16. Stock-based Compensation

The Company measures stock-based compensation expense for all stock-based compensation awards based on the grant-date fair value and recognizes the cost in the financial statements over the employee requisite service period.

The following table summarizes the stock-based compensation expense, by type of awards for the periods as follow (in thousands):


	For the Three Months Ended
	March 31, 2015		March 31, 2014

Employee stock options	$	1,751		215

Restricted stock grants		31,151	$	—

Total stock-based compensation expense	$	32,902	$	215

The following table summarizes the stock-based compensation by line item for the periods as follow (in thousands):


	For the Three Months Ended
	March 31, 2015		March 31, 2014
General and administrative	$	32,890	$	210
Sales, marketing and customer service		12		5

Total stock-based compensation expense		32,902		215

Tax effect on stock-based compensation expense		—		—

Total stock-based compensation expense after income taxes	$	32,902	$	215

Stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Determining Fair Value

Valuation and Amortization Method — The Company estimates the fair value of service-based and performance-based stock options granted using the Black-Scholes option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. In the case of performance-based stock options, amortization does not begin until it is determined that meeting the performance criteria is probable. Service-based and performance-based options typically have a five to ten year life from date of grant and vesting periods of three to four years.

Expected Term — The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method for estimating the expected term of the stock-based award, instead of historical exercise data. For its performance-based awards, the Company has determined the expected term life to be five years based on contractual life and the seniority of the recipient.

Expected Volatility —The Company uses historical volatility of the price of its common shares to calculate the volatility for its granted options.

Expected Dividend — The Company has never paid dividends on its common shares and currently does not intend to do so, and accordingly, the dividend yield percentage is zero for all periods.

Risk-Free Interest Rate — The Company bases the risk-free interest rate used in the Black-Scholes valuation model upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

There were no new grants or awards issued during the three months ended March 31, 2014.

Assumptions used in the determination of the fair value of share-based payment awards using the Black-Scholes model for stock option grants during the three months ended March 31, 2015 were as follows:


	For the Three Months Ended
	March 31, 2015
Expected term				4
Risk-free interest rate		1.68	%	—		2.24	%
Expected volatility		141	%	—		142	%
Expected dividend yield				0	%

Equity Incentive Plan

On November 15, 2006, subject to approval of the stockholders, the Company adopted the 2006 Equity Incentive Plan (the “Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of incentive and nonqualified stock options (“Option”), stock (“Restricted Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). The Plan was approved by the stockholders on February 7, 2007.

The Company has granted time-based share options and restricted stock under the Plan to directors, officers, employees and individual consultants of the Company. The time-based options generally vest 25% annually and expire three to ten years from the date of grant. Total number of shares reserved and available for grant and issuance pursuant to this Plan is equal to 9% of the number of outstanding shares of the Company. Shares issued under the Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company. Outstanding shares of the Company shall, for purposes of such calculation, include the number of shares of stock into which other securities or instruments issued by the Company are currently convertible (e.g., convertible preferred stock, convertible debentures, or warrants for Common Stock), but not outstanding options to acquire stock. At March 31, 2015 there were 1,335,374 shares available for grant under the plan (9% of the outstanding shares of 601,270,944 less options and restricted stock outstanding and exercised since inception).

The exercise price of any Option will be determined by the Company when the Option is granted and may not be less than 100% of the fair market value of the shares on the date of grant, and the exercise price of any incentive stock option granted to a stockholder with a 10% or greater shareholding will not be less than 110% of the fair market value of the shares on the date of grant. The exercise price per share of a SAR will be determined by the Company at the time of grant, but will in no event be less than the fair market value of a share of Company’s stock on the date of grant.

On January 12, 2015 and February 23, 2015, the Board of Directors approved the grants of restricted stock unit awards (“RSU”) to core management members, other management and staff, pursuant to the terms of the 2006 Equity Incentive Plan. The total number of RSUs granted is 20,384,000 shares. Among these, the vesting schedules for the chairman, CEO and CFO (“core management”) are 100% vested at the grant date and the vesting schedules for the rest RSUs granted to other management and staff would be vested within the next four years equally. The Company used the market price of its share at grant date as the fair value of the RSUs in calculating the stock based compensation expense. The core management exercised all RSUs of 19,200,000 and all these shares were issued to them in 2015 March (See Note 15).

The following table summarizes the Company’s stock option activities for the three month periods ended March 31, 2015 and 2014:


	2015					2014
	Shares			Weighted- Average Exercise Price Per Share		Shares			Weighted- Average Exercise Price Per Share
Outstanding as of January 1,		25,429,000		$	0.84		7,114,250		$	0.20
Granted		8,682,000			1.83		—			—
Exercised		—			—		—			—
Forfeited		(490,000	)		2.09		(559,250	)		0.29

Outstanding as of March 31,		33,621,000		$	1.08		6,555,000		$	0.19

The following table presents the exercise price and remaining life information about options exercisable at March 31, 2015:


Range of exercise price	Shares Exercisable		Weighted average remaining contractual life		Weighted average exercise price		Aggregate Intrinsic ($000)
$0.51 - $1.24		200,000		4.76	$	1.24	$	184
$0.30 - $0.50		792,000		1.07		0.48		1,331
$0.05 - $0.29		500,000		3.39		0.05		1,055

		1,492,000		2.34	$	0.44	$	2,570

Changes in the Company’s non-vested stock awards are summarized as follows:


	Time-based Options					Restricted Stock
	Shares			Weighted Average Exercise Price Per Share		Shares			Weighted Average Grant Date Fair Value Per Share
Non-vested as of January 1, 2015		23,937,000			0.84		525,000		$	0.75
Granted		8,682,000			1.83		20,384,000			1.66
Vested		—			—		(19,200,000	)		1.67
Forfeited		(490,000	)		2.09		—			—

Non-vested as of March 31, 2015		32,129,000			1.09		1,709,000		$	1.66