NOTE 15– STOCK-BASED COMPENSATION

ACM’s stock-based compensation awards consisting of employee and non-employee awards were issued under the 1998 Stock Option Plan and 2016 Omnibus Incentive Plan and as standalone options.

Employee Awards

The following table summarizes the Company’s employee share option activities during the nine months ended September 30, 2019:

	Number of Option Share			Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighed Average Remaining Contractual Term
Outstanding at December 31, 2018		2,503,405		$	0.91	$	4.09	7.30 years
Granted		614,000			6.30		16.39
Exercised		(105,113	)		0.60		2.08
Expired		(628	)		0.55		3.00
Forfeited/cancelled		(41,203	)		1.35		3.82
Outstanding at September 30, 2019		2,970,461		$	2.55	$	6.71	7.28 years
Vested and exercisable at September 30, 2019		1,673,780

In addition to the above share option activities, as mentioned in note 14, purchase price paid by the Employee Entities was at a discount of 20% from the purchase price paid by the other investors, and there was no vesting condition attached to the subscription. Accordingly, the Company determined the discount as stock based compensation expenses, which amounted to $949.

During the three months ended September 30, 2019 and 2018, the Company recognized employee stock-based compensation expense of $1,329 and $195, respectively. During the nine months ended September 30, 2019 and 2018, the Company recognized employee stock-based compensation expense of $1,841 and $458, respectively. As of September 30, 2019 and December 31, 2018, $5,009 and $2,424, respectively, of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards were expected to be recognized over a weighted-average period of 1.63 years and 1.62 years, respectively. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The change in recognized and unrecognized employee stock-based compensation expense during the three and nine months ended September 30, 2019 included the effect of the employee share option activities in the table above, together with an incremental $949 due to the discounted purchase price paid by the Employee Entities for their investments in ACM Shanghai (note 14).

Stock options to acquire 319,000 and 614,000 shares, respectively, of Class A common stock were granted to employees during the three and nine months ended September 30, 2019. Stock options to acquire 31,339 shares of Class A common stock held by employees were canceled pursuant to the Equity Purchase Agreement (note 11) during the three and nine months ended September 30, 2019.

Non-employee Awards

The following table summarizes the Company’s non-employee share option activities during the nine months ended September 30, 2019:

	Number of Option Shares			Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2018		1,212,374		$	0.78	$	2.57	6.66 years
Granted		-			-		-		-
Exercised		(88,529	)		0.45		1.06		-
Expired		-			-		-		-
Forfeited/cancelled		(22,232	)		0.55		3.00		-
Outstanding at September 30, 2019		1,101,613		$	0.82	$	2.69		6.10 years
Vested and exercisable at September 30, 2019		959,845

The Company adopted ASU 2018-07 on January 1, 2019, and the stock-based compensation expense for grants before the adoption of ASU 2018-07 is based on the grant date fair value as of December 31, 2018, which was the last business day before the Company adopted ASU 2018-07, for all nonemployee awards that have not vested as of December 31, 2018. The cumulative-effect adjustment to retained earnings as of January 1, 2019 was immaterial to the financial statements as a whole. Accordingly, the Company did not record this adjustment as of January 1, 2019. Furthermore, for future awards, compensation expense is based on the fair value of the shares at the grant date.

During the three months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $228 and $216, respectively, related to share option vesting. During the nine months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $1,078 and $2,313, respectively, related to share option vesting. As of September 30, 2019 and December 31, 2018, $634 and $1,713, respectively, of total unrecognized non-employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards were expected to be recognized over a weighted-average period of 0.33 years and 1.31 years, respectively. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

Stock options to acquire 22,232 shares of Class A common stock held by a director were canceled pursuant to the Equity Purchase Agreement (note 11) during the three and nine months ended September 30, 2019.