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SHARE BASED COMPENSATION
 12 Months Ended
Dec. 31, 2014
SHARE BASED COMPENSATION [Abstract]  
SHARE BASED COMPENSATION

14. SHARE BASED COMPENSATION

 

In December 2014, The Company's shareholders adopted the 2014 share incentive plan. The Company's shareholders have authorized the issuance of up to 21,000,000 ordinary shares underlying all options (including incentive share options, or ISOs), restricted shares and restricted share units granted to a participant under the plan, or the awards.

 

During the years ended December 31, 2012, 2013 and 2014, the Company granted 1,190,000 and 140,000 and 6,274,166 share options respectively to its officers, directors and employees, respectively.


On January 28, 2014, the Company granted options to acquire 566,666 ordinary shares to independent directors of the Company pursuant to the Option Plan. Twenty-five percent (25%) of the options will vest half- year following the service inception date, twenty-five percent (25%) of the options will vest on the second half year of service inception date, and the remaining forty percent (50%) of the options will vest in twenty-four equal installments over the next two years. The exercise price is $1.49.

 

On January 28, 2014, the Company granted options to acquire 5,707,500 ordinary shares to employees and executive officers of the Company pursuant to the Option Plan. Twenty-five percent (25%) of the options will vest half- year following the service inception date, twenty-five percent (25%) of the options will vest on the second half year of service inception date, and the remaining forty percent (50%) of the options will vest in thirty-six equal installments over the next three years. The exercise price is $1.49.

 

The Company utilized the Binomial option pricing model to evaluate the fair value of the stock options with reference to the closing price of the Company on the measurement dates.

 

The following assumptions were used in the Binomial option pricing model:

 

  Year Ended December 31, 2013
Options
granted		 Average
risk-free
rate of
return		     Exercise
multiple		     Volatility
rate		     Dividend
yield		     Post-
vesting
forfeiture
rate		  
April 3, 2013     2.29%       2.8 times       51.78%       0%       3%  

 

  Year Ended December 31, 2014
Options
granted		 Average
risk-free
rate of
return		     Exercise
multiple		     Volatility
rate		     Dividend
yield		     Post-
vesting
forfeiture
rate		  
January 28, 2014
     2.77%       3.0-3.5 times       93.0%       0%       3-9.5%  

 

The risk-free rate of return is based on the yield curve of China USD sovereign bond commensurate with the same maturity at the respective grant dates. The exercise multiple is estimated by reference to the proprietary research and empirical studies. The expected volatility is based on the average of historical daily annualized share price volatility of 6 comparable companies over a normalized period that commensurate with the option life of 10 years. The post-vesting forfeiture rate is based on the historical data and management's best estimation.

 

A summary of the aggregate option activity and information regarding options outstanding as of December 31, 2014 is as follows:

 

  Number of
Options		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contract Life		     Aggregate
Intrinsic
Value		  
Options outstanding on January 1, 2014     6,371,250     $ 0.25      
     
 
Granted     6,274,166     $ 1.49                  
Forfeited     (112,500 )   $ 1.49                  
Expired     (7,500 )   $ 1.49                  
Exercised     (150,000 )   $ 0.25                  
Options outstanding on December 31, 2014     12,375,416     $ 0.87       7.23     $ 5,016,816  
Options vested or expected to vest on December 31, 2014     8,693,171     $ 0.47       6.02     $ 5,763,445  
Options exercisable on December 31, 2014     7,353,583     $ 0.51       6.07     $ 4,689,250  

 

The share-based compensation charge related to the share options of approximately$2,249,834 and $1,881,401 and $1,792,819 was recognized by the Company for the years ended December 31, 2012, 2013 and 2014, respectively.

 

The weighted average grant date fair value of options granted during the year ended December 31, 2012, 2013 and 2014 was $0.23 and $0.11 and $0.98, respectively.

 

As of December 31, 2014, there was $4,700,682 in total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.97 years.