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

Share-based Compensation

v3.21.1
Share-based Compensation
12 Months Ended
Dec. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-based Compensation

(17)

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 (the “Amendment and Restatement of 2008 Plan”). On October 26, 2018, the Company amended and restated the Amendment and Restatement of 2008 Plan to increase the number of Common Shares the Company reserved for issuance to 6,965,846 shares, extend its terms to last till October 25, 2028 and change the number of common shares automatically added to the option pool on each calendar year during its term to an amount equal to the lesser of (i) one percent of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, or (ii) such number of common shares as may be established by the board of directors (the “Second Amendment and Restatement of 2008 Plan”). As of December 31, 2020, 8,047,386 shares were reserved for issuance under the Second Amendment and Restatement of 2008 Plan.

Under both the 2005 Plan and 2008 Plan (including the original and both versions of the Amendment and Restatement), 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 or as an average over a certain number of trading days of the fair market value of the Company’s share at the date of grant and expire 10 years from the grant date, unless a shorter or longer expiration period is specified.

Under the 2008 Plan (including the original and both versions of the Amendment and Restatement), non-vested shares are generally granted with a graded vesting as to 25% at the end of each year from the grant date over 4 years, or with certain percentage vesting on the grant date or first anniversary of the grant date and the remaining portion vesting ratably over the following 36 months, unless a shorter or longer duration is established at the time of the grant.

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 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.

In July 2018, 129,168 share options and 1,262,250 non-vested shares were cancelled in connection with the ATA Online Sale Transaction. RMB 6,753,771 compensation costs were accelerated and recognized for the year ended December 31, 2018.

In November 2018, 1,772,584 share options, including 1,215,114 vested share options and 557,470 non-vested share options were cancelled in accordance with the board of directors resolutions. RMB 877,321 of compensation costs were accelerated and recognized for the year ended December 31, 2018.

In November 2018, 1,452,600 share options were issued to certain employees and officers with 4 years’ service condition and annual performance targets for the year 2018, 2019, 2020 and 2021, among which 363,150 share options were granted in November 2018 and the remaining portion will be granted when the employee knows the specific performance target. As the performance condition for the year 2018 was not achieved, no compensation cost was recognized for these share options. In addition, 690,000 share options were granted to employees and officers, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting ratably over the following 36 months. The exercise price of these options is USD 0.578 per common share. In addition, 800,000 non-vested shares were granted to directors, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting ratably over the following 36 months.

In December 2018, 1,772,584 shares were granted to employees and officers, among which 1,412,336 shares vested immediately on the grant date and the remaining shares vested for a period from January 1, 2019 to September 1, 2021.

In January and March 2019, 50,000 share options and 20,000 share options were granted to employees and officers, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting ratably over the following 36 months. The exercise prices of these two tranches options are USD 0.4868 and USD 0.532 per common share respectively.

In 2019, 1,698,790 share options were issued to certain officer with service condition and specific performance target among which 424,698 share options (the “First Tranche”) were granted on March 25, 2020 and the remaining portion will be granted when the specific performance target is established and there is mutual understanding of the terms of the award. The First Tranche will be vested on April 1, 2021 or the following anniversaries of April 1, 2021 until the same performance target can be achieved. The Company estimates the requisite service period is from March 25, 2020 to December 31, 2022, which is when the performance target is considered probable to be met.

 

A summary of the share options activities for years ended December 31, 2018, 2019 and 2020:

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

Aggregate

 

 

 

 

 

 

average

 

 

remaining

 

Intrinsic

 

 

Number of

 

 

exercise

 

 

contractual

 

Value

 

 

shares

 

 

USD

 

 

years

 

USD

Outstanding as of December 31, 2017

 

 

2,377,067

 

 

 

2.18

 

 

 

 

 

Granted

 

 

1,053,150

 

 

 

0.58

 

 

 

 

 

Exercised

 

 

(119,792)

 

 

 

1.77

 

 

 

 

 

Forfeited

 

 

(123,438)

 

 

 

1.71

 

 

 

 

 

Cancelled

 

 

(1,901,752)

 

 

 

2.13

 

 

 

 

 

Expired

 

 

(143,023)

 

 

 

3.89

 

 

 

 

 

Outstanding as of December 31, 2018

 

 

1,142,212

 

 

 

0.67

 

 

 

 

 

Granted

 

 

70,000

 

 

 

0.50

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(809,712)

 

 

 

0.61

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2019

 

 

402,500

 

 

 

0.75

 

 

 

 

Granted

 

 

424,698

 

 

 

1.26

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2020

 

 

827,198

 

 

 

1.01

 

 

 

 

 

Vested and expected to vest as of December 31, 2020

 

 

827,198

 

 

 

1.01

 

 

8.11

 

6,700

Exercisable as of December 31, 2020

 

 

235,832

 

 

 

0.87

 

 

7.40

 

3,385

 

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2020, was determined based on the closing price of the Company’s common shares on December 31, 2020.

Information relating to options outstanding and exercisable as of December 31, 2020 is as follows:

 

Options outstanding as of December 31, 2020

 

Options exercisable as of December 31, 2020

 

 

Exercise

 

Remaining

 

 

 

Exercise

 

Remaining

Number of

 

Price

 

Contractual

 

Number

 

Price

 

Contractual

Shares

 

per Share

 

Life

 

of Shares

 

per Share

 

Life

 

 

USD

 

Years

 

 

 

USD

 

Years

62,500

 

1.71

 

6.05

 

60,416

 

1.71

 

6.05

320,000

 

0.58

 

7.85

 

166,666

 

0.58

 

7.85

20,000

 

0.53

 

8.21

 

8,750

 

0.53

 

8.21

424,698

 

1.26

 

8.60

 

 

 

827,198

 

1.01

 

8.11

 

235,832

 

0.87

 

7.40

 

The Company calculated the fair value of the share options on the grant date, for the years ended December 31, 2018, 2019 and 2020, using the Black-Scholes-Merton pricing valuation model. The assumptions used in the valuation model are summarized as follows:

 

 

 

Year Ended December 31,

 

 

2018

 

2019

 

2020

Expected dividend yield

 

0%

 

0%

 

0%

Expected volatility

 

57%

 

55%/54%

 

57%

Expected term

 

5.11/6.11

 

6.08

 

6.04

Risk-free interest rate (per annum)

 

3.05%/3.10%

 

2.53%/2.45%

 

0.67%

 

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.

Compensation expense recognized for non-vested share options for the year ended December 31, 2018, 2019 and 2020 is allocated to the following expense items:

 

 

 

Year Ended December 31,

 

 

2018

 

 

2019

 

 

2020

 

 

RMB

 

 

RMB

 

 

RMB

Research and development

 

157,355

 

 

68,016

 

 

Sales and marketing

 

70,915

 

 

 

 

General and administrative

 

2,024,940

 

 

345,991

 

 

316,815

Total share-based compensation expense

 

2,253,210

 

 

414,007

 

 

316,815

 

As of December 31, 2020, RMB 369,568 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 1.98 years.

Non-vested shares

A summary of the non-vested shares activities for the year ended December 31, 2018, 2019 and 2020 is presented below:

 

 

 

 

 

 

 

Weighted average

 

 

 

Number

 

 

grant date

 

 

 

of shares

 

 

fair value

 

 

 

 

 

 

 

USD

 

Outstanding at December 31, 2017

 

 

2,625,000

 

 

 

1.650

 

Granted

 

 

2,572,584

 

 

 

0.537

 

Vested

 

 

(2,068,586)

 

 

 

0.872

 

Forfeited

 

 

(71,250)

 

 

 

1.650

 

Cancelled

 

 

(1,262,250)

 

 

 

1.650

 

Outstanding at December 31, 2018

 

 

1,795,498

 

 

 

0.951

 

Granted

 

 

 

 

 

 

Vested

 

 

(693,362)

 

 

 

0.885

 

Forfeited

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

Outstanding at December 31, 2019

 

 

1,102,136

 

 

 

0.933

 

Granted

 

 

 

 

 

 

Vested

 

 

(484,678)

 

 

 

1.043

 

Forfeited

 

 

(14,370)

 

 

 

0.907

Cancelled

 

 

 

 

 

 

Outstanding at December 31, 2020

 

 

603,088

 

 

 

0.955

 

 

The total fair value of shares vested during the years ended December 31, 2018, 2019 and 2020 was USD 2,591,875, USD 461,309 and USD 318,038 respectively.

Upon vesting of the non-vested shares, the Company withholds shares issued to the employees to meet the relevant minimum tax withholding requirements. For the years ended December 31, 2018, 2019 and 2020, the Company withheld 93,496, 28,456 and 12,292 vested shares upon vesting of the non-vested shares to satisfy the minimum tax withholding obligation. Compensation expense recognized for non-vested shares for the years ended December 31, 2018, 2019 and 2020 is allocated to the following expense items:

 

 

 

Year Ended December 31,

 

 

2018

 

 

2019

 

 

2020

 

 

RMB

 

 

RMB

 

 

RMB

Research and development

 

 

240,441

 

 

 

367,313

 

 

74,861

Sales and marketing

 

 

96,058

 

 

 

 

 

General and administrative

 

 

7,119,658

 

 

 

4,028,134

 

 

1,385,107

Total share-based compensation expense

 

 

7,456,157

 

 

 

4,395,447

 

 

1,459,968

 

As of December 31, 2020, RMB 488,189 of total unrecognized compensation expense related to non-vested shares is expected to be recognized over a weighted average period of approximately 1.72 years.