Share options granted by the Company

In November 2012, the Company adopted a share incentive plan (“2012 Plan”), which was amended in October 2013. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2012 Plan is 44,758,220 ordinary shares.

In November, 2014, the Company adopted the 2014 share incentive plan (“2014 Plan”), pursuant to which a maximum aggregate of 14,031,194 Class A ordinary shares may be issued pursuant to all awards granted thereunder. Starting from 2017, the number of shares reserved for future issuances under the 2014 Plan will be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately preceding calendar year, or such lesser number of Class A ordinary shares as determined by the Company’s board of directors, on the first day of each calendar year during the term of the 2014 Plan. With the adoption of the 2014 Plan, the Company will no longer grant any incentive shares under the 2012 Plan. The time and condition to exercise options will be determined by the Board or a committee of the Board. The term of the options may not exceed ten years from the date of the grant, except for the situation of amendment, modification and termination. Under the 2014 Plan, share options are subject to vesting schedules ranging from two to four years.

The following table summarizes the option activity for the year ended December 31, 201


	Number of options			Weighted average exercise price per option (US$)		Weighted average remaining contractual life (years)		Aggregated intrinsic Value (US$)
Outstanding as of January 1, 201 9		21,783,103			0.0296		7.36		258,030
Granted		5,820,796			0.0002
Exercised		(3,290,330	)		0.0082
Forfeited		(515,862	)		0.0002
Outstanding as of December 31, 201 9		23,797,707			0.0260		7.05		397,993
Exercisable as of December 31, 201 9		12,180,915			0.0506		5.58		203,414

There were 12,180,915 vested options, and 10,517,170 options expected to vest as of December 31, 201

. For options expected to vest, the weighted-average exercise price was US$0.0002 as of December 31, 201

and aggregate intrinsic value was US$124,415 and US$176,161 as of December

31,

2018 and 2019, respectively.

The weighted-average grant-date fair value of the share options granted during the years 2017, 2018, and 2019 was US$17.41, US$17.75 and US$16.42, respectively.

The t

otal intrinsic value of options exercised for the years ended December 31, 2017, 2018 and 2019 was US$154,233, US$209,797 and US$59,423, respectively. The total

grant

fair value of options vested during the years ended December 31, 2017, 2018 and 2019 was US$37,979, US$59,226 and US$69,174, respectively.

The fair value of options granted was estimated on the date of grant using the Black-Sholes pricing model after the Company completed its

initial public offering

, with the following assumptions used for grants during the applicable periods:


	Risk-free interest rate of return			Expected term		Volatility			Dividend yield		Exercise price (US$)
2017		2.47%~2.87	%		6 years		50.7%~54.0	%		—		0.0002
2018		3.16%~3.66	%		6 years		50.0%~50.7	%		—		0.0002
2019		2.45%~3.21	%		6 years		49.0%~50.5	%		—		0.0002

(1)

Risk-free interest rate

Risk-free interest rate was estimated based on the daily treasury long term rate of U.S. Department of the Treasury with a maturity period close to the expected term of the options, plus the country default spread of China.

(2)

Expected term

The expected term of the options represents the period of time between the grant date and the time the options are either exercised or forfeited, including an estimate of future forfeitures for outstanding options.

(3)

Volatility

The volatility of the underlying ordinary shares during the life of the options was estimated based on the historical stock price volatility of comparable listed companies over a period comparable to the expected term of the options.

(4)

Dividend yield

The dividend yield was estimated by the Group based on its expected dividend policy over the expected term of the options.

(5)

Exercise price

The exercise price of the options was determined by the Group’s board of directors.

(6)

Fair value of underlying ordinary shares

The fair value of the ordinary shares is determined as the closing sales price of the ordinary shares as quoted on the principal exchange or system. For employee and executives share options, the Group recorded share-based compensation of RMB286,119, RMB377,241 and RMB495,256 during the years ended December 31, 2017, 2018 and 2019, respectively, based on the fair value on the grant dates over the requisite service period of award according to the vesting schedule for employee share option.

For

non-employee

share options the Group recorded share-based compensation of RMB44,277, RMB14,360 and RMB880 during the years ended December 31, 2017, 2018 and 2019, respectively, based on the fair value at the

grant dates

and recognized over the period the service is provided.

As of December 31, 201

, total unrecognized compensation expense relating to unvested share options was RMB1,178,770, which will be recognized over a weighted average period of 2.62 years. The weighted-average remaining contractual term of options outstanding is 7.05 years.

Restricted share units (“RSUs”) granted by the Company

On March 7, 2017

May 2, 2018

and April 15, 2019, the

Company granted 100,000

, 100,000

and 130,000 shares of RSUs, respectively, to independent directors under the 2014 Plan with a vesting period of 4 years.

The Company will forfeit the unvested portion of the RSUs if the grantees terminate their service during the vesting period.

The Group recorded share-based compensation of RMB4,173, RMB6,609 and RMB10,622 for RSUs for the years ended December 31, 2017, 2018 and 2019, respectively, based on the fair value on the grant dates over the requisite service period of award using the straight-line method.

As of December 31, 2019, total unrecognized compensation expense relating to unvested RSUs was RMB23,808 which will be recognized over a weighted average period of 2.73 years.

Restricted shares granted by QOOL Inc.

On December 12, 2018, QOOL Inc.’s minority interest shareholder entered into an arrangement with QOOL Inc. whereby

9,000,000

ordinary shares of QOOL Inc. owned by the minority interest shareholder became subject to service and transfer restrictions. Such restricted shares are subject to repurchase by QOOL Inc. upon early termination of two years of the employment or consulting service provided by the founder of the minority interest shareholder at a nominal price.

The Group recorded share-based compensation of RMB566 and RMB10,811 for the restricted shares for the years ended December 31, 2018 and 2019, respectively, based on the fair value on the grant dates over the requisite service period of award using the straight-line method.

As of December 31, 2019, total unrecognized compensation expense relating to unvested restricted shares was RMB10,314 which will be recognized over a weighted average period of 0.95 years.

Share options granted by Tantan

In March, 2015, Tantan adopted the 2015 share incentive plan (“2015 Plan”), pursuant to which a maximum aggregate of 1,000,000 shares may be issued pursuant to awards may be authorized, but unissued ordinary shares. The Board of Directors

Tantan

may in its discretion make adjustments to the numbers of shares. In April 2016 and March 2017, the Board of Directors of Tantan approved to adjust the numbers of shares to a maximum aggregate of 2,000,000 and 2,793,812, respectively.

In July, 2018, Tantan adopted the 2018 share incentive plan (“2018 Plan”), pursuant to which the maximum aggregate number of shares which may be issued shall initially be 5,963,674 ordinary shares, plus that number of ordinary shares authorized for issuance under the 2015 Plan, in an amount equal to (i) the number of ordinary shares that were not granted pursuant to the 2015 Plan, plus (ii) the number of ordinary shares that were granted pursuant to the 2015 Plan that have expired without having been exercised in full or have otherwise become unexercisable. The time and condition to exercise options will be determined by Tantan’s Board. The term of the options may not exceed ten years from the date of the grant, except for the situation of amendment, modification and termination.

Tantan split its shares 1-for-5 on August 30, 2019. As a result, the Board of Directors of Tantan approved the amended and restated 2015 share incentive plan (“Amended and Restated 2015 Plan”) and adjusted the maximum aggregate number of shares which may be issued under the 2015 plan to 9,039,035 shares; the Board of Directors of Tantan also approved the amended and restated 2018 share incentive plan (“Amended and Restated 2018 Plan”) and adjusted the maximum aggregate number of shares which may be issued under the 2018 plan to 29,818,370 shares, plus that number of ordinary shares authorized for issuance under Tantan’s Amended and Restated 2015 Plan, in an amount equal to (i) the number of ordinary shares that were not granted pursuant to the 2015 Plan, plus (ii) the number of ordinary shares that were granted pursuant to the 2015 Plan that have expired without having been exercised in full or have otherwise become unexercisable. Accordingly, all below figures are adjusted retrospectively.

Options classified as equity awards

The following table summarizes the option activity for the year ended December 31, 2019:


	Number of options			Weighted average exercise price per option (US$)		Weighted average remaining contractual life (years)		Aggregated intrinsic value (US$)
Outstanding as of December 31, 2018		9,482,930			1.4309		7.45		35,666

Granted		3,414,378			3.8135
Redeemed		(170,118	)		0.1796
Forfeited		(802,107	)		1.1616

Outstanding as of December 31, 2019		11,925,083			2.1490		7.40		34,356

Exercisable as of December 31, 2019		4,797,434			1.0284		6.18		19,197

There were 4,797,434 vested options, and 6,129,788 options expected to vest as of December 31, 2019. For options expected to vest, the weighted-average exercise price was

$2.90 as of December 31, 2019 and the aggregate intrinsic value amounted to

$23,534

and

$13,037

as of December 31, 2018 and 2019, respectively.

The weighted-average grant-date fair value of the share options granted during the years ended December 31, 2018 and 2019

was US$

3.00

nd US$3.05, respectively.

The total grant-date fair

value of options vested during the year ended December 31, 2018 and 2019 was

US$7,600

and US$24,985, respectively.

The fair value of each option granted was estimated on the date of grant using the binomial tree pricing model with the following assumptions used for grants during the applicable periods:

Risk-free

interest

rate of return

Contractual term

Volatility

Dividend yield

Exercise price

(US$)

During the year ended December 31, 2018

3.58

10 years

55.4

—

0.32

5.0

During the year ended December 31, 2019

2.30%~3.50

10 years

54.2%~55.4

—

0.32~5.0

(1)

Risk-free interest rate

(2)

Contractual term

Tantan used the original contractual term.

(3)

Volatility

(4)

Dividend yield

The dividend yield was estimated by Tantan based on its expected dividend policy over the expected term of the options.

(5)

Exercise price

The exercise price of the options was determined by the Board of Directors of Tantan.

(6)

Fair value of underlying ordinary shares

The estimated fair value of the ordinary shares underlying the options as of the respective grant dates was determined based on a retrospective valuation before Tantan was acquired and on a contemporaneous valuation after Tantan was acquired, which used management’s best estimate for projected cash flows

as of each valuation date.

The estimated fair value of the ordinary shares of

Tantan

was US$5.03 as of December 31, 2019.

For share options classified as equity awards, Tantan recorded share-based compensation of RMB94,977

and RMB99,635 during the year ended December 31, 2018 and 2019, respectively, based on the fair value of the grant dates over the requisite service period of award according to the vesting schedule for employee share option.

As of December 31, 2019, total unrecognized compensation expense relating to unvested share options was RMB180,170 which will be recognized over a weighted average period of 2.39 years. The weighted-average remaining contractual term of options outstanding is 7.40 years.

Options classified as liability awards

In August 2018, Tantan granted 17,891,025 share options to its founders under the 2018 Plan. The founders have the right to request Tantan to redeem for cash the vested options upon the termination of the founders’ employment at a price based on a fixed equity value of Tantan. Therefore, the awards are classified as liability on the consolidated balance sheet due to their cash settlement feature. The options include a four years vesting condition whereas options vest ratably at the end of each year.

Accordingly, the awards are re-measured at each reporting date with a corresponding charge to share-based compensation expense and are amortized over the estimated vesting period. The share options also include a performance condition in which the founders have the right to receive fully vested options immediately upon achieving certain performance conditions.

During the year ended December 31, 2019, all outstanding options granted to Tantan’s founders were vested as the necessary performance conditions were satisfied. Thereafter, the awards are re-measured at fair value at each reporting date with a corresponding charge to share-based compensation expense.

The fair value of each option granted was estimated using the binomial tree pricing model with the following assumptions used during the applicable periods:

Risk-free

interest

rate of return

Contractual term

Volatility

Dividend yield

Exercise price

(US$)

During the year ended December 31, 2018

3.39%~3.58

10 years

55.4%~55.6

—

0.0004

During the year ended December 31, 2019

2.45%~3.19

10 years

54.2%~55.5

—

0.0004

(1)

Risk-free interest rate

(2)

Contractual term

Tantan used the original contractual term.

(3)

Volatility

(4)

Dividend yield

The dividend yield was estimated by Tantan based on its expected dividend policy over the expected term of the options.

(5)

Exercise price

The exercise price of the options was determined by the Board of Directors of Tantan.

(6)

Fair value of underlying ordinary shares

The estimated fair value of the ordinary shares underlying the options as of each period-end date was determined based on a

contemporaneous valuation, which used management’s best estimate for projected cash flows as of each valuation date.
The estimated fair value of the ordinary shares of Tantan was US$5.03 as of December 31, 2019.

For share options classified as liability awards, Tantan recorded share-based compensation of RMB86,778

and RMB791,028 during the years ended December 31, 2018 and 2019, respectively,

including the impact of the accelerate vesting and the subsequent adjustment of

the fair value at each reporting dates.