| SHARE-BASED COMPENSATION | 13. SHARE-BASED COMPENSATION (a) 2017 Employee Stock Option Plan (“2017 Plan”) In October 2017, the Company adopted the 2017 Plan. Under the 2017 Plan, a maximum aggregate number of 13,376,865 shares that may be issued pursuant to all awards granted was approved. Stock options granted to an employee under the 2017 Plan will be exercisable upon the Company completes a listing and the employee renders service to the Company in accordance with a stipulated service schedule starting from the employee's date of employment. Employees are generally subject to a three-year service schedule, under which an employee earns an entitlement to vest in 50% of the option grants on the second anniversary of the grant date, a vesting of the remaining 50% on the third anniversary of the applicable grant date. The stock option under 2017 Plan, to the extent then vested, shall become exercisable only upon the earlier of (i) a listing, and (ii) occurrence of a change in control. On December 25, 2019, the Second Amended and Restated 2017 Plan was approved by the shareholders and board of directors of the Company, pursuant to which, in connection with the Company’s IPO, the maximum aggregate number of shares that may be granted pursuant to all awards under 2017 Plan shall be adjusted in accordance with a formula pre-approved by the shareholders. In connection with above amendments to 2017 Plan, each of the Company’s founders, namely Zheru Zhang, Lili Qian, Zhengyi Wang and Lei Fang, is willing to irrevocably surrender by him or her, for no consideration, a portion of the unvested options granted to him or her, which, if vested, would entitle him or her to acquire up to 130,000 ordinary shares of the Company, par value US$0.0001 per share, at an exercise price of US$1.0, respectively, under the Second Amended and Restated 2017 Plan (in respect of each individual, the “Founder’s Surrendered Options”). On December 25, 2019, the board of directors of the Company approved that the Company accepts all Founder’s Surrendered Options from each of the founders, Zheru Zhang, Lili Qian, Zhengyi Wang and Lei Fang, for no consideration, with effect immediately prior to the completion of the IPO and such surrendered options be cancelled with effect immediately prior to the completion of the IPO. Prior to the Company completes a listing, all stock options granted to an employee shall be forfeited at the time the employee terminates his employment with the Group. After the Company completes a listing, vested options not exercised by an employee shall be exercised until later of: (i) 90 days after the date when the options become exercisable, or (ii) 30 days after the date of cessation of employment or directorship, or such longer period as the Board of Directors may otherwise determine. The Group did not grant any stock options to employees for the year ended December 31, 2021 and six months ended June 30, 2022. 2,569,017 and 2,098,008 stock options were exercisable as of December 31, 2021 and June 30, 2022, respectively. The following table sets forth the stock options activities of 2017 Plan for the six months ended June 30 2022 presented: Weighted Weighted average average Aggregate exercise remaining intrinsic Number of price contractual value shares US$ term US$ Outstanding as of December 31, 2021 2,569,017 1.00 5.79 50,361 Exercised (471,009) 1.00 — — Outstanding as of June 30, 2022 2,098,008 1.00 5.28 8,209 Exercisable as of June 30, 2022 2,098,008 1.00 5.28 8,209 All the stock options were vested as of December 31, 2021. 13. SHARE-BASED COMPENSATION (CONTINUED) (a) 2017 Employee Stock Option Plan (“2017 Plan”) (continued) Share-based compensation expenses related to the stock options of 2017 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 2,448 — — Research and development expenses (292) — — Equity in loss of an affiliate 519 — — 2,675 — — (b) 2018 Employee Stock Option Plan (“2018 Plan”) On February 22, 2019, the Group adopted the 2018 Plan, which was subsequently amended on July 22, 2019. Under the amended and restated 2018 Plan, the maximum aggregate number of ordinary shares which may be issued pursuant to all awards is 14,005,745, and if the Group successfully lists on an internationally recognized securities exchange for a Qualified Public Offering by December 31, 2019, the maximum aggregate number of ordinary shares which may be issued shall be 15,452,620. On December 25, 2019, the Second Amended and Restated 2018 Plan were approved by the shareholders and board of directors of the Company, pursuant to which, in connection with the Company’s IPO, the maximum aggregate number of shares that may be granted pursuant to all awards under 2018 Plan shall be adjusted in accordance with a formula pre-approved by the shareholders. In connection with above amendments to 2018 Plan, the director of the Company, Dr. Jingwu Zhang Zang is willing to irrevocably surrender by him, for no consideration, of the right to acquire a certain amount of ordinary shares of the Company, par value US$0.0001 per share, at an exercise price of US$1.0 pursuant to the options granted to him under the Second Amended and Restated 2018 Plan (the “Dr. Zang’s Surrendered Options”). On December 25, 2019, the board of directors of the Company approved that the Company accepts the irrevocable surrender of Dr. Zang’s Surrendered Options for no consideration, with effect immediately prior to the completion of the IPO and such surrendered options be cancelled with effect immediately prior to the completion of the IPO. Stock options granted to an employee under the 2018 Plan will be generally exercisable when the Company completes a listing and the employee renders service to the Company in accordance with a stipulated service schedule starting from the employee’s date of employment. The vesting schedule shall generally be a two-year vesting schedule consisting of a cliff vesting 50% on the first anniversary of the applicable vesting commencement date, and a vesting of the remaining 50% on the second anniversary of the applicable vesting commencement date. If a listing occurs at anytime prior to any option granted under the 2018 Plan becoming full vested, and to the extent such option has been granted and outstanding, any such option shall vest in full with immediate effect upon the listing. Except as otherwise approved by the board of directors, vested portion of option shall become exercisable upon the earlier of six months after a listing or the occurrence of a change in control; provided, however that in each case, no option of an employee shall become exercisable until the third anniversary of such employee’s employment commencement date. The Group did not grant any stock options to employees for the year ended December 31, 2021 and the six months ended June 30, 2022. 7,553,236 and 1,825,101 stock options were exercisable as of December 31, 2021 and June 30, 2022, respectively. 13. SHARE-BASED COMPENSATION (CONTINUED) (b) 2018 Employee Stock Option Plan (“2018 Plan”) (continued) The following table sets forth the stock options activities of 2018 Plan for the six months ended June 30, 2022: Weighted Weighted average average Aggregate exercise remaining intrinsic Number of price contractual value shares US$ term US$ Outstanding as of December 31, 2021 7,553,236 1.00 7.15 148,076 Exercised (5,728,135) 1.00 — — Outstanding as of June 30, 2022 1,825,101 1.00 6.65 7,142 Exercisable as of June 30, 2022 1,825,101 1.00 6.65 7,142 All the stock options were vested as of December 31, 2021. Share-based compensation expenses related to the stock options of 2018 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 3,906 — — Research and development expenses 55 — — Equity in loss of an affiliate 258 — — 4,219 — — (c) 2019 Share Incentive Plan (“2019 Plan”) On October 29, 2019, the Group adopted 2019 Share Incentive Plan (the “2019 Plan”), which will become effective immediately prior to the completion of the Company’s initial public offering. Under the 2019 Plan, the maximum aggregate number of ordinary shares available for issuance shall initially be 100,000. The options shall vest when the Group completes a listing and the employee renders service to the Group in accordance with a stipulated service schedule starting from the employee’s date of employment. Stock options granted to 3 independent directors under the 2019 Plan will be generally exercisable under the following terms:(a) a cliff vesting of 1/3 of the option on the first anniversary of the vesting commencement date (January 17, 2020); (b) a cliff vesting of 1/3 of the option on the second anniversary of the vesting commencement date (January 17, 2020); (c) a vesting of the remaining 1/3 of the option on the third anniversary of the vesting commencement date. In the last year of the grantee's service, the options shall vest on a prorated basis to reflect the portion of the year during which the grantee provided services to the Group. For the year ended December 31, 2020, the Group granted 72,000 stock options to 3 independent directors (all with an exercise price of US$6.09). 24,000 and 48,000 options were exercisable as of December 31, 2021 and June 30, 2022, respectively. 13. SHARE-BASED COMPENSATION (CONTINUED) (c) 2019 Share Incentive Plan (“2019 Plan”) (continued) The following table sets forth the stock options activities of 2019 Plan for the six months ended June 30, 2022 presented: Weighted Weighted average average Aggregate exercise remaining intrinsic Number of price contractual value shares US$ term US$ Outstanding as of December 31, 2021 72,000 6.09 8.05 1,045 Granted — — — — Outstanding as of June 30, 2022 72,000 6.09 7.56 — Exercisable as of June 30, 2022 48,000 6.09 7.56 — A summary of non-vested stock options activity for the six months ended June 30, 2022 is presented below: Weighted average grant-date fair value Number of shares US$ Non-vested at December 31, 2021 48,000 4.50 Vested (24,000) 4.50 Non-vested at June 30, 2022 24,000 4.50 Share-based compensation expenses related to the stock options of 2019 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 374 147 23 Research and development expenses — — — Equity in loss of an affiliate — — — 374 147 23 (d) 2020 Plan On July 15, 2020, the Group adopted 2020 Share Incentive Plan (“2020 Plan”). Under the 2020 Plan, the maximum aggregate number of shares authorized to be issued is 10,760,513 ordinary shares, provided that the maximum number of shares to be issued in the form of restricted share units shall not exceed 7,686,081 ordinary shares. Stock options granted to employees under the 2020 Plan are graded vesting in four years with 25% vesting each year. For the year ended December 31, 2021 and six months ended June 30, 2022, the Group granted 133,913 and 2,026,300 stock options to its employees, respectively. 192,340 options and 387,309 options were exercisable as of December 31, 2021 and June 30, 2022, respectively. 13. SHARE-BASED COMPENSATION (CONTINUED) (d) 2020 Plan (continued) The following table sets forth the stock options activities of 2020 Plan for the six months ended June 30, 2022: Weighted Weighted average average Aggregate exercise remaining intrinsic Number of price contractual value shares US$ term US$ Outstanding as of December 31, 2021 997,773 7.61 8.68 12,967 Granted 2,026,300 9.20 — — Exercised (14,645) 5.91 — — Forfeited (85,082) 6.43 — — Expired (35,691) 6.16 — — Outstanding as of June 30, 2022 2,888,655 8.78 9.25 — Exercisable as of June 30, 2022 387,309 6.98 8.18 — A summary of non-vested stock option activities for the six months ended June 30, 2022 is presented below: Weighted average grant-date fair value Number of shares US$ Non-vested at December 31, 2021 805,433 9.44 Granted 2,026,300 4.45 Vested (245,305) 9.40 Forfeited (85,082) 5.02 Non-vested at June 30, 2022 2,501,346 5.43 Stock options granted to the employees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following assumptions: Six Months Ended June 30, 2021 2022 Expected volatility 50.78%-51.84 % 53.66 % Risk-free interest rate (per annum) 1.32%-1.88 % 1.88 % Exercise multiple 2.20-2.80 2.20-2.80 Expected dividend yield — — Contractual term (in years) 10 10 The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication. Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend payments in the foreseeable future. Expected term is the contract life of the option. 13. SHARE-BASED COMPENSATION (CONTINUED) (d) 2020 Plan (Continued) Share-based compensation expenses related to the stock options of 2020 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 3,126 10,749 1,652 Research and development expenses 10,189 5,419 833 Equity in loss of an affiliate 2,123 1,098 169 15,438 17,266 2,654 Restricted share units granted to employees under the 2020 Plan will be exercisable under the following items: (a) (b) (c) Notwithstanding the foregoing, if the Group’s weighted average market value during the last 30 days prior to the initial vesting date reaches US$2 billion or above, and to the extent such restricted share units have been granted and outstanding, any such restricted share unit (except for those are based on time attribution) shall vest in full with immediate effect, inure to the benefit of the related grantees. For the year ended December 31, 2021 and the six months ended June 30, 2022, the Group granted 1,649,045 and 755,734 restricted share units to employees, respectively. 13. SHARE-BASED COMPENSATION (CONTINUED) (d) 2020 Plan (Continued) The following table sets forth the restricted share units of 2020 Plan for the six months ended June 30, 2022: Weighted Weighted average average Aggregate Number of exercise remaining intrinsic restricted price contractual value share units US$ term US$$'000 Outstanding as of December 31, 2021 1,481,791 — 8.95 30,531 Granted 755,734 — — — Vested (484,523) — — — Forfeited (192,848) — — — Outstanding as of June 30, 2022 1,560,154 — 9.00 7,665 A summary of non-vested restricted share units activities for the six months ended June 30, 2022 is presented below: Weighted average Number of restricted share grant-date fair value units US$ Non-vested at December 31, 2021 1,481,791 17.80 Granted 755,734 19.49 Vested (484,523) 9.20 Forfeited (192,848) 9.25 Non-vested at June 30, 2022 1,560,154 13.31 Share-based compensation expenses related to the aforementioned restricted share units of 2020 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 207,243 16,717 2,570 Research and development expenses 99,358 11,144 1,713 Equity in loss of an affiliate 8,715 828 127 315,316 28,689 4,410 Apart from the aforementioned restricted share units, up to 1,446,875 shares can be issued in the form of restricted share unit to eligible grantees that the board of the Group or a committee that board delegated its powers or authority determined appropriate with immediate effect of being fully vested, which are defined as special awards and are subject to terms and conditions under 2018 Plan. For the year ended December 31, 2020, the Group granted 1,328,120 such restricted share units to employees. All the restricted share units were vested as of December 31, 2021. Share-based compensation expenses related to these restricted share units are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$(Note 2.5) Administrative expenses 4,690 — — Research and development expenses 3,386 — — Equity in loss of an affiliate 723 — — 8,799 — — 13. SHARE-BASED COMPENSATION (CONTINUED) (e) 2021 Share Incentive Plan (“2021 Plan”) On May 28, 2021, the Group adopted 2021 Plan. Under the 2021 Plan, the maximum aggregate number of shares authorized to be issued is 12,023,618 ordinary shares, provided that the maximum number of shares to be issued in the form of restricted share units shall not exceed 6,011,809 ordinary shares. Stock options granted to employees under the 2021 Plan are graded vesting in four years with 25% vesting each year. For the year ended December 31, 2021 and the six months ended June 30, 2022, the Group granted 2,698,245 and 2,707,238 stock options to its employees, respectively. nil options and 565,580 were exercisable as of December 31, 2021 and June 30, 2022, respectively. The following table sets forth the stock options activities of 2021 Plan for the six months ended June 30, 2022: Weighted Weighted average average Aggregate exercise remaining intrinsic Number of price contractual value shares US$ term US$ Outstanding as of December 31, 2021 2,444,440 26.44 9.57 — Granted 2,707,238 9.20 — — Forfeited (374,067) 22.15 — — Outstanding as of June 30, 2022 4,777,611 17.23 9.40 — Exercisable as of June 30, 2022 565,580 26.46 9.08 — A summary of non-vested stock option activities for the six months ended June 30, 2022 is presented below: Weighted average grant-date fair value Number of shares US$ Non-vested at December 31, 2021 2,444,440 14.12 Granted 2,707,238 2.78 Vested (565,580) 14.18 Forfeited (374,067) 4.71 Non-vested at June 30, 2022 4,212,031 8.35 Stock options granted to the employees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following assumptions: Six Months Ended June 30, Six Months Ended June 30, 2021 2022 Expected volatility 51.77 % 53.66 % Risk-free interest rate (per annum) 1.68 % 1.88 % Exercise multiple 2.80 2.20-2.80 Expected dividend yield — — Contractual term (in years) 10 10 13. SHARE-BASED COMPENSATION (CONTINUED) (e) 2021 Share Incentive Plan (“2021 Plan”) (Continued) The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication. Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend payments in the foreseeable future. Expected term is the contract life of the option. Share-based compensation expenses related to the stock options of 2021 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$(Note 2.5) Administrative expenses 86 42,383 6,515 Research and development expenses — 24,422 3,754 86 66,805 10,269 Restricted share units granted to employees under the 2021 Plan will be exercisable under the following items: (a) (b) i. ii. In the event that any share issuance in connection with any share split, share dividend, reclassification or other similar event occurs, the target share price herein shall be adjusted accordingly with the proportion of additional share issuance. In the event that the average market value of NASDAQ Biotechnology Index falls by more than 20% from the adoption date of the 2021 Plan, it shall be deemed as a decline of the market, and the Group shall adjust the vesting schedule as appropriate. (c) i. ii. 13. SHARE-BASED COMPENSATION (CONTINUED) (e) 2021 Share Incentive Plan (“2021 Plan”) (Continued) As of December 31, 2021 it is probable that the 2/3 of the awarded restricted share units are fully vested because it is probable that the Group’s weighted average share price can reach the second share price level as approved by the Board during any consecutive 90 days within one year after the adoption date of 2021 Plan, and more than twelve of the fifteen performance conditions will be met on or before the first anniversary of the adoption date. The following table sets forth the restricted share units of 2021 Plan for the six months ended June 30, 2022: Weighted Weighted average average Aggregate Number of exercise remaining intrinsic restricted price contractual value share units US$ term US$ Outstanding as of December 31, 2021 1,656,253 — 9.57 34,126 Granted 821,215 — — — Vested (602,271) — — — Forfeited (192,126) — — — Outstanding as of June 30, 2022 1,683,071 — 9.35 8,269 A summary of non-vested restricted share units activities for the six months ended June 30, 2022 is presented below: Weighted average Number of restricted grant-date fair value share units US$ Non-vested at December 31, 2021 1,656,253 26.45 Granted 821,215 26.44 Vested (602,271) 9.18 Forfeited (192,126) 9.41 Non-vested at June 30, 2022 1,683,071 18.67 Share-based compensation expenses related to the restricted share units of 2021 Plan are included in: Six Months Ended June 30, 2021 2022 RMB RMB US$(Note 2.5) Administrative expenses 154 49,317 7,581 Research and development expenses — 36,643 5,632 154 85,960 13,213 (f) 2022 Share Incentive Plan (“2022 Plan”) On June 17, 2022, the Group adopted 2022 Plan. Under the 2022 Plan, the maximum aggregate number of shares authorized to be issued is 13,148,594 ordinary shares, provided that the maximum number of shares to be issued in the form of restricted share units shall not exceed 7,670,017 ordinary shares. As of June 30, 2022, no options or restricted share units were granted under 2022 Plan. 13. SHARE-BASED COMPENSATION (CONTINUED) (g) Establishment of Biomaster Trust Biomaster Trust was established under the trust deed dated October 23, 2019, between the Company and TMF Trust (HK) Limited, or TMF Trust, as the trustee of the Biomaster Trust. Through the Biomaster Trust, the Company’s ordinary shares and other rights and interests under awards granted pursuant to 2017 Plan and 2018 Plan may be provided to certain recipients of equity awards. Upon satisfaction of vesting conditions, TMF Trust will exercise the equity awards and transfer the relevant ordinary shares and other rights and interests under the equity awards to the relevant grant recipients with the consent of the advisory committee of Biomaster Trust. TMF Trust shall not exercise the voting rights attached to such ordinary shares unless otherwise directed by the advisory committee, whose members shall be appointed by I-Mab. The Company has the power to direct the relevant activities of Biomaster Trust and it has the ability to use its power over the Biomaster Trust to affect its exposure to returns. Therefore, the assets and liabilities of the Biomaster Trust are included in the Group’s consolidated balance sheets. Share-Based Compensation Expense The allocation of share-based compensation expense was as follows: Six Months Ended June 30, 2021 2022 RMB RMB US$ (Note 2.5) Administrative expenses 222,027 119,314 18,340 Research and development expenses 112,696 77,628 11,932 Equity in loss of an affiliate 12,338 1,925 296 347,061 198,867 30,568 |
