11.

Share-Based Compensation

2018 and 2016 Equity Incentive Plans

The Company’s 2018 Incentive Award Plan and 2016 Equity Incentive Plan (the “Plans”), were adopted by the Company’s board of directors and shareholders. Under the Plans, the Company has granted share options to selected officers, employees and non-employee consultants. The Company’s board of directors administer the Plans. Options granted under the Plans have a maximum contractual term of ten years. Options granted generally vest 25% on the first anniversary date of grant and the balance ratably over the next 36 months. Options granted to directors generally vest on the first anniversary date of grant. Upon the adoption of the 2018 Incentive Award Plan, the Company ceased issuing awards under the 2016 Equity Incentive Plan.

A summary of the Company’s share option activity related to employees, non-employee members of the board of directors and non-employee consultants as of and for the years ended December 31, 2018 and 2017 is as follows:

STOCK OPTION TABLE


	Number of Options			Weighted- Average Exercise Price			Aggregate Instrinsic Value
Outstanding at December 31, 2016		333,660		$	7.72
Granted		611,933			3.73
Exercised		(1,288	)		(7.57	)
Expired		—			—
Forfeited		(5,668	)		(7.72	)

Outstanding at December 31, 2017		938,637		$	5.12
Granted		2,334,285			8.63
Exercised		—			—
Expired		—			—
Forfeited		(10,557	)		(5.51	)

Outstanding at December 31, 2018		3,262,365		$	7.64		$	6,903,313

Weighted average remaining contractual life of options outstanding as of December 31, 2017 (yrs)		9.09

Weighted average remaining contractual life of options outstanding as of December 31, 2018 (yrs)		9.24

Options exercisable at December 31, 2017		186,394		$	7.72

Options exercisable at December 31, 2018		535,241		$	5.79

Weighted average remaining contractual life of options exercisable as of December 31, 2017 (yrs)		8.21

Weighted average remaining contractual life of options exercisable as of December 31, 2018 (yrs)		7.88

The total fair value of options vested during the years ended December 31, 2018 and 2017 was $1,387,607 and $898,699, respectively.

During the years ended December 31, 2018 and 2017, the Company granted 2,334,285 and 611,933 share options, respectively. The grant date fair values of the stock options granted were estimated using the Black-Scholes option valuation model with the following ranges of assumptions (see Note 2):


	2018	2017
Risk-free interest rate	2.32% - 2.98%	2.28% - 2.51%
Expected volatility	90%	80%
Expected dividend yield	0%	0%
Expected life (in years)	5.5 - 10.0	5.5 - 10.0

As of December 31, 2018 and 2017, the total compensation expense relating to unvested options granted that had not yet been recognized was $17,415,098 and $987,413, respectively which is expected to be realized over a period of 4.0 and 3.42 years, respectively. The Company will issue shares upon exercise of options from Ordinary Shares reserved.

The weighted average grant date fair value of options granted during the years ended December 31, 2018 and 2017 was $6.53 and $3.10, respectively.

Restricted Ordinary Shares

In 2015, in connection with certain service and consulting agreements, certain employees and a consultant were awarded an aggregate of 867,935 restricted Ordinary Shares of the Company. Such shares were subject to forfeiture over a three-year service period. The shares granted to the consultant and employees were valued at $7.72 and $7.76 per share, respectively, and were included in loss from operations over the requisite service period. As of December 31, 2018, all such shares are no longer subject to forfeiture as the three-year service period has been completed.

On June 7, 2018, 1,306,348 restricted Ordinary Shares, which represented 5% of the fully-diluted outstanding shares of the Company as of such date, were issued to certain members of senior management in accordance with their employment agreements. One-third of such shares vested immediately, with the balance vesting quarterly over the next eight quarters beginning three months after the effectiveness of the Company’s registration statement on Form S-1 filed with the SEC on June 7, 2018 (the “Registration Statement”). The shares were valued at $15.00 per share and the related share-based compensation expense, which is recognized over the requisite service period, is included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. Additionally, under the terms of the employment agreements, the Company was required to pay the income taxes incurred by the grantees in connection with the grant of those restricted shares. Total compensation expense in connection with the issuance of those restricted Ordinary Shares, in the amount of $20,141,876, of which $10,156,868 was share-based, was recorded as general and administrative expense during the year ended December 31, 2018 (See Note 16).

A summary of the restricted Ordinary Shares is as follows:


	Ordinary Shares			$ Value
Non-vested at December 31, 2016		386,608		$	3,020,191
Vesting during 2017		(280,695	)		(2,154,330	)

Non-vested at December 31, 2017		105,913			865,861
Issued during 2018		1,306,348			19,595,220
Vesting during 2018		(759,087	)		(10,663,471	)

Non-vested at December 31, 2018		653,174		$	9,797,610

Ordinary Shares

On March 1, 2018, a funding milestone was met under the employment agreements for certain members of senior management. Accordingly, the employees were issued an aggregate of 550,162 fully vested Ordinary Shares, which represented 3% of the fully-diluted outstanding shares of the Company as of such date. The shares were recorded as share-based compensation in the amount of $3,096,104. Additionally, under the terms of the employment agreements, the Company was required to pay the income taxes incurred by the grantees in connection with the grant of those shares. Total compensation expense in connection with the issuance of those Ordinary Shares, in the amount of $6,456,215, of which $3,096,104 was share-based, was recorded as general and administrative expense during the year ended December 31, 2018.

During the years ended December 31, 2018 and 2017 the Company recognized total share-based compensation expense in the accompanying consolidated statements of operations and comprehensive loss as follows:


	2018		2017
Research and development	$	3,372,054	$	2,374,899
General and administrative		14,511,500		584,832

Total share based compensation	$	17,883,554	$	2,959,731

The Company does not expect to realize any tax benefits from its share option activity or the recognition of share-based compensation expense because the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations or cash flows from financing activities for the years ended December 31, 2018 and 2017.