Note 9. Share-Based Compensation

The Company records share-based compensation expense in respect of options and restricted share units (“RSUs”), including multi-year performance based restricted share units (“MRSUs”) issued under its share incentive plans and in respect of deferred shares issued to employees. Share-based compensation expense amounted to $2,004 in the year ended March 31, 2016, $1,138 in the year ended March 31, 2015 and $933 in the year ended March 31, 2014.

Option Plans

The 2012 Option Plan (the “Option Plan”) was designed in order to grant options on ordinary shares in the capital of the Company to certain of its directors and employees. The purpose of the Option Plan is to provide employees with an opportunity to participate directly in the growth of the value of the Company by receiving options for shares.

Each option converts into one ordinary share of the Company on exercise.

The 2012 Option Plan was approved by the shareholders on February 16, 2012.

The total number of shares in respect of which options may be granted under the 2012 Option Plan is limited at 839,509. Options that lapse or are forfeited are available to be granted again.

Options generally vest over a period of three years but certain employees have shorter vesting periods. The contractual life of all options is 10 years. Options were not exercisable before the Company became a public company and all outstanding options become exercisable in the event of an acquisition of 75% or more of the share capital of the Company by a third party. No further awards will be granted under the 2012 Option Plan.

The 2014 Stock Incentive Plan was approved by the directors and shareholders immediately prior to the Company’s initial public offering in April 2014. The 2014 Plan was designed to provide flexibility to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the business depends, and to provide additional incentives to such persons to devote their effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in its success and increased value.

Under the 2014 Plan, 1,500,000 ordinary shares were initially reserved for issuance. This number is subject to adjustment in the event of a recapitalization, share split, share consolidation, reclassification, share dividend or other change in the Company’s capital structure and automatically increases annually on April 1 of each year. The plan provides for the issuance of share options, restricted shares, RSUs (including MRSUs) or share appreciation rights (“SARs”). The Company has only issued options, RSUs and MRSUs under the plan prior to March 31, 2016. To the extent that an award terminates, or expires for any reason, then any shares subject to the award may be used again for new grants. However, shares which are (i) not issued or delivered as a result of the net settlement of outstanding SARs or options; (ii) used to pay the exercise price related to outstanding options; (iii) used to pay withholding taxes related to outstanding options or SARs; or (iv) repurchased on the open market with the proceeds from an option exercise, will not be available for grant under the 2014 Plan.

Share option activity

The following table summarizes share option activity:

	Number of Share Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)
Outstanding — March 31, 2013		369,400		$	1.44	116
Granted		477,149		$	4.21	120
Exercised		(60,044	)	$	4.08		—
Forfeited		(7,043	)		4.87		—
Outstanding — March 31, 2014		779,462		$	2.92	109
Granted		605,250			8.34	120
Exercised		(137,478	)		2.23		—
Forfeited		(39,116	)		7.93		—
Outstanding — March 31, 2015		1,208,118		$	5.58	103
Granted		404,327			14.71		120
Exercised		(8,712	)		4.72		—
Forfeited		(13,795	)		10.25		—
Outstanding — March 31, 2016		1,589,938		$	7.86		96
Exercisable —March 31, 2016		662,261		$	4.37		88

The following table summarizes the options granted in the year ended March 31, 2016 with their exercise prices, the fair value of ordinary shares as of the applicable grant date, and the intrinsic value, if any:

Grant Date	Number of Options Granted		Exercise Price		Ordinary Shares Fair Value Per Share at Grant Date		Per Share Intrinsic Value of Options
May 20, 2015		312,300	$	15.17	$	15.17	$	6.08
August 5, 2015		8,000	$	16.70	$	16.70	$	6.54
September 2, 2015		25,000	$	16.34	$	16.34	$	6.52
October 31, 2015		39,727	$	11.62	$	11.62	$	4.76
November 4, 2015		11,400	$	13.00	$	13.00	$	5.33
February 9, 2016		7,900	$	7.34	$	7.34	$	3.02

Determining the fair value of share options

The fair value of each grant of share options was determined by the Company using the Black-Scholes options pricing model. The total fair value of option awards in the years ended March 31, 2016 and March 31, 2015 amounted to $2,054 and $2,108.

Assumptions used in the option pricing models are discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Expected volatility. The expected volatility was based on the historical share volatilities of a selection of the Company’s publicly listed peers over a period equal to the expected terms of the options as the Company did not have a sufficient trading history to use the volatility of its own ordinary shares.

Fair value of ordinary shares. Since the Company’s initial public offering in April 2014, the fair value of ordinary shares has been based on the share price of the Company’s shares on the NASDAQ Global Market immediately prior to the grant of the options concerned.

Risk-Free Interest Rate. The risk-free interest rate is based on the UK Government 10 year bond yield curve in effect at the time of grant prior to the initial public offering and 10 year U.S. Treasury Stock for awards from April 2014 onwards.

Expected term. The expected term is determined after giving consideration to the contractual terms of the share-based awards, graded vesting schedules ranging from one to three years and expectations of future employee behavior as influenced by changes to the terms of its share-based awards.

Expected dividend. According to the terms of the awards, the exercise price of the options is adjusted to take into account any dividends paid. As a result dividends are not required as an input to the model, as these reductions in the share price are offset by a corresponding reduction in exercise price.

A summary of the weighted-average assumptions applicable to the share options is as follows:

	Year ended March 31,
	2016			2015
Risk-free interest rate		2.26	%		2.64	%
Expected lives (years)		3			3
Volatility		57.38	%		59.62	%
Dividend yield		—			—
Grant date fair value (per share)	$	14.71		$	8.34
Number granted		404,327			605,250

RSU and MRSU Activity

During the year ended March 31, 2015, the Company awarded 50,000 RSUs to a non-executive director upon his appointment as a director of the Company. These vest in equal annual installments over the four year period following the date of grant. During the year ended March 31, 2016, 12,500 of these RSUs vested resulting in the issuance of 12,500 ordinary shares and at March 31, 2016, 37,500 of these RSUs remained outstanding.

During the year ended March 31, 2016, the Company made various RSU awards. The Company awarded 137,000 MRSUs on May 20, 2015. These MRSUs will vest if the volume weighted average price of the Company’s ordinary shares exceeds $60 for a continuous twenty day period between April 1, 2018 and December 31, 2018. The Company determined the grant date fair value of the MRSUs using a barrier option pricing model with the same grant date fair value per share, risk free interest rate, volatility and dividend yield assumptions as the options awarded on the same date. This resulted in a grant date fair value of $6.09 per MRSU. On September 2, 2015, the Company issued 25,000 RSUs which will vest if specific sales performance targets are met prior to December 31, 2022. The Company expects these performance targets to be met and share based compensation expense is being recognized on these awards over the period to the date when the sales performance targets are expected to be achieved. The Company also issued 10,000 RSUs on May 20, 2015, 9,867 RSUs on September 4, 2015 and 10,328 RSUs on October 31, 2015 which vest over a two year period from the date of grant. On November 4, 2015, the Company issued 8,000 RSUs which vest over a three year period from the date of grant.

Restricted shares

Share based compensation expense arising on deferred shares amounted to $156 in the year ended March 31, 2014. As of March 31, 2014, there was no remaining unrecognized compensation cost related to deferred shares.

The fair value of the Company’s ordinary shares was $8.80 per share on March 31, 2016.

As of March 31, 2016, total compensation cost related to share options and RSUs granted but not yet recognized was $3,900 net of estimated forfeitures. This cost will be amortized to expense over a weighted average remaining period of 1.8 years and will be adjusted for subsequent changes in estimated forfeitures.