NOTE 10:—SHAREHOLDERS' EQUITY

a.Share capital is composed as follows:

	December 31, 2016				December 31, 2015
	Authorized		Issued and outstanding		Authorized		Issued and outstanding
Ordinary share of NIS 0.01 par value		50,000,000		20,139,826		50,000,000		13,585,810

Total		50,000,000		20,139,826		50,000,000		13,585,810

The Ordinary Shares entitle their holders to one vote per share on all matters to be voted on by the shareholders of the Company, to receive dividends according to Board of Directors' decision, to participate in the balance of the Company's assets remaining after liquidation, dissolution or winding up, ratably in proportion to the number of shares of Ordinary Shares held by them, to increase or decrease Ordinary Shares, any other preferences, voting powers, relative, participating, optional or other special rights and privileges right compulsorily granted by the law to the holders of Ordinary Shares.

b.On February 17, 2014 and April 9, 2014, the Company executed the first and second closings in total gross amount of $13,608 and $5,625 at a price per share of $8.49 for the issuance of 1,603,297 and 662,725 Series E Preferred Shares, respectively, and 240,491 warrants to Preferred E Shares with an exercise price of $0.001 per Preferred E Share, exercisable until the earliest of seven years after February 17, 2014, the consummation of an initial public offering or a merger and acquisition event. The issuance costs related to the above investment round amounted to $26.

The exercise price and the number of shares to be issued upon exercise of the warrants were subject to weighted average adjustments for dilution in accordance with ASC 815 and therefore classified as a liability and re-measured using the Monte Carlo Cliquent Model.

c.On January 24, 2015, the Company signed an addendum to the Series E Convertible Preferred Share purchase agreement to raise additional funds of $11,406, net of fees and expenses. Under the addendum, the Company issued 1,445,966 Series E Convertible Preferred Shares to its existing and new investors for a price of $8.49 per share.

d.On March 1, 2015, the Company effected a 7.75 for 1 forward split of its Ordinary Shares, by way of issuance and distribution of bonus shares without a change in nominal value of the Company's outstanding Ordinary Shares.

For accounting purposes, this transaction was recorded as a share split and accordingly, all Shares, warrants to purchase Convertible Preferred Shares, options to purchase Ordinary Shares and loss per share amounts have been adjusted to give retroactive effect to this Share Split for all periods presented in these consolidated financial statements. Any fractional shares resulting from the Share Split will be rounded up to the nearest whole share.

In addition, the Company's Board of Directors approved an increase the Company's authorized Shares from 5,000,000 to 50,000,000.

e.As described in Note 1c, on March 19, 2015, the Company completed its IPO by raising gross consideration of $40 million for issuance of 4,700,000 Ordinary Shares at a price of $8.50 per share. The issuance costs in respect of the IPO transaction amounted to $5.2 million.

f.On April 22, 2015, the Company's underwriters exercised their overallotment option pursuant to which they purchased 165,452 Ordinary Shares of the Company for $1,308 net of underwriters' fees and commissions.

g.On July 29, 2016, the Company entered into a subscription agreement with investors for a private placement of the Company's Ordinary Shares, pursuant to which the Company agreed to issue and sell the following securities to the investors for an aggregate price of up to approximately $32,000: (i) in the initial tranche, an aggregate of 6,554,016 Ordinary Shares of the Company, nominal value NIS 0.01 per share (the "Shares"), and warrants to purchase up to 6,554,016 additional Ordinary Shares of the Company, for $3.255 per unit (the "Warrants"), and (ii) in the second tranche, an aggregate of up to approximately $10,700 of Ordinary Shares of the Company at a purchase price equal to the higher of (x) $3.13 or (y) the average closing price of Ordinary Shares of the Company on NASDAQ over the 30 trading days immediately preceding the closing date of the second tranche (the "Private Placement") with no warrants. The second tranche will occur at the election of the Company following achievement by the Company of certain milestones related to its lead drug product candidate Trevyent. The first tranche of the Private Placement closed on August 4, 2016, pursuant to which the Company received gross proceeds of approximately $21,333. Two of the Company's board members, who are also shareholders in the Company, invested a total amount of $5,133. The related issuance costs in respect of the private placement were $1,748.

The warrants issued are exercisable immediately upon issuance and may be exercised at any time prior to August 2021 at an exercise price of $3.5995 per share (see also note 7).

The Company granted to the participants certain registration rights related to the Shares and Warrants issued in this Private Placement. In connection therewith, the Company filed a registration statement for the resale of the Shares and Ordinary Shares underlying the Warrants, which was declared effective by the U.S. Securities and Exchange Commission on September 21, 2016. If the Company fails to maintain the effectiveness of the registration statement, it may incur liquidated damages for each participant of up to 5% of the pro-rata purchase price of the Shares.

h.Stock-based compensation:

On June 18, 2009, a Stock Option Plan (the "2009 Plan") was adopted by the Board of Directors of the Company, under which options to purchase up to 55,971 Ordinary Shares have been reserved. Such pool was increased over the years and as of December 31, 2014, options to purchase up to 978,655 Ordinary Shares were authorized. The 2009 Plan was adopted in accordance with the amended sections 102 and 3(i) of Israel's Income Tax Ordinance. Under the 2009 Plan, options to purchase Ordinary Shares of the Company may be granted to employees, advisors, directors, consultants and service providers of the Company or any subsidiary or affiliate. The default vesting schedule is up to three years, subject to the continuation of employment or service. Each option may be exercised into Ordinary Shares during a period of seven years from the date of grant, unless a different term is provided in the option agreement. On April 30, 2013, the 2013 Stock Incentive Sub Plan (the "2013 Sub Plan") was adopted by the Board of Directors of the Company, which set forth the terms for the grant of stock awards to Inc.'s employees or US non- employees. On January 25, 2015, the Board of Directors reserved an additional 1,072,879 Ordinary Shares out of its authorized and unissued share capital for future option grants under the 2009 Plan.

On February 20, 2015, the Company's Board of Directors approved the replacement of the 2009 Plan and 2013 Sub Plan by adopting the Amended and Restated 2009 Stock Incentive Plan. This action was approved by the shareholders on March 1, 2015.

On July 7, 2014, the Company's Board of Directors approved to reduce the exercise price of all outstanding options which were previously granted to certain employees at an exercise price which exceeded $3.61 per share down to $3.61 per share, representing the underlying fair value of the Ordinary Share at that date. The Company accounted for the reduction of the options' exercise price pursuant to ASC 718 as a modification. Accordingly, additional compensation of $49 was calculated as the fair value of the modified award in excess of the fair value of the original award measured immediately before its terms have been modified based on current circumstances and recorded incremental fair value as an immediate or future expense based on the vesting schedule of the relevant options. As result of the above modification, during the years ended December 31, 2015 and 2014, the Company recorded compensation cost of $5 and $44, respectively.

During year ended December 31, 2016, the Company's Board of Directors approved grant of 433,620 options to certain employees to purchase the Company's Ordinary Shares at an exercise price of $2.74 to $3.80.

On October 5, 2016, the Company's annual general meeting of shareholders approved among others, a grant of 23,250 options to its directors to purchase the Company's Ordinary Shares at an exercise price of $3.85.

On October 5, the Company held its 2016 Annual General Meeting of Shareholders. Among other things, the shareholders approved an amendment to the Stock Option Plan providing for the four percent (4%) automatic annual increase in the authorized number of Ordinary Shares available for future grant under the 2009 Plan to begin on January 1, 2017 instead of January 1, 2019.

Transactions related to the grant of options to employees and directors under the Amended and Restated 2009 Stock Incentive Plan during the year ended December 31, 2016, were as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value
				$		(years)		$
Options outstanding at January 1, 2016		1,247,185			4.39		5.78		8.99
Options granted		456,870			2.94
Options expired		(14,500	)		3.18

Options outstanding at end of year		1,689,555			4.02		6.06		—


Options vested and expected to be vested at end of year		1,672,623			4.03		6.03		—


Options vested at end of year		945,260			4.20		4.27		—

The options outstanding as of December 31, 2016 have been presented by exercise prices, as follows:

Exercise price		Options outstanding as of December 31, 2016		Weighted average remaining contractual term		Options vested as of December 31, 2016		Weighted average remaining contractual term
				(years)				(years)
	2.70		35,000		9.98		—
	2.74		312,780		9.46		—
	3.40		35,000		9.92		—
	3.59		5,000		9.75		—
	3.61		772,136		3.64		684,434		3.50
	3.64		13,000		9.72		—
	3.80		25,000		9.89		—
	3.85		23,250		9.76		—
	3.96		5,178		4.78		5,178		4.78
	4.38		3,500		8.57		1,459		8.57
	5.55		5,000		8.57		2,084		8.57
	5.60		200,100		8.60		83,382		8.60
	5.84		248,798		5.07		165,817		5.07
	7.45		5,813		8.44		2,906		8.44

			1,689,555		6.06		945,260		4.27

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the deemed fair value of the Company's Ordinary Shares on the last day of fiscal 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2016. This amount is impacted by the changes in the fair market value of the Company's shares. The weighted average grant date fair value of options granted during the years ended December 31, 2016 and 2015 was $2.94 and $3.02, respectively. The following table presents the assumptions used to estimate the fair values of the options granted in the period presented:

	Year ended December 31
	2016	2015
Volatility	79.7% - 98.78%	61.1% - 61.49%
Risk-free interest rate	1.25% - 2.17%	1.17% - 1.97%
Dividend yield	0%	0%
Expected life (years)	5.87	4.33 - 5.91

As of December 31, 2016, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $1,409 which is expected to be recognized over a weighted average period of approximately 1.91 years.

The total compensation cost related to all of the Company's equity-based awards, recognized during the years ended December 31, 2016 and 2015 was comprised as follows:

	Year ended December 31,
	2016		2015
Research and development	$	129	$	145
Sales and Marketing		10		11
General and administrative		694		427

	$	833	$	583