OPERATING AND FINANCIAL REVIEW 9 Share-Based Compensation We have granted share-based warrants in the form of share warrants for founders (Bons de Souscription de Parts de Créateur d’Entrerp ise, or BCE) and share warrants (Bons de Souscription d’Actions, or BSA), stock options (Options de souscription ou d’achat d’actions, or SO) and free shares (Attributions gratuites d’actions, or AGA), since January 1, 2016 with the following exercise prices for each of the grant dates reflected below: Grant date Number of Exercise price Ordinary share fair Per share fair value warrants granted per share market value per share of warrants granted atgrant date July 8, 2013 892,000 €0.025 €1.025 €0.44 July 8, 2013 328,000 €0.025 €1.025 €0.36 April 9, 2014 193,800 €0.025 €1.025 €0.44 April 9, 2014 33,000 €0.025 €1.025 €0.36 December 3, 2014 60,000 €0.025 €2.150 €2.15 July 8, 2015 733,298 €3.275 €7.800 €5.56 July 8, 2015 121,000 €3.275 €7.800 €5.31 July 26, 2016 205,000 €8.080 €8.000 €2.94 July 27, 2017 165,000 €5.040 €5.15 €1.64 Grant date Number of stock Exercise price Ordinary share fair Per share fair value options granted per share market value per share of warrants granted at grant date July 27, 2017 220,000 €5.04 €5.12 €2.09 December 19, 2017 300,000 €5.55 €5.55 €2.20 Grant date Number of shares Ordinary share fair granted market value per share at grant date July 26, 2016 766,000 €8.00 July 27, 2017 593,500 €5.12 December 19, 2017 72,500 €5.55 We account for share-based compensation in accordance • the expected dividend yield; and with IFRS2. Under the fair value recognition provisions of this • the fair value of our ordinary shares on date of grant. guidance, share-based compensation is measured at the grant date based on the fair value of the award and is recognized as To determine the grant date fair value of share-based warrants, expense, net of estimated forfeitures, over the requisite service these complex and subjective variables are estimated as follows: period, which is generally the vesting period of the respective Expected Term. The expected term represents the period that our award. Our determination of the fair value of the warrants and share-based awards are expected to be outstanding. As we do not ordinary shares is described below: have sufficient historical experience for determining the expected Fair Value of Our Warrants term of the warrant awards granted, we have based our expected term on the simplified method, which represents the average We use the Black-Scholes option-pricing model to determine period from vesting to the expiration of the award. the fair value of warrants. Use of this valuation method requires management to apply judgment and make estimates, including: Expected Volatility. As we do not have a sufficient amount of • the expected term of our share-based warrants; trading history for our ordinary shares to make reliable volatility estimates, the expected share price volatility for our ordinary • the volatility of our ordinary shares; shares was estimated by taking the average historic price volatility • the risk-free rate for a period that approximates the expected for industry peers based on daily price observations over a period term of our share-based warrants; equivalent to the expected term of the warrant grants. We did 118– GENSIGHT BIOLOGICS – 2017 Registration Document