Note 9 — Share-based compensation

 

The following table shows the total share-based compensation expense included in the consolidated statements of operations (thousands):

 

 

There were 1,768,243 and 1,885,615 share options granted in the three months ended June 30, 2016 and 2015, respectively, and 15,343,797 and 11,069,517 share options granted in the six months ended June 30, 2016 and 2015, respectively. The weighted average fair value of stock options granted was $0.89 and $1.45 in the three months ended June 30, 2016 and 2015, respectively, and $0.70 and $0.94 in the six months ended June 30, 2016 and 2015.

 

The fair value of the share options granted during the period was calculated using the Black-Scholes option-pricing model using the following assumptions:

 

 

The expected term of the option is based on management judgment.  Forfeitures are recognized when they occur. To date, our forfeitures have been minimal.  Due to the Company’s lack of sufficient history as a publicly traded company, management’s estimate of expected volatility is based on the average volatilities of seven public companies with similar attributes to the Company.  The risk free rate is based on the Bank of England’s estimates of gilt yield curve as of the respective grant dates.

 

At June 30, 2016, there were 3,074,600 share options granted to nonemployees outstanding.  These share options are measured at the current fair values at each reporting date until the share options have vested and recognized in the consolidated statement of operation over the requisite service period.  The total share based payment expense relating to these options was a charge of $274,000 and $1,707,000 in the three months ended June 30, 2016 and 2015, respectively and a benefit of $108,000 and a charge of $2,506,000 in the six months ended June 30, 2016 and 2015, respectively.