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 2,414,576 share options granted in the three months ended September 30, 2016.  No share options were granted in the three months ended September 30, 2015 and 17,758,373 and 11,069,577 share options granted in the nine months ended September 30, 2016 and 2015, respectively. The weighted average fair value of stock options granted was $0.74 in the three months ended September 30, 2016 and $0.74 and $0.94 in the nine months ended September 30, 2016 and 2015, respectively.

 

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 September 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 benefit of $24,000 and $450,000 in the three months ended September 30, 2016 and 2015, respectively, and a benefit of $139,000 and an expense of $2,056,000 in the nine months ended September 30, 2016 and 2015, respectively.