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 September 30, 2015, total number of shares of common stock issued and outstanding was 17,211,986 (December 31, 2014 – 10,695,108). As of September 30, 2015 and December 31, 2014, 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”) and 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 September 30, 2015, the maximum number of shares of common stock that may be issued under the 2014 Plan was 1,271,756 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
Outstanding at December 31, 2014		824,604		$	6.79		7.16	$	789
Options granted		287,750			11.46
Options exercised		(191,878	)		5.99
Options forfeited		(49,349	)		9.58
Options expired		(12,170	)		9.26

Outstanding at September 30, 2015		858,957		$	9.72		7.80	$	3,736
Exercisable at September 30, 2015		152,802		$	9.29		6.37	$	2,231

During the nine months ended September 30, 2015, the Company granted 257,750 stock options to employees and 30,000 stock options to directors. The stock options granted to employees during the nine months ended September 30, 2015 have exercise price per share ranging from $7.45 to $12.03 and vest 25% one year after the beginning of the vesting period and thereafter ratably each month over the following thirty-six months. The stock options granted to non-employee directors during the nine months ended September 30, 2015 have an exercise price per share of $12.03 and have vesting period of either (i) one year at equal monthly installment from the beginning of the vesting period or (ii) three years at equal annual installments from the beginning of the vesting period. All stock options under the 2014 Plan are subject to a 10 year expiration period.

During the nine months ended September 30, 2015, 191,878 shares of common stock were issued upon exercise of options.

(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 SEPTEMBER 30,			NINE MONTHS ENDED SEPTEMBER 30,
	2015		2014	2015	2014
Expected volatility		NA	108%	98%	108%
Expected dividends		NA	0%	0%	0%
Expected terms (years)		NA	6.00	6.40	6.00
Risk free rate		NA	1.70%	1.48%	1.67%
Weighted average grant-date fair value of stock options		NA	$6.16	$9.02	$8.33

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 income for the plans was $424 and $1,145 for the three and nine months ended September 30, 2015, respectively and $233 and $585 for the three and nine months ended September 30, 2014, respectively. As of September 30, 2015, total unrecognized compensation cost for all stock-based compensation plans was $3,513 ( September 30, 2014 – $2,982), which is expected to be recognized over a weighted-average period of 2.76 years (September 30, 2014 – 2.87 years). No stock options were granted for the three months ended September 30, 2015.

(d) Public offering

On September 15, 2015, the Company completed an underwritten public offering of 6,325,000 shares of its common stock (inclusive of 825,000 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares) at a price to the public of $15.50 per share. The Company received gross proceeds of approximately $98.0 million before underwriting commissions and expenses of approximately $6.2 million.