Note 6 - Personnel Expenses Including Share-based Remuneration

12 Months Ended

Dec. 31, 2019

Statement Line Items [Line Items]

Disclosure of employee benefits [text block]

NOTE 6. PERSONNEL EXPENSES INCLUDING SHARE-BASED REMUNERATION

The table below specifies the amounts of personnel expenses including share-based remuneration. The amount of personnel expenses presented as cost of revenue is specified in Note

7.

[US$ thousands]	Year ended December 31,
Personnel expenses including share-based remuneration	2017		2018		2019
Salaries incl. bonuses		23,714		20,412		34,186
Social security cost, excluding amounts related to share-based remuneration		4,235		3,428		3,777
External temporary hires		686		1,687		8,159
Defined-contribution pension cost		2,068		2,066		3,616
Other personnel related expenses		1,935		2,244		5,364
Personnel expenses excluding share-based remuneration		32,638		29,836		55,101
Share-based remuneration, including related social security costs		9,496		4,846		5,928
Total		42,134		34,683		61,029

The amount of expensed versus capitalized development cost is detailed in the following table:

[US$ thousands]	Year ended December 31,
Research and development expenditure	2017		2018		2019
Total research and development expenditure		23,386		26,418		34,143
Less: Capitalized development expenditure excluded from personnel expenses		3,503		4,545		4,056
Net expensed research and development expenditure		19,883		21,873		30,087

The table below specifies the amount of compensation to key management personnel, which include Officers and Directors of the Group:

[US$ thousands]	Year ended December 31,
Compensation of key management personnel	2017		2018		2019
Short-term employee benefits		946		843		2,121
Post-employment and medical benefits		47		57		59
Share-based payment transactions		-		621		536
Total		993		1,521		2,716

The amounts disclosed as short-term benefits in the table above are the amounts recognized as an expense during the reporting period. In

2019,

the Chairman and CEO started receiving remuneration from the Group. The cost of equity grants to Officers that vested in

2019

was

$536

thousand, compared to

US$621

thousand in

2018.

No

equity grants vested in

2017.

No

loans have been granted and

no

guarantees have been issued to key management personnel. Key management personnel do

not

have any agreements for compensation upon termination or change of employment or directorship.

Share-based remuneration

On

April 7, 2017

the Group adopted an RSU (Restricted Share Unit) plan for employees of the Group. The program was transferred to the Group’s new parent company, Opera Limited, in connection with the Group’s IPO in

2018.

Awards equal to

10%

of the equity of the Company are made available for grants.

The program was established with an assumption that there would be

500

million shares in the ultimate issuer entity. Opera Limited was set up with

200

million shares, resulting in a conversion ratio of

0.4

from the count of RSUs granted to the ultimate shares to be delivered. As each traded ADS represents

two

shares, the reported grants have been further adjusted by a factor of

0.5.

On

January 10, 2019,

the Group amended and restated its share incentive plan. The plan was adopted for the purpose of rewarding, attracting and retaining employees of the Group. Under the amended plan, a total of

20,000,000

ordinary shares are issuable to employees, corresponding to

10,000,000

ADSs. For the purpose of these consolidated financial statements, all counts of RSUs and options, as well as per-unit values, are communicated as converted to ADS equivalent units.

In

2019,

grants were made in the months of

March,

June,

September,

November

and

December.

The average vesting schedule for the majority of

2019

grants were

16%,

22%,

28%,

34%

on

January 1

in each of the years

2020

-

2023.

The equity unit value applied for the

2019

grants was determined based on the market value of the Company on the date of each grant. The fair value for RSUs granted was determined by Monte Carlo simulation, while the fair value of options was determined based on the Black-Scholes model, as specified below. The table presents the weighted average values across grants within each category of equity award instruments. The equity cost of each award is recognized on a straight-line basis over the vesting period.

The Group accrues for relevant social security costs based on the most recent available measure of the equity value, with the same straight-line recognition over the vesting period. As of

December 31, 2019,

social security cost was accrued based on the period-end market value of the Company, and corresponded to

US$1,050

thousand. The full amount of social security payable on grants outstanding at period end, assuming all grants become exercisable at the current period-end market value of the Company, amounts to

US$1,442

thousand.

The expense recognized for the employee services received is shown in the following table:

[US$ thousands]	Year ended December 31,
Expense from share-based payment transactions	2017		2018		2019
Expense arising from equity-settled share-based payment transactions (1)		9,496		4,846		5,928
Expense arising from cash-settled share-based payment transactions		-		-		-
Total		9,496		4,846		5,928

(

1

)

Including accrued social security cost.

Movements during the period: Number of RSUs and options as expressed in equivalent ADSs:

	Year ended December 31,
RSUs	2018			2019
Outstanding at period start		3,882,600			4,244,132
Granted during the period		516,000			1,019,000
Forfeited during the period		(154,468	)		(550,700	)
Exercised during the period		-			(1,728,492	)
Expired during the period		-			-
Outstanding at period end		4,244,132			2,983,940

	Year ended December 31,
Options	2018		2019
Outstanding at period start		-		-
Granted during the period		-		150,000
Forfeited during the period		-		-
Exercised during the period		-		-
Expired during the period		-		-
Outstanding at period end		-		150,000

The weighted average remaining vesting period for the equity instruments outstanding as of

December 31, 2019

was

0.95

years (

December 31, 2018:

0.97

years). On

January 1, 2020,

1,130,000

RSUs and

30,000

options became exercisable, with

no

exercise price for the RSUs and

$7.42

exercise price for the options.

Fair value measurement per awarded equity unit as converted to ADS equivalent:

	2018 RSU grants: RSU valuation input			2019 RSU grants: RSU valuation input			2019 RSU grants: Option valuation input
Equity unit price valuation ($)		7.75			9.09	(3)		7.42
Model Used		Monte Carlo			Monte Carlo			Black-Scholes
Expected Volatility (%) (1), (2)		35.28	%		40.00	%		40	%
Risk free interest rate (%) (1)		2.43	%		1.70	%		2.43	%
Dividend Yield (%)		0	%		0	%		0	%
Duration of initial simulation period (years to longstop date)		4.73			3.16			4.81
Duration of second simulation period with postponed exercise (years)		3.00			3.00			N/A
Fair value at the measurement date ($)		7.12			8.92			2.36

(

1

)

 Specified value is

4

years (modelled on yearly basis).

(

2

)

Based on a defined peer group of companies considered comparable to the Group.

(

3

)

Weighted average equity unit price valuation of all grants in

2019.