STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2021

NOTE 19 – STOCK-BASED COMPENSATION

In January 2020 ACM Shanghai adopted a 2019 Stock Option Incentive Plan (the “Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, employees of options to purchase shares of ACM Shanghai’s common stock. The fair value of the stock options granted is estimated at the date of grant based on the Black-Scholes option pricing model using assumptions generally consistent with those used for ACM’s stock options. Because ACM Shanghai shares are not publicly traded, the expected volatility is estimated with reference to the average historical volatility of a group of publicly traded companies that are believed to have similar characteristics to ACM Shanghai.

ACM’s stock-based compensation consists of employee and non-employee awards issued under its 1998 Stock Option Plan, its 2016 Omnibus Incentive Plan, and as standalone options. ACM granted stock options to employees under the 2016 Omnibus Incentive Plan during the three months ended March 31, 2021. The vesting condition may consist of a service period determined by the Board of Directors for a grant or certain performance conditions determined by the Board of Directors for a grant. The fair value of the stock options granted with service period based condition is estimated at the date of grant using the Black-Scholes option pricing model. The fair value of the stock options granted with market based condition is estimated at the date of grant using the Monte Carlo simulation model.

The following table summarizes the components of stock-based compensation expense included in the consolidated statements of operations:

	Three Months Ended March 31,
	2021		2020
Stock-Based Compensation Expense:
Cost of revenue	$	71	$	45
Sales and marketing expense		505		94
Research and development expense		229		187
General and administrative expense		405		363
	$	1,210	$	689

	Three Months Ended March 31,
	2021		2020
Stock-based compensation expense by type:
Employee stock purchase plan	$	1,085	$	431
Non-employee stock purchase plan		40		172
Subsidiary option grants		85		86
	$	1,210	$	689

The following table summarizes the Company’s employee share option activities during the three-months ended March 31, 2021:

	Number of Option Share	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2020	3,191,411	$	5.13	$	12.73	7.13 years
Granted	106,400		50.67		111.98
Exercised	(255,582)		1.78		4.55
Forfeited/cancelled	(11,989)		27.45		62.58
Outstanding at March 31, 2021	3,030,240		6.93	$	16.70	7.22 years
Vested and exercisable at March 31, 2021	1,809,322

As of March 31, 2021 and December 31, 2020, $12,340 and $8,733, respectively, of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards for ACM were expected to be recognized over a weighted-average period of 1.92 years and 1.89 years, respectively. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The fair value of options granted to employee with a service period based condition is estimated on the grant date using the Black-Scholes valuation.

	Three months ended March 31, 2021
Fair value of common share(1)	$48.25-51.07
Expected term in years(2)	5.50-6.25
Volatility(3)	48.53%
Risk-free interest rate(4)	1.00%
Expected dividend(5)	0%

(1)	Equal to closing value on the grant date.

(2)	Expected term of share options is based on the average of the vesting period and the contractual term for each grant according to Staff Accounting Bulletin 110.

(3)	Volatility is calculated based on the historical volatility of ACM’s comparable companies in the period equal to the expected term of each grant.

(4)	Risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the share options in effect at the time of grant.

(5)	Expected dividend is assumed to be 0% as ACM has no history or expectation of paying a dividend on its common stock.

Non-employee Awards

The following table summarizes the Company’s non-employee share option activities during the three months ended March 31, 2021:

	Number of Option Shares	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2020	836,038	$	1.02	$	3.07	4.92 years
Granted	-		-		-
Exercised	(54,358)		1.51		5.44
Expired	-		-		-
Forfeited/cancelled	(76)		0.30		0.75
Outstanding at March 31, 2021	781,604	$	0.99	$	2.91	4.64 years
Vested and exercisable at March 31, 2021	773,139

As of March 31, 2021 and December 31, 2020, $155 and $195, 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 0.08 years and 0.09 years, respectively. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

ACM Shanghai Option Grants

The following table summarizes the ACM Shanghai employee stock option activities during the three months ended March 31, 2021:

	Number of Option Shares in ACM Shanghai	Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2020	5,423,654	$	0.23	$	1.89	3.50 years
Granted	-		-		-
Exercised	-		-		-
Expired	-		-		-
Forfeited/cancelled	(46,154)		0.24		2.00
Outstanding at March 31, 2021	5,377,500	$	0.24	$	2.00	3.26 years
Vested and exercisable at March 31, 2021	-

During the three months ended March 31, 2021 and 2020, the Company recognized stock-based compensation expense of $85 and $86, respectively, related to stock option grants of ACM Shanghai. As of March 31, 2021 and 2020, $779 and $822, respectively, of total unrecognized non-employee stock-based compensation expense, net of estimated forfeitures, related to ACM Shanghai stock-based awards were expected to be recognized over a weighted-average period of 2.3 years and 2.5 years, respectively. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.