% | | |
| 1.15%
- 2.26% | |
| Expected volatility | |
| 624%-756% | | |
| 284%-763% | | |
| 166%
- 178% | |
| Expected dividend yield | |
| 0% | | |
| 0% | | |
| 0% | |
Equity Incentive Plan
On November 15, 2006, subject
to approval of the shareholders, the Company adopted the 2006 Equity Incentive Plan (the “2006 Plan”) which permits
the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of Ordinary
Stock of the Company through awards of incentive and nonqualified stock options (“Option”), stock (“Restricted
Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). The Plan was approved by
the shareholders on February 7, 2007.
The Company has granted time-based
share options and restricted stock under the Plan to directors, officers, employees and individual consultants of the Company.
The time-based options generally vest 25% annually and expire three to ten years from the date of grant. Total number of shares
reserved and available for grant and issuance pursuant to the 2006 Plan is equal to 9% of the number of outstanding shares of
the Company. Shares issued under the Plan will be drawn from authorized and unissued shares or shares now held or subsequently
acquired by the Company. Outstanding shares of the Company shall, for purposes of such calculation, include the number of shares
of stock into which other securities or instruments issued by the Company are currently convertible (e.g., convertible preferred
stock, convertible debentures, or warrants for Ordinary Stock), but not outstanding options to acquire stock. (9% of the outstanding
shares of 7,914,125 plus nil of outstanding warrants, less options and restricted stock outstanding and exercised since inception)
The exercise price of any Option
will be determined by the Company when the Option is granted and may not be less than 100% of the fair market value of the shares
on the date of grant, and the exercise price of any incentive stock option granted to a shareholder with a 10% or greater shareholding
will not be less than 110% of the fair market value of the shares on the date of grant. The exercise price per share of a SAR
will be determined by the Company at the time of grant, but will in no event be less than the fair market value of a share of
Company’s stock on the date of grant.
On May 8, 2015, the Company
adopted the 2015 Equity Incentive Plan (the “2015 Plan”) which permits the Company to grant stock options to directors,
officers or employees of the Company or others to purchase shares of Ordinary Stock of the Company through awards of incentive
and Option, Restricted Stock or Unrestricted Stock and SARs which was approved by the shareholders. The total number of shares
which may be issued under the 2015 Plan is 9% of the number of outstanding and issued ordinary shares of the Company. The Option
Price per Share shall be determined by the compensation committee of the Board (“Compensation Committee”), unless
expressly approved by the Compensation Committee, shall not be less than 100% of the fair market value of the shares on the date
an Option is granted.
During the year ended December
31, 2016, the Board of the Company considered and believed that it was advisable and in the best interest of the Company to terminate
the share option grant agreements under 2006 Plan, and replace it with the ones under 2015 Plan. On May 20, 2016, the Board of
Directors authorized and approved the replacement. A total number of 224 employees accepted the replacement, and the total number
of options replaced represented 13,788 shares. The vesting schedule would be based on the remaining vesting period under the “2006
Plan” or 25% vested on each of the first, second, third, and fourth anniversaries of the grant date, which represents the
date the new options was approved by the Board. The total incremental compensation cost resulting from the modifications was $1,263,
which was amortized on straight-line basis over the remaining vesting period under the “2006 Plan” or the four-year
vesting period under the “2015 Plan”.
During the year ended December
31, 2018, the Board of Directors approved the grants of RSUs to core management members and other management, pursuant to the
terms of the 2015 Plan. The total number of RSUs granted is 663,460 shares. The vesting schedules are 100% vested at the grant
date for all the grants. All these shares were issued to the management during the year ended December 31, 2018. The Group used
the market price of its shares at grant date as the fair value of the RSUs in calculating the share based compensation expense.
The following table summarizes
the Group’s stock option activities:
| | |
Shares | | |
Weighted-Average Exercise Price
Per Share | | |
Weighted-Average
Remaining
Contractual Term | | |
Aggregate Intrinsic Value ($000) | |
| Outstanding as of December 31, 2015 | |
| 635,488 | | |
| 145 | | |
| 7.85 | | |
$ | 87,401 | |
| Granted | |
| 268,490 | | |
| 47 | | |
| | | |
| | |
| Exercised | |
| (1,000 | ) | |
| 49 | | |
| | | |
| | |
| Forfeited/expired | |
| (352,218 | ) | |
| 169 | | |
| | | |
| | |
| Outstanding as of December 31, 2016 | |
| 550,760 | | |
| 82 | | |
| 7.40 | | |
$ | 60,032 | |
| Granted | |
| 325,300 | | |
| 4 | | |
| | | |
| | |
| Exercised | |
| – | | |
| – | | |
| | | |
| | |
| Forfeited/expired | |
| (374,800 | ) | |
| 36 | | |
| | | |
| | |
| Outstanding as of December 31, 2017 | |
| 501,260 | | |
| 66 | | |
| 7.03 | | |
$ | 769 | |
| Granted | |
| 287,000 | | |
| 13 | | |
| | | |
| | |
| Exercised | |
| – | | |
| – | | |
| | | |
| | |
| Forfeited/expired | |
| (528,060 | ) | |
| 10 | | |
| | | |
| | |
| Outstanding as of December 31, 2018 | |
| 260,200 | | |
| 212 | | |
| 8.59 | | |
$ | – | |
| Vested and exercisable as of December 31, 2018 | |
| 76,900 | | |
| 29 | | |
| 9.12 | | |
$ | – | |
| Expected to vest as of December 31, 2018 | |
| 177,383 | | |
| 12 | | |
| 8.29 | | |
$ | – | |
The following table presents
the exercise price and remaining life information about options exercisable at December 31, 2018:
| Range of exercise price | |
Shares Exercisable | | |
Weighted Average Remaining Contractual
Life | | |
Weighted Average
Exercise Price | | |
Aggregate Intrinsic ($000) | |
| $118 - $172 | |
| 750 | | |
| 7.13 | | |
| 172 | | |
| – | |
| $40 - $117 | |
| 28,200 | | |
| 8.39 | | |
| 64 | | |
| – | |
| $2 - $39 | |
| 47,950 | | |
| 9.58 | | |
| 6 | | |
| – | |
| | |
| 76,900 | | |
| | | |
| | | |
| – | |
Changes in the Group’s non-vested stock awards
are summarized as follows:
| | |
Time-based Options | | |
Restricted Stock | |
| | |
Shares | | |
Weighted Average Exercise Price
Per Share | | |
Shares | | |
Weighted Average Grant-Date
Fair Value Per Share | |
| Non-vested as of December 31, 2015 | |
| 559,658 | | |
$ | 128 | | |
| 8,778 | | |
$ | 178 | |
| Granted | |
| 268,491 | | |
| 47 | | |
| – | | |
| – | |
| Vested | |
| (45,573 | ) | |
| 110 | | |
| (2,778 | ) | |
| 178 | |
| Forfeited | |
| (352,218 | ) | |
| 169 | | |
| (1,250 | ) | |
| 177 | |
| Non-vested as of December 31, 2016 | |
| 430,358 | | |
$ | 46 | | |
| 4,750 | | |
$ | 178 | |
| Granted | |
| 325,300 | | |
| 4 | | |
| – | | |
| – | |
| Vested | |
| (100,663 | ) | |
| 43 | | |
| (2,187 | ) | |
| 128 | |
| Forfeited | |
| (275,075 | ) | |
| 48 | | |
| (1,250 | ) | |
| 177 | |
| Non-vested as of December 31, 2017 | |
| 379,920 | | |
$ | 9 | | |
| 1,313 | | |
$ | 264 | |
| Granted | |
| 287,000 | | |
| 13 | | |
| 663,460 | | |
| 1 | |
| Vested | |
| (87,285 | ) | |
| 25 | | |
| (663,273 | ) | |
| 1 | |
| Forfeited | |
| (396,335 | ) | |
| 13 | | |
| (250 | ) | |
| 185 | |
| Non-vested as of December 31, 2018 | |
| 183,300 | | |
$ | 8 | | |
| 1,250 | | |
$ | 185 | |
The total fair value of shares
vested during the years ended December 31, 2018, 2017 and 2016 was $1,382, $2,955 and $2,423, respectively. There were no changes
to the contractual life of any fully vested options during the years ended December 31, 2018, 2017 and 2016.
Following is a summary of our restricted stock awards
as follows:
| | |
Number of Shares | | |
Weighted Average Grant-Date Fair Value | |
| Restricted stock units at December 31, 2015 | |
| 218,309 | | |
| 151 | |
| Granted | |
| – | | |
| – | |
| Forfeited | |
| (1,250 | ) | |
| 177 | |
| Restricted stock units at December 31, 2016 | |
| 217,059 | | |
| 151 | |
| Granted | |
| – | | |
| – | |
| Forfeited | |
| (1,250 | ) | |
| 177 | |
| Restricted stock units at December 31, 2017 | |
| 215,809 | | |
| 151 | |
| Granted | |
| 663,460 | | |
| 1 | |
| Forfeited | |
| (250 | ) | |
| 185 | |
| Restricted stock units at December 31, 2018 | |
| 879,019 | | |
| 38 | |
|
