4. Share-Based Compensation

Equity Incentive Plans

The Company’s 2018 Incentive Award Plan and 2016 Equity Incentive Plan (collectively, the “Plans”) were adopted by the Company’s board of directors and shareholders. Under the Plans, the Company has granted share options and restricted share units (“RSUs”) to selected officers, employees and non-employee consultants. The Company’s board of directors or a committee thereof administers the Plans. Upon the adoption of the 2018 Incentive Award Plan, the Company ceased issuing awards under the 2016 Equity Incentive Plan.

Options

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 year-ended December 31, 2019 and the three-month period ended March 31, 2020 is as follows:


					Weighted-
			Weighted-		Average
			Average		Remaining
		Number of	Exercise		Contractual
		Options	Price		Life (years)
Outstanding at December 31, 2018		3,254,365	$	7.64
Granted		551,000		17.94
Exercised		(134,533)		4.14
Expired		—		—
Forfeited		(25,472)		9.37
Outstanding at December 31, 2019		3,645,360		9.31	8.45	years
Granted		1,106,500		20.24
Exercised		(26,010)		6.73
Expired		—		—
Forfeited		(50,000)		17.38
Outstanding at March 31, 2020		4,675,850	$	11.82	8.38	years
Options exercisable at March 31, 2020		1,636,949	$	7.65	7.51	years
Aggregate intrinsic value of options outstanding as of March 31, 2020	$	17,470,736
Aggregate intrinsic value of options exercisable as of March 31, 2020	$	9,706,669

Options granted under the Plans have a maximum contractual term of ten years. Options granted generally vest 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months. Options granted to directors when they join the board generally vest in 36 equal monthly installments following the date of grant, and annual options granted to directors generally vest on the earlier of the first anniversary of the date of grant or the day before the Company’s annual meeting of shareholders.

The total fair value of options vested during the three-month periods ended March 31, 2020 and 2019 was $1,650,925 and $1,390,942, respectively.

The weighted-average grant date fair value of options granted during the three-month periods ended March 31, 2020 and 2019 was $15.24 and $9.64, respectively.

The grant date fair values of the share options granted were estimated using the Black-Scholes option valuation model with the following ranges of assumptions:


	2020	2019
Risk-free interest rate	0.72 - 2.56%	1.76 - 2.55%
Expected volatility	90%	90%
Expected dividend yield	0%	0%
Expected life (in years)	6.1	5.5 - 6.1

As of March 31, 2020, the total compensation expense relating to unvested options granted that had not yet been recognized was $29,244,344, which is expected to be realized over a period of 4.0 years. The Company will issue shares upon exercise of options from ordinary shares reserved under the Plans.

Restricted Share Units

On January 8, 2020 and March 6, 2020, the Company granted 505,000 and 40,000 RSUs to certain members of senior management and a consultant, respectively. The RSUs were valued at $20.30 and $16.45 per share, respectively, and the related share-based compensation expense, which is recognized ratably over the requisite service period, is included in general and administrative and research and development expenses in the condensed consolidated statements of operations and comprehensive loss.

These RSUs vest 50% on the second anniversary of the date of grant and 25% on each of the third and fourth anniversaries of the date of grant. Total share-based compensation expense in connection with the RSUs, in the amount of $598,295, was recorded as general and administrative and research and development expense during the three-month period ended March 31, 2020.

As of March 31, 2020, the total compensation expense relating to unvested RSUs granted that had not yet been recognized was $10,311,205, which is expected to be realized over a period of 4.0 years.

Restricted Ordinary Shares

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 Securities and Exchange Commission (“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 condensed 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 $3,576,526 and $3,772,650, of which $1,632,930 and $1,632,930 was share-based, was recorded as general and administrative expense during the three-month periods ended March 31, 2020 and 2019, respectively.

A summary of the restricted ordinary shares is as follows:


	Ordinary Shares	$ Value
Non-vested at December 31, 2019	217,726	$	3,265,890
Vested during 2020	(108,862)		(1,632,930)
Non-vested at March 31, 2020	108,864	$	1,632,960

During the three-month periods ended March 31, 2020 and 2019 the Company recognized total share-based compensation expense in the accompanying condensed consolidated statements of operations and comprehensive loss as follows:


	Three-month periods ended March 31,
	2020		2019
Research and development	$	1,417,791	$	834,314
General and administrative		4,265,090		2,100,677
Total share-based compensation	$	5,682,881	$	2,934,991

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 three-month periods ended March 31, 2020 and 2019.