11. Share-Based Compensation

2014 Equity Incentive Plan

The Company’s 2014 Equity Incentive Plan, as amended, (the “2014 Plan”) provides for the Company to sell or issue common shares or restricted common shares, or to grant incentive stock options or nonqualified stock options for the purchase of common shares, to employees, members of the board of directors and consultants of the Company. The 2014 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the common share on the date of grant and the term of stock option may not be greater than ten years.

The total number of common shares that may be issued under the 2014 Plan was 4,000,000 shares as of December 31, 2016. In January 2017, the Company effected an increase, effective October 28, 2016, in the number of common shares reserved for issuance under the 2014 Plan from 4,000,000 to 4,899,230 shares. The total number of common shares that may be issued under the 2014 Plan was 4,899,230 shares as of March 31, 2017. As of March 31, 2017 and December 31, 2016, 553,886 and 1,034,805 shares remained available for future grant under the 2014 Plan, respectively.

Vesting periods are determined at the discretion of the board of directors. Stock options granted to employees and directors typically vest over three years. Stock options granted to non-employees typically vest over three years. The Company measures and records the value of these options over the period of time services are provided and, as such, unvested portions are subject to remeasurement at subsequent reporting periods.

During the three months ended March 31, 2017, the Company granted options to purchase 422,382 common shares to employees and directors, and there were no options granted during the three months ended March 31, 2016. The Company recorded share-based compensation expense for options granted to employees and directors of $1,153 and $432 during the three months ended March 31, 2017 and 2016, respectively.

During the three months ended March 31, 2017, the Company granted options to purchase 58,537 common shares to non-employees, and there were no options granted during the three months ended March 31, 2016. The Company recorded share-based compensation expense for options granted to non-employees of $733 and $255 during the three months ended March 31, 2017 and 2016, respectively.

In May 2017, the Company’s shareholders approved the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan became effective on May 3, 2017 in connection with the Company’s IPO. Upon the effectiveness of the 2017 Plan, no further grants will be made under the 2014 Plan (see Note 17).

Stock Option Valuation

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors under the 2014 Plan during the three months ended March 31, 2017 were as follows, presented on a weighted average basis, noting there were no stock options granted to employees and directors during the three months ended March 31, 2016:

	Three Months Ended March 31, 2017
Risk-free interest rate	1.96		%
Expected term (in years)	5.51
Expected volatility	70.46		%
Expected dividend yield	0		%
Exercise price	$	9.38
Fair value of common share	$	8.68

The assumptions that the Company used to determine the grant-date fair value of stock options granted to non-employees under the 2014 Plan during the three months ended March 31, 2017 were as follows, presented on a weighted average basis, noting there were no stock options granted to non-employees during the three months ended March 31, 2016:

	Three Months Ended March 31, 2017
Risk-free interest rate	2.45		%
Expected term (in years)	10.0
Expected volatility	69.98		%
Expected dividend yield	0		%
Exercise price	$	9.29
Fair value of common share	$	8.68

Stock Options

Stock option activity under the 2014 Plan is summarized as follows:

				Weighted
		Weighted		Average
		Average		Remaining		Aggregate
	Number of	Exercise		Contractual		Intrinsic
	Shares	Price		Term		Value
				(in years)
Outstanding as of December 31, 2016	3,864,425	$	3.61	9.21		$	15,991
Granted	480,919	9.37
Exercised	—	—
Forfeited	—	—

Outstanding as of March 31, 2017	4,345,344	$	4.24	$	9.18	$	28,578

Options exercisable as of March 31, 2017	2,442,114	$	3.02	$	8.17	$	19,051
Options unvested as of March 31, 2017	1,903,230	$	5.81	$	8.82	$	9,527

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those stock options that had exercise prices lower than the fair value of the Company’s common shares. There have been no exercises as of March 31, 2017.

The weighted average grant-date fair value per share of stock options granted for the three months ended March 31, 2017 was $5.57. There were no stock options granted during the three months ended March 31, 2016.

The total fair value of options vested for the three months ended March 31, 2017 and 2016 was $1,034 and $0, respectively.

Share-Based Compensation

Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:

	Three Months Ended March 31,
	2017		2016

Research and development expenses	$	999	$	335
General and administrative expenses	887		352

	$	1,886	$	687

As of March 31, 2017, total unrecognized compensation cost related to the unvested share-based awards was $7,685, which is expected to be recognized over a weighted average period of 2.01 years.

2017 Employee Share Purchase Plan

In May 2017, the Company’s shareholders approved the 2017 Employee Share Purchase Plan (the “2017 ESPP”). The 2017 ESPP became effective on May 3, 2017 in connection with the Company’s IPO (see Note 17).