Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

SHARE-BASED COMPENSATION

v3.8.0.1
SHARE-BASED COMPENSATION
9 Months Ended
Dec. 31, 2017
SHARE-BASED COMPENSATION  
SHARE-BASED COMPENSATION

 

(15)    SHARE-BASED COMPENSATION

 

2005 Share incentive plan

 

In April 2005, the Company adopted a share incentive plan (the “2005 Plan”), pursuant to which the Company is authorized to issue options to officers, employees, directors and consultants of the Group to purchase up to 2,894,000 of its common shares. In October 2007, the Company’s board of directors approved an increase in the number of shares reserved for issuance under the 2005 Plan to 3,310,300 shares. The 2005 Plan expired in April 2015. Options awards provide for accelerated vesting if there is a change in control (as defined in the 2005 Plan).

 

2008 Share incentive plan

 

On January 7, 2008, the Company adopted a share incentive plan (the “2008 Plan”), pursuant to which the Company is authorized to issue options and other share-based awards to officers, employees, directors and consultants of the Group to purchase up to 336,307 of its common shares, plus, unless the board of directors determines a lesser amount, an annual increase on January 1 of each calendar year beginning in 2009 equal to the lesser of 1) one percent of the number of shares issued and outstanding on December 31 of the immediately preceding calendar year, and 2) 336,307 shares (the “replenish terms”). The 2008 Plan expires in ten years. Options awards provide for accelerated vesting if there is a change in control (as defined in the 2008 Plan). On December 30, 2016, the Company amended the 2008 Plan to increase the number of Common Shares of the Company reserved for issuance to 5,726,763 shares and extend the plan together with the replenish terms for ten years from December 30, 2016. As of December 31, 2017,  6,063,070 shares were reserved for issuance under the 2008 Plan.

 

Under both the 2005 Plan and 2008 Plan, share options are generally granted with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting ratably over the following 36 months, unless a shorter or longer duration is established at the time of the option grant. Share options are granted at an exercise price equal to the fair market value of the Company’s share at the date of grant and expire 10 years from the grant date.

 

Under the 2008 Plan, non-vested shares are granted with a graded vesting as to 25% at the end of each year from the grant date over 4 years.

 

For the graded vesting share options and non-vested shares, the Company recognizes the compensation cost over the requisite service period for each separately vesting portion of the award as if the award is, in substance, multiple awards.

 

In April 2015, the Company extended the exercise period of vested share options of certain employees for an additional six months. The modification resulted in additional compensation expense of RMB 1,635,726 for the year ended March 31, 2016. All of these share options were expired without any exercise as of March 31, 2016.

 

In January 2017, 2,700,000 non-vested shares were granted to employees and officers with a graded vesting as to 25% at the end of each year from the grant date over 4 years and 900,000 share options were granted to Company’s employees and officers, 25% of the options vest on the first anniversary of the grant date with the remaining 75% vesting evenly over the following 36 months. The exercise price of these options is USD 1.705 per common share.

 

In August 2017, 50,000 share options were granted to an employee, 25% of the options vest on the first anniversary of the grant date with the remaining 75% vesting evenly over the following 36 months. The exercise price of these options is USD 2.35 per common share.

 

A summary of the share options activities for the years ended March 31, 2016, 2017 and nine months ended December 31, 2017 is presented below:

 

 

 

 

Weighted

 

Weighted

 

Aggregate

 

 

 

 

 

average

 

remaining

 

intrinsic

 

 

 

Number of

 

exercise

 

contractual

 

value

 

 

 

shares

 

USD

 

years

 

USD

 

Outstanding as of March 31, 2015

 

3,885,667

 

2.66

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

Expired

 

(1,981,600

)

2.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2016

 

1,904,067

 

2.61

 

 

 

 

 

Granted

 

900,000

 

1.71

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Forfeited

 

(100,000

)

1.71

 

 

 

 

 

Expired

 

(253,000

)

3.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2017

 

2,451,067

 

2.21

 

 

 

 

 

Granted

 

50,000

 

2.35

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Forfeited

 

(50,000

)

1.71

 

 

 

 

 

Expired

 

(74,000

)

3.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

2,377,067

 

2.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest as of December 31, 2017

 

2,377,067

 

2.18

 

7.46

 

556,612

 

 

 

 

 

 

 

 

 

 

 

Exercisable as of December 31, 2017

 

842,337

 

2.54

 

6.23

 

51,431

 

 

 

 

 

 

 

 

 

 

 

 

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2017, was determined based on the closing price of the Company’s common shares on December 31, 2017.

 

Information relating to options outstanding and exercisable as of December 31, 2017 is as follows:

 

Options outstanding as of December 31, 2017

 

Options exercisable as of December 31, 2017

 

 

 

Exercise

 

Remaining

 

 

 

Exercise

 

Remaining

 

Number of

 

Price

 

Contractual

 

Number

 

Price

 

Contractual

 

Shares

 

per Share

 

Life

 

of Shares

 

per Share

 

Life

 

 

 

USD

 

Years

 

 

 

USD

 

Years

 

100,000

 

4.75

 

0.07

 

100,000

 

4.75

 

0.07

 

7,607

 

2.69

 

1.16

 

7,607

 

2.69

 

1.16

 

1,469,460

 

2.24

 

7.12

 

734,730

 

2.24

 

7.12

 

750,000

 

1.71

 

9.05

 

 

 

 

50,000

 

2.35

 

9.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,377,067

 

2.18

 

7.46

 

842,337

 

2.54

 

6.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company calculated the fair value of the share options on the grant or the modification date, for the years ended March 31, 2016, 2017 and nine months ended December 31, 2017, using the Black-Scholes-Merton pricing valuation model. The assumptions used in the valuation model are summarized as follows:

 

 

 

Twelve months ended
March 31,

 

Nine months ended
December 31,

 

 

 

2016

 

2017

 

2017

 

 

 

 

 

 

 

 

 

Expected dividend yield

 

0%

 

0%

 

8.7%

 

Expected volatility

 

50%

 

63%

 

60%

 

Expected term

 

0.25

 

6.08

 

6.08

 

Risk-free interest rate (per annum)

 

0.72%

 

1.98%

 

1.96%

 

 

The expected volatility was based on the historical volatilities of the Company. The expected term was related to the period of time the options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the United States treasury yield curve in effect at the time of grant or modification.

 

Compensation expense for share options of RMB 8,040,512 , RMB 4,079,082 and RMB 3,760,421 was recognized for the years ended March 31, 2016, 2017 and nine months ended December 31, 2017.

 

As of December 31, 2017, RMB 3,527,802 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 2.53 years.

 

Non-vested shares

 

A summary of the non-vested shares activities for the years ended March 31, 2016, 2017 and nine months ended December 31, 2017 is presented below:

 

 

 

 

 

Weighted
average

 

 

 

Number

 

grant date

 

 

 

of shares

 

fair value

 

 

 

 

 

USD

 

Outstanding at March 31, 2015

 

445,000

 

3.819

 

Granted

 

 

 

Vested

 

(325,000

)

4.437

 

Forfeited

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2016

 

120,000

 

2.145

 

 

 

 

 

 

 

Granted

 

2,700,000

 

1.650

 

Vested

 

(60,000

)

2.145

 

Forfeited

 

(60,000

)

1.650

 

 

 

 

 

 

 

Outstanding at March 31, 2017

 

2,700,000

 

1.661

 

 

 

 

 

 

 

Granted

 

 

 

Vested

 

(60,000

)

2.145

 

Forfeited

 

(15,000

)

1.650

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

2,625,000

 

1.650

 

 

 

 

 

 

 

 

The total fair value of shares vested during the years ended March 31, 2016, 2017 and nine months ended December 31, 2017 was USD 831,375, USD 157,176 and USD 148,500 respectively.

 

Upon the vesting of the non-vested shares, the Company withholds the shares issued to the employees to meet the relevant minimum tax withholding requirements. For the years ended March 31, 2016, 2017 and nine months ended December 31, 2017, the Company withheld 51,234, 11,624 and 11,252 vested shares upon the vesting of the non-vested shares to satisfactory the minimum tax withholding obligation. Compensation expense recognized for non-vested shares for the years ended March 31, 2016, 2017 and nine months ended December 31, 2017 is allocated to the following expense items:

 

 

 

Twelve months ended
March 31,

 

Nine months ended
December 31,

 

 

 

2016

 

2017

 

2017

 

 

 

RMB

 

RMB

 

RMB

 

Cost of revenues

 

90,002

 

455,115

 

1,791,786

 

Research and development

 

75,834

 

495,440

 

2,130,513

 

Sales and marketing

 

150,420

 

525,542

 

2,051,481

 

General and administrative

 

808,054

 

1,403,224

 

5,401,445

 

 

 

 

 

 

 

 

 

Total share-based compensation expense

 

1,124,310

 

2,879,321

 

11,375,225

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017, RMB 14,789,370 of total unrecognized compensation expense related to non-vested shares is expected to be recognized over a weighted average period of approximately 3.05 years.