Note 26 — Share-Based Payment
On February 25, 2010, the Company’s board of directors authorized and issued 20,000 stock options, each option to purchase one ordinary share of the Company, to directors and consultants of the Company. In November 2010, September 2015 and April 2016, the Company’s board of directors authorized to reserve an additional 200,000, 280,000 and 200,000 stock options, respectively, for issuance to directors and consultants of the Company from time to time, bringing the total authorized to an aggregate of 700,000 stock options.
In May and September 2014, the Company’s board of directors granted 62,000 stock options to an officer and an employee, and 7,500 stock options to certain employees of the Subsidiaries.
In May and September 2015, the Company’s board of directors granted 125,500 stock options to a director and certain employees of the Subsidiaries.
In January, April and October 2016, the Company’s board of directors granted 150,000 stock options to two directors, 140,000 stock options two officers, and 23,000 stock options to two external consultants.
In May, 2017, one consultant to the Company and various employees of the subsidiaries elected to exercise the stock options vested. There were a total of 2,900 options exercised.
The following table summarizes the stock option activity for the years ended December 31, 2017, 2016 and 2015:
| Number
of shares |
Weighted average exercise price per share |
Weighted average remaining contractual term (in years) |
Aggregate intrinsic value |
|||||||||||||
| Outstanding at January 1, 2015 | 77,000 | $ | 0.669 | 4.40 | $ | 67,414 | ||||||||||
| Granted | 125,500 | – | – | 346,280 | ||||||||||||
| Exercised | – | – | – | – | ||||||||||||
| Cancelled | – | – | – | – | ||||||||||||
| Outstanding at December 31, 2015 | 202,500 | $ | 2.759 | 5.00 | 413,693 | |||||||||||
| Granted | 313,000 | – | – | 329,871 | ||||||||||||
| Exercised | – | – | – | – | ||||||||||||
| Cancelled | (31,250 | ) | – | – | – | |||||||||||
| Outstanding at December 31, 2016 | 484,250 | $ | 1.132 | 4.69 | $ | 743,564 | ||||||||||
| Granted | – | – | – | – | ||||||||||||
| Exercised | (2,900 | ) | – | – | – | |||||||||||
| Cancelled | (7,500 | ) | – | – | (2,400 | ) | ||||||||||
| Outstanding and exercisable at December 31, 2017 | 473,850 | $ | 1.132 | 3.85 | $ | 741,164 | ||||||||||
The following table summarizes the unvested stock option activity during the period from January 1, 2015 to December 31, 2017:
| Number of shares | ||||
| Unvested January 1, 2015 | 62,031 | |||
| Granted | 125,500 | |||
| Vested | (92,844 | ) | ||
| Cancelled | – | |||
| Unvested December 31, 2015 | 94,687 | |||
| Granted | 313,000 | |||
| Vested | (266,837 | ) | ||
| Cancelled | (31,250 | ) | ||
| Unvested December 31, 2016 | 109,600 | |||
| Granted | – | |||
| Vested | (99,249 | ) | ||
| Cancelled | (7,500 | ) | ||
| Unvested December 31, 2017 | 2,851 | |||
The fair value assigned to the vested increments of these awards was estimated at the grant date of the stock options using the Black-Scholes option-pricing model with the following assumptions:
| Year ended December 31, 2016 | Year ended December 31, 2015 | |||||||
| Stock price | $1.80 - $3.55 | $1.25 - $4.00 | ||||||
| Risk-free interest rate | 0.94% - 2.10% | 1.18% - 1.81% | ||||||
| Expected term (in years) | 5.0 | 5.0 | ||||||
| Weighted average expected stock price volatility | 34.28% | 71.32% | ||||||
| Expected dividend yield | 0% | 0% | ||||||
| Weighted average grant-date fair value of options granted | $ | 1.0539 | $ | 2.7592 | ||||
For the year ended December 31, 2017, there were no stock options granted. For the years ended December 31, 2016 and 2015, Management used the following assumptions for the Black-Scholes inputs: On the option valuation date, the current stock price of the Company was used for determining the fair value of the Company’s stock based on the closing price of common stock on the valuation date. The expected dividend rate of 0% is based on Management’s plan of operations. The risk-free interest rate is based on the U.S. Treasury 5-year Treasury Bill on the date of measurement. The Company’s historical stock price was used to determine the expected volatility. The Company expects that no options will be forfeited.
Share-based compensation expense from stock options totaled $95,419, $370,040 and $260,819 for the years ended December 31, 2017, 2016 and 2015, respectively. Share-based compensation expense from stock options to be expensed in future periods is expected to be $20,302, $7,164 and $27 for the years ending December 31, 2018, 2019 and 2020, respectively.