NOTE 9:—SHAREHOLDERS' EQUITY

a. Share capital is composed as follows:

	December 31, 2017				December 31, 2016
	Authorized		Issued and outstanding		Authorized		Issued and outstanding
Ordinary share of NIS 0.01 par value		50,000,000		26,572,719		50,000,000		20,139,826

Total		50,000,000		26,572,719		50,000,000		20,139,826

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 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 6).

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.

c. On April 20, 2017, 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 to the investors for an aggregate price of up to approximately $30,000 of the following securities: (i) 5,031,550 Ordinary Shares of the Company, nominal value NIS 0.01 per share for $5.90 per share and (ii) 2,515,775 warrants to purchase additional Ordinary Shares of the Company, for $0.125 per warrant (the "2017 Private Placement"). The 2017 Private Placement closed on April 25, 2017, pursuant to which the Company received approximately $28,110, net of issuance costs of $1,890. One of the Company's board members, who is also a shareholder in the Company, invested a total amount of $2,999.

The warrants issued are exercisable immediately upon issuance and may be exercised at any time prior to April 2022 at an exercise price of $6.785 per share.

The Company filed a registration statement for the resale of the shares and warrant shares issued in the Private Placement on May 24, 2017, which was declared effective on June 6, 2017.

d. 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. The 2009 Plan also allows the issuance of restricted stock units.

During the year ended December 31, 2017, the Company's Board of Directors approved grant of 382,414 options to certain employees to purchase the Company's Ordinary Shares at an exercise price of $3.35 to $6.5.

During the year ended December 31, 2017, the Company's Board of Directors approved grant of 247,095 restricted share units to certain employees to purchase the Company's Ordinary Shares at an exercise price of $3.32.

On December 28, 2017, the Company's annual general meeting of shareholders approved among others, a grant of 126,174 options to its directors to purchase the Company's Ordinary Shares at an exercise price of $3.65.

On October 5 2017, the Company held its 2016 Annual General Meeting of Shareholders. Among other things, the shareholders approved an amendment to the 2009 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 and restricted stock units to employees and directors under the Amended and Restated 2009 Stock Incentive Plan during the year ended December 31, 2017, were as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value
				$		(years)		$
Options outstanding at January 1, 2017		1,689,555			4.02		6.06		—
Options granted		508,588			3.86
Options exercised		(49,577	)		3.32
Options expired		(90,704	)		3.16

Options outstanding at end of year		2,057,862			4.03		6.12	$	1,384


Options vested at end of year		1,297,409			4.19		4.27	$	201

A summary of restricted share units activity for the year ended December 31, 2017, is as follows:

	Number of restricted share units		Weighted average grant date fair value		Aggregate intrinsic value
Unvested at January 1, 2017		—	$	—	$	—
Restricted share units granted		247,095		3.32

Unvested at end of year		247,095	$	3.32	$	914

50% of the restricted share units will vest on June 30, 2018 and the remainder will vest on the approval of the Trevyent NDA by the FDA.

The options outstanding as of December 31, 2017 have been presented by exercise prices, as follows:

Exercise price range	Options outstanding as of December 31, 2017		Weighted average remaining contractual term		Options vested as of December 31, 2017		Weighted average remaining contractual term
			(years)				(years)
$2.70 - $4.38		1,555,344		6.15		892,111		3.75
$5.55 - $7.45		502,518		6.04		405,298		5.45

		2,057,862		6.12		1,297,409		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 2017 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, 2017. 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, 2017 and 2016 was $2.91 and $2.94, respectively. The following table presents the assumptions used to estimate the fair values of the options granted in the periods presented:

	Year ended December 31
	2017	2016
Volatility	82.8% - 93.9%	79.7% - 98.9%
Risk-free interest rate	1.95% - 2.28%	1.25% - 2.17%
Dividend yield	0%	0%
Expected life (years)	5.87	5.87

As of December 31, 2017, the total unrecognized compensation costs were $2,689 which is expected to be recognized over a weighted average period of approximately 2.04 years.

The total compensation cost related to all of the Company's equity-based awards, recognized during the years ended December 31, 2017 and 2016 was comprised as follows:

	Year ended December 31,
	2017		2016
Research and development	$	202	$	129
Sales and Marketing		45		10
General and administrative		693		694

	$	940	$	833