12.

Share option and equity incentive plans

The Company has issued share options since

2003,

restricted shares in

2014

and RSUs since

2015

to incentivize employees and directors providing services to the Company. Currently, the Company maintains

two

equity compensation plans, the Amended and Restated

2008

Stock Incentive Plan and the

2013

Share Incentive Plan, or the Plans. With the adoption of the

2013

Share Incentive Plan or the

2013

Plan, the Company is

longer authorized to grant awards under the Amended and Restated

2008

Stock Incentive Plan.

November 2013,

in connection with the Company’s IPO, the Company adopted the

2013

Plan, which provides for the grant of share options, restricted shares, RSUs and other share-based awards to employees, officers, directors and consultants of the Company. The

2013

Plan authorized the Company to grant up to

2,684,563

ordinary shares with such amount automatically increasing annually on each

January 1

through

January 1, 2023

of the number of shares outstanding on the close of business of the immediately preceding

December 31

, provided that the board of directors

may

limit the increase to a smaller amount or to

increase in any given year. The

2013

Plan was amended in

April 2017

to delete the provision that allows for yearly increases to the shares available for issuance under the Plan. At that time, the maximum number of shares available for future issuance was also capped at

2,684,563,

which is the original amount of shares allocated for issuance under the

2013

Plan. At

December 31, 2019

, there were

1,552,474

shares available for future issuance under the

2013

Plan.

Under both the

2008

Plan and the

2013

Plan, share options, and only under the

2013

Plan, restricted shares and RSUs, have been granted to employees, officers and directors who provide services to the Company. Options generally vest based on the grantee’s continued service with the Company during a specified period following grant or, in rare instances, based on the achievement of performance or other conditions as determined by the board of directors, and expire after

ten

years. For options granted prior to

2015,

the vesting percentage was generally

until the

second

anniversary of the vesting start date of the employee’s

first

option award under the

2008

Plan and either the

second

anniversary of the employee’s date of hire or the

first

day of the month following the

second

anniversary of the employee’s date of hire under the

2013

Plan. Effective in

2015,

the Company began granting options that vest in equal parts over

four

years starting on the vesting start date. Generally, restricted shares and RSUs vest based on the grantees’ continued service with the Company during a specified period following grant as follows:

40%

on the

second

anniversary of the grant date;

30%

on the

third

anniversary of the grant date; and

30%

on the

fourth

anniversary of the grant date.

The fair value of the options was estimated at the grant date using the Black-Scholes option pricing model, taking into account the terms and conditions upon which options are granted. The fair value of the options is amortized on a straight-line basis over the requisite service period of the awards. The weighted-average grant date fair value per share relating to share options granted under the Plans during the years ended

December 31, 2019

and

2018

was

$7.23

and

$6.15,

respectively. Share-based compensation expense for restricted shares and RSUs is calculated based on the grant date market price of the shares and is also amortized on a straight-line basis over the requisite service period of the awards.

The fair value of each option granted under the Plans has been calculated on the date of grant using the following assumptions:

	2019		2018
Expected dividend yield (%)		—		—
Expected volatility (%)		43.82		43.70
Risk-free interest rate (%)		2.19		2.70
Expected life of option (years)		6.25		6.25
Weighted-average share price ($)		15.83		13.37
Weighted-average exercise price ($)		15.83		13.37
Model used		Black-Scholes Model		Black-Scholes Model

Expected dividend yield:

The Company has

not

paid and does

not

anticipate paying any dividends in the foreseeable future.

Expected volatility:

As the Company operated as a private company until

November 2013,

there is limited historical volatility for the expected term of the options. Therefore, in the

first

half of the year, the Company used

50%

of average share price volatility of the peer group companies and

50%

of its own average share price volatility. In the

second

half of the year, the Company used

100%

of its own average share price volatility, since a sufficient amount of historical information regarding the volatility of its own share price is now available.

Risk-free interest rate:

The Company determined the risk-free interest rate by using a weighted-average equivalent to the expected term based on the U.S. Treasury yield curve in effect as of the date of grant.

Expected life of options (in years):

Expected life of options represents the period that the Company’s share option grants are expected to be outstanding. As the Company operated as a private company until

November 2013,

there is limited historical share data to calculate the expected term of the options. Therefore, the Company elected to utilize the “simplified” method to value share option grants during the year. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. Expected term calculated using the simplified method was in line with historical actuals.

Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. The Company estimates forfeitures based on historical termination behavior and future expectations. The forfeiture rates are rounded in

increments. For the year ended

December 31, 2018

, forfeiture rates of

were applied to both management and non-management grants. For the year ended

December 31, 2019

, forfeiture rates of

and

were applied to management and non-management grants, respectively. The Company expects a lower management forfeiture rate due to changes in the business following the Quest transaction.

The following table illustrates the number of ordinary shares and weighted-average exercise prices, or WAEP, of, and movements in, share options during the year:

	Number of ordinary shares			WAEP
Outstanding as of December 31, 2018		2,563,169		$	13.37
Granted		495,460			15.83
Exercised		(394,078	)		10.24
Forfeited		(254,283	)		14.10
Expired		(187,513	)		16.34
Outstanding as of December 31, 2019		2,222,755			14.15
Vested or expected to vest as of December 31, 2019		2,210,714		$	14.14
Exercisable as of December 31, 2019		1,228,244		$	13.93

The following table illustrates the number of RSUs, and weighted-average fair value, or WAFV, of, and movements in, RSUs during the year:

	Number of ordinary shares			WAFV
Outstanding as of December 31, 2018		300,954		$	13.88
Granted		167,159			16.07
Forfeited		(96,496	)		14.56
Vested		(79,286	)		13.70
Unvested balance as of December 31, 2019		292,331			14.96

As of

December 31, 2019

, there was

$4.5

million and

$3.2

million of total unrecognized compensation cost related to unvested share options and unvested RSUs, respectively, granted under the Plans. The cost for unvested share options and unvested RSUs is expected to be recognized over weighted-average periods of

2.5

years and

2.7

years, respectively.

The aggregate intrinsic value of all share options outstanding under the Plans as of

December 31, 2019

and

2018

was

$6.5

million and

$2.8

million, respectively. The aggregate intrinsic value of share options that were exercisable under the Plans as of

December 31, 2019

and

2018

was

$4.4

million and

$2.4

million, respectively.

During the years ended

December 31, 2019

and

2018

, current and former employees of the Company exercised a total of

394,078

and

694,322

share options, respectively, resulting in total proceeds of

$4.0

million during

2019

and

$3.2

million during

2018

. The intrinsic value of share options exercised during the years ended

December 31, 2019

and

2018

was

$1.9

million and

$6.7

million, respectively. In accordance with Company policy, the shares were issued from a pool of shares reserved for issuance under the Plans described above.

A summary of the activity of the Company’s unvested share options is as follows:

	Number of shares			Weighted-average grant date fair value
Balance as of December 31, 2018		1,161,530		$	6.06
Granted		495,460			15.83
Vested		(408,196	)		5.94
Forfeited		(254,283	)		14.10
Balance as of December 31, 2019		994,511			6.59

The total fair value of shares vested for the years ended

December 31, 2019

and

2018

was

$2.4

million and

$3.7

million, respectively.

The impact on the Company’s results of continuing and discontinued operations from share-based compensation for the years ended

December 31, 2019

and

2018

was as follows:

(in thousands)	2019		2018
Cost of revenue	$	74	$	182
Research and development		385		758
Sales and marketing		1,173		965
General and administrative		1,981		2,602
Total continuing operations		3,613		4,507
Discontinued operations		—		1,044
Total share-based compensation	$	3,613	$	5,551

September 10, 2018,

the Company’s board of directors approved the modification of unvested equity awards awarded to approximately

employees expected to move to Quest. Per the terms of the modification, upon closing of the transaction, all outstanding awards became fully vested. The Company accounted for the modification as of

September 25, 2018,

when the Company signed the Purchase Agreement with Quest and the performance criteria became probable. At that time, all expense related to unvested awards was reversed, and the modified awards were revalued. The Company compared the fair value of the award immediately before and after the modification, and there was

incremental compensation to be recognized. Expense related to the modified awards was fully recognized on the closing date. Approximately

120,000

options and

28,100

RSUs were accelerated.

For the year ended

December 31, 2019

, the Company incurred shared-based compensation expense related to share options and RSUs of approximately

$2.6

million and

$1.0

million, respectively. For the year ended

December 31, 2018

, the Company incurred shared-based compensation expense related to share options, restricted shares and RSUs of approximately

$3.6

million and

$2.0

million, respectively.