| Share-Based Compensation | Note 20. Share-Based Compensation The amounts of share-based compensation expenses included in applicable costs of revenues and expense categories and related tax effects are summarized as follows: Year ended December 31, 2020 2021 2022 (in thousands) Cost of revenues $ 87 682 481 Research and development 4,467 17,662 15,345 General and administrative 368 2,367 2,193 Sales and marketing 603 3,163 2,612 Total compensation $ 5,525 23,874 20,631 Income tax benefit $ 1,176 4,896 4,201 (a) Long-term Incentive Plan (i) Restricted share Units (RSUs) On September 7, 2011, the Company’s shareholders approved a long-term incentive plan. The amended and restated plan was amended and restated by extending its duration to September 6, 2025, which was approved by the Company’s shareholders at the annual general meeting held on August 16, 2022. The plan permits the grants of options or RSUs to the Company’s employees, directors and service providers where each unit of RSU represents two ordinary shares of the Company. On September 29, 2017, the Company’s compensation committee made grants of 580,235 RSUs to the Company’s employees. The vesting schedule for the RSUs is as follows: 96.91% of the RSUs grant vested immediately on the grant date which was settled by cash amounting to $6,147 thousand, a subsequent 1.03% will vest On September 26, 2018, the Company’s compensation committee made grants of 676,273 RSUs to the Company’s employees. The vesting schedule for the RSUs is as follows: 97.15% of the RSUs grant vested immediately on the grant date which was settled by cash amounting to $3,778 thousand, a subsequent 0.95% will vest On September 28, 2020, the Company’s compensation committee made grants of 1,402,714 RSUs to the Company’s employees. The vesting schedule for the RSUs is as follows: 98.68% of the RSUs grant vested immediately on the grant date which was settled by cash amounting to $4,762 thousand, a subsequent 0.44% will vest On September 28, 2021, the Company’s compensation committee made grants of 2,604,545 RSUs to the Company’s employees. The vesting schedule for the RSUs is as follows: 85.63% of the RSUs grant vested immediately on the grant date which was settled by cash amounting to $23,174 thousand, a subsequent 4.79% will vest On September 28, 2022, the Company's compensation committee made grants of 3,987,509 RSUs to the Company's employees. The vesting schedule for the RSUs is as follows: 86.41% of the RSUs grant vested immediately on the grant date which was settled by cash amounting to $17,535 thousand, a subsequent 4.53% will vest On November 9, 2022, the Company's compensation committee made the unvested RSUs generally include forfeitable dividend-equivalent rights, which entitle holders of RSUs to the same dividend value per share as holders of common stock. The dividend-equivalent rights are subject to the same vesting and other terms and conditions as the underlying RSUs. The amount of compensation expense from the long-term incentive plan was determined based on the estimated fair value and the market price of ADS (one ADS represents two ordinary shares) underlying the RSUs granted on the date of grant, which were $10.93 per ADS, $5.76 per ADS, $3.44 per ADS, $10.39 per ADS and $5.09 per ADS on September 29, 2017, September 26, 2018, September 28, 2020, September 28, 2021 and September 28, 2022, respectively. RSUs activity under the long-term incentive plan during the periods indicated is as follows: Number of Weighted Underlying Average Grant Shares for RSUs Date Fair Value Balance at January 1, 2020 18,493 $ 7.34 Granted 1,402,714 3.44 Vested (1,392,355) 3.47 Forfeited (5,963) 6.57 Balance at December 31, 2020 22,889 3.88 Granted 2,604,545 10.39 Vested (2,237,499) 10.37 Forfeited (3,415) 4.38 Balance at December 31, 2021 386,520 10.17 Granted 3,987,509 5.09 Vested (3,563,177) 5.25 Forfeited (18,643) 10.15 Balance at December 31, 2022 792,209 6.71 As of December 31, 2022, the total compensation cost related to the unvested RSUs not yet recognized was $3,506 thousand. The weighted-average period over which it is expected to be recognized is 2.43 years. In 2020, 2021 and 2022, the Company settled RSUs release with shares buyback of 16,302 shares, 14,264 shares and 235,910 shares, respectively. The allocation of compensation expenses and related tax effects from the RSUs granted to employees under the long-term incentive plan are summarized as follows: Year ended December 31, 2020 2021 2022 (in thousands) Cost of revenues $ 70 676 472 Research and development 3,924 17,592 15,097 General and administrative 319 2,343 1,934 Sales and marketing 520 3,149 2,497 Total compensation $ 4,833 23,760 20,000 Income tax benefit $ 1,044 4,896 4,201 (ii) Employee stock options On September 23, 2019, the Company's compensation committee approved a plan to grant stock options, the 2019 plan, to certain employees. The 2019 plan authorizes grants to purchase up to 3,000,000 units ADS, representing 6,000,000 shares of the Company's ordinary share. 2,226,690 units of stock option to purchase 2,226,690 units ADS were grant to certain employees at an exercise price of $2.27 on September 30, 2019. The 2019 plan has two years contractual life and one year vesting period. Based on the vesting schedule, 50% of the options vest half year after the date of grant and 50% of the options vest one year after the date of grant. The Company recognized compensation expenses of $570 thousand in 2020. Such compensation expense was recorded as cost of revenues, sales and marketing expenses, general and administrative expenses and research and development expenses in the consolidated statements of profit or loss. Income tax benefits of $103 thousand are realized in the consolidated statements of profit or loss for employee stock options for the year ended December 31, 2020. During 2020, 114,500 units, 39,000 units and 10,000 units of stock option to purchase 114,500 units, 39,000 units and 10,000 units ADS were grant to certain employees at an exercise price of $2.74, $3.9 and $3.35 on March 31, 2020, August 11, 2020 and September 25, 2020, respectively. The options granted in 2020 were fully vested on October 1, 2020. The Company recognized compensation expenses of $122 thousand and recorded income tax benefits of $29 thousand for employee stock options in the consolidated statements of profit or loss for the year ended December 31, 2020. The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table. The Company uses the simplified method to estimate the expected term of the options as it does not have sufficient historical share option exercise experience and the exercise data relating to employees of other companies is not easily obtainable. The risk-free rates for the expected term of the options are based on the interest rates of 1 years and 1.5 years U.S. Treasury yield at the time of grant. 2019 plan Valuation assumptions: Expected dividend yield 3.5 % Expected volatility 51.96%-57.79 % Expected term (years) 1-1.5 Risk-free interest rate 1.69%-1.75 % Stock option activity during the periods indicated is as follows: Weighted Weighted average average remaining Number exercise contractual of Units price term Balance at January 1, 2020 2,226,690 $ 2.27 1.5 Granted 163,500 3.05 0.88 Exercised (1,574,869) 2.32 Forfeited (236,853) 2.30 Balance at December 31, 2020 578,468 2.36 0.54 Exercised (524,387) 2.37 Expired (54,081) 2.27 Balance at December 31, 2021 - - - Exercisable at December 31, 2021 - - - (b) Employee stock options (i) On March 19, 2021, board of directors of CM Visual Technology Corp. approved a plan to grant stock options, the 2021 plan, to certain employees. This plan authorizes grants to purchase up to 3,000,000 shares of CM Visual Technology Corp.’ authorized but unissued ordinary shares. The exercise price was NT $10 (US$ 0.36 ). The 2021 plan has four years contractual life and three years vesting period. Based on the vesting schedule, 50% of the options vest one and half years after the date of grant and 50% of the options vest three years after the date of grant. The Company recognized compensation expenses of $71 thousand and $76 thousand in 2021 and 2022, respectively. Such compensation expense was recorded as cost of revenues, sales and marketing expenses, general and administrative expense and research and development expenses in the consolidated statements of income. There was no income tax benefit realized in the consolidated statements of income for employee stock options for the years ended December 31, 2021 and 2022, respectively. The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table. CM Visual Technology Corp. uses the simplified method to estimate the expected term of the options as it does not have sufficient historical share option exercise experience and the exercise data relating to employees of other companies is not easily obtainable. Since CM Visual Technology Corp.’ shares are not publicly traded and its shares are rarely traded privately, expected volatility is computed based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options is based on the interest rates of 2 years and 5 years ROC central government bond at the time of grant. 2021 plan Valuation assumptions: Expected dividend yield 0% Expected volatility 43.82% Expected term (years) 3.125 Risk-free interest rate 0.223% Stock option activity during the periods indicated is as follows: Weighted Weighted average average remaining Number exercise contractual of shares price term Balance at January 1, 2021 - $ - Granted 2,791,000 0.36 Exercised - - Forfeited (120,000) 0.36 Balance at December 31, 2021 2,671,000 0.36 3.5 Forfeited (380,000) 0.36 Balance at December 31, 2022 2,291,000 0.36 2.5 Exercisable at December 31, 2022 - - - (ii) On June 28, 2021, board of directors of Liqxtal Technology Inc. approved a plan to grant stock options, the 2021 plan, to certain employees. This plan authorizes grants to purchase up to 1,000,000 shares of Liqxtal Technology Inc.’ authorized but unissued ordinary shares. The exercise price was NT$ 18 (US$ 0.65 ). The 2021 plan has one and half years contractual life and one year vesting period. Based on the vesting schedule, 100% of the options vest one year after the date of grant. The Company recognized compensation expenses of $43 thousand and $33 thousand in 2021 and 2022, respectively. Such compensation expense was recorded as sales and marketing expenses, general and administrative expense and research and development expenses in the consolidated statements of income. There was no income tax benefit realized in the consolidated statements of income for employee stock options for the years ended December 31, 2021 and 2022, respectively. The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table. Liqxtal Technology Inc. uses the simplified method to estimate the expected term of the options as it does not have sufficient historical share option exercise experience and the exercise data relating to employees of other companies is not easily obtainable. Since Liqxtal Technology Inc.’ shares are not publicly traded and its shares are rarely traded privately, expected volatility is computed based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options is based on the interest rates of 2 years ROC central government bond at the time of grant. 2021 plan Valuation assumptions: Expected dividend yield 0% Expected volatility 30.06% Expected term (years) 1.25 Risk-free interest rate 0.107% Stock option activity during the periods indicated is as follows: Weighted Weighted average average remaining Number exercise contractual of shares price term Balance at January 1, 2021 - $ - Granted 1,000,000 0.65 Exercised - - Forfeited (90,000) 0.65 Balance at December 31, 2021 910,000 0.65 1.0 Exercised (840,000) 0.65 Forfeited (70,000) 0.65 Balance at December 31, 2022 - - - Exercisable at December 31, 2022 - - - (iii) All Options granted under this 2022 Option Plan shall vest over a 4-year period, with 25% thereof vesting on the end of a 12-month period following the date of grant, and the remaining 75% thereof vesting in 12 equal portions at the end of each 3-month period thereafter. The Company recognized compensation expenses of $522 thousand in 2022, including 2022 Option Plan cancelled and recognized compensation expenses of $219 thousand. Such compensation expense was recorded as sales and marketing expenses, general and administrative expense and research and development expenses in the consolidated statements of income. There was no income tax benefit realized in the consolidated statements of income for employee stock options for the years ended December 31, 2022. The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table. EMZA uses the simplified method to estimate the expected term of the options as it does not have sufficient historical share option exercise experience and the exercise data relating to employees of other companies is not easily obtainable. Since EMZA's shares are not publicly traded and its shares are rarely traded privately, expected volatility is computed based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options is based on the interest rates of 5 years Israel non-indexed government bond at the time of grant. 2022 Option Plan Valuation assumptions: Expected dividend yield 0 % Expected volatility 54.05 % Expected term (years) 6.11 Risk-free interest rate 0.65 % Stock option activity during the periods indicated is as follows: Weighted Weighted average average remaining Number exercise contractual of shares price term Balance at January 1, 2022 — $ — Granted 150,940 20.49 6.11 Exercised — — Forfeited (1,797) 20.49 Cancelled (149,143) 20.49 Balance at December 31, 2022 — — — Exercisable at December 31, 2022 — — — |
