5. Stockholders’ equity

(a) Share capital

Aquinox USA is authorized to issue two classes of stock, common and preferred. The total number of shares Aquinox USA is authorized to issue is 55,000,000 shares, comprised of 50,000,000 common stock and 5,000,000 preferred stock both with a par value of $0.000001 per share. As of March 31, 2018, the total number of shares of common stock issued and outstanding was 23,492,161 (December 31, 2017 – 23,472,430). As of March 31, 2018 and December 31, 2017, no shares of preferred stock were issued or outstanding.

(b) Stock option plan

On January 27, 2014, the stockholders of Aquinox USA approved a 2014 Equity Incentive Plan (“2014 Plan”). The 2014 Plan became effective on March 6, 2014. The 2014 Plan is the successor to and continuation of the Joint Canadian Stock Option Plan (the “2006 Plan”). No further grants will be made under the 2006 Plan. The 2014 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity awards to employees, directors, and consultants.

As at March 31, 2018, the maximum number of shares of common stock that may be issued under the 2014 Plan was 3,786,175 shares. Additionally, the number of shares of common stock reserved for issuance under the 2014 Plan will automatically increase on January 1 of each year for a period of up to 10 years, beginning on January 1, 2015 and ending on and including January 1, 2024, by 4% of the total number of shares of capital outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the board of directors.

Stock option transactions and the number of stock options outstanding are summarized below:


	NUMBER OF SHARES			WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (IN YEARS)		AGGREGATE INTRINSIC VALUE (IN THOUSANDS)
Outstanding at December 31, 2017		2,069,167		$	12.18		7.76	$	3,187
Options granted		787,490			16.55
Options exercised		(19,731	)		10.30
Options forfeited		(60,849	)		13.42

Outstanding at March 31, 2018		2,776,077		$	13.41		8.19	$	5,876

Exercisable as of March 31, 2018		1,115,975		$	10.67		6.63	$	4,321

During the three months ended March 31, 2018, the Company granted 787,490 stock options to employees. The stock options granted to employees during the three months ended March 31, 2018 have an exercise price per share of $16.55 and vest 25% one year after the beginning of the vesting period and thereafter ratably each month over the following thirty-six months. All stock options under the 2014 Plan are subject to a 10-year expiration period.

During the three months ended March 31, 2018, 19,731 shares of common stock were issued upon exercise of options with an aggregate intrinsic value of $0.1 million.

(c) Stock-based compensation

The fair value of stock options granted is estimated using the Black-Scholes option pricing model with the following weighted average assumptions:


	THREE MONTHS ENDED MARCH 31,
	2018			2017
Expected volatility		75	%		91	%
Expected dividends		0	%		0	%
Expected terms (years)		6.00			6.00
Risk free rate		2.72	%		1.90	%
Weighted average grant-date fair value of stock options	$	11.11		$	13.02

The Company amortizes the fair value of the stock options on a straight-line basis over the applicable requisite service periods of the awards, which is generally the vesting period. Stock-based compensation expense charged to operating expenses was $1.3 million and $0.6 million for the three months ended March 31, 2018 and March 31, 2017, respectively. Total unrecognized compensation cost for all stock-based compensation plans was $17.0 million and $12.8 million as of March 31, 2018 and March 31, 2017, respectively, which is expected to be recognized over a weighted-average period of 3.31 years (March 31, 2017 – 3.34 years)