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Shareholders' Equity
 12 Months Ended
Dec. 31, 2013
Shareholders' Equity [Abstract]  
Shareholders' Equity
Note 9 - Shareholders' Equity
 
Share based compensation
 
 
A.
On July 21, 2004, the Board resolved, subject to shareholders' approval that was given on December 30, 2004, to adopt the Share Option Plan (2004) (the "2004 Plan"). Option grants to employees under the 2004 Plan, including terms of vesting and the exercise price, are subject to the Board of Directors' approval. Option grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO will also generally have to be approved by the Shareholders. The term of the options shall not exceed 10 years from the date that the option was granted.
 
The 2004 plan initially covered up to 282,750 options and subsequent to an amendment by the board in 2007 it covered up to 582,750 options.   In August 2012, the Board of Directors increased the number of the ordinary shares available for issuance under the 2004 plan by an additional 500,000. All options are at a conversion rate of 1:1.
 
On October 21, 2013 the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 plan") and to reserve up to 500,000 ordinary shares for issuance under the Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. Grants under the 2013 Plan, whether as options, restricted stock units, restricted stock or other equity based awards, including their terms, are subject to the Board of Directors' approval. Grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO (and under certain circumstances certain other officers) will also have to be approved by the Shareholders.
 
 
 
 
 
B.
No options have been granted by the Company other than to employees and directors, as mentioned above.
 
 
C.
Options granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
Gains on awards granted under the plans are subjected to capital gains tax of 25% to be paid by the employee, and the Company is not entitled to a tax deduction.
 
 
 
 
 D.
On October 15, 2008, the Company granted, in the aggregate, 200,000 options to certain of its directors and employees under the 2004 Plan.  In relation to this grant:
 
 
1.
The exercise price for the options (per ordinary share) was US$ 3.82 and the option expiration date was the earlier to occur of: (a) October 15, 2016; and (b) the closing price of the shares falling below US$ 1.91 at any time after the date of grant. 50% of the options vest and become exercisable on the second anniversary of the date of grant and the additional 50% of the options vest and become exercisable on the third anniversary of the date of the grant.
 
 
2.
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
 
Average Risk-free interest rate (a)
3.73%
Expected dividend yield
0.0%
Average expected volatility (b)
112.42%
Termination rate
11%
Suboptimal rate (c)
3.45
 
 
(a)
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
 
(b)
Expected average volatility represents a weighted average standard deviation rate for the price of the Company's ordinary shares on the NASDAQ National Market.
 
(c)
Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.
 
 
3.
No expenses were incurred during the year ended December 31, 2013 in relation to this grant. As at December 31, 2013, all expenses related to this grant were recognized.
 
 
 
 
 E.
On December 21, 2010, the Company granted, in the aggregate, 137,500 options to certain of its directors and employees under the 2004 Plan.  In relation to this grant:
 
 
1.
The exercise price for the options (per ordinary share) was US$ 18.82 and the Option expiration date was the earlier to occur of: (a) December 21, 2018; and (b) the closing price of the shares falling below US$ 9.41 at any time after the date of grant. 50% of the options vest and become exercisable on the second anniversary of the date of grant and the additional 50% of the options vest and become exercisable on the third anniversary of the date of the grant.
 
 
2.
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:
 
Average Risk-free interest rate (a)
3.00%
Expected dividend yield
0.0%
Average expected volatility  (b)
82.64%
Termination rate
9%
Suboptimal rate (c)
3.45
 
 
(a)
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
 
(b)
Expected average volatility represents a weighted average standard deviation rate for the price of the Company's ordinary shares on the NASDAQ National Market.
 
(c)
Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.
 
 
3.
Compensation expenses incurred during the year ended December 31, 2013 in relation to this grant were approximately US$ 149 thousand. As at December 31, 2013, all expenses related to this grant were recognized.
 
 
 
 
 F.
On September 13, 2012, the Company granted, in the aggregate, 240,000 options to certain of its directors and employees under the 2004 Plan.  In relation to this grant:
 
 
1.
The exercise price for the options (per ordinary share) was US$ 15.28 and the Option expiration date was the earlier to occur of: (a) September 13, 2020; and (b) the closing price of the shares falling below US$ 7.64 at any time after the date of grant. 50% of the options vest and become exercisable on the second anniversary of the date of grant and the additional 50% of the options vest and become exercisable on the third anniversary of the date of the grant.
 
 
2.
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:
 
Average Risk-free interest rate (a)
1.33 %
Expected dividend yield
0.0%
Average expected volatility  (b)
64.71 %
Termination rate
9%
Suboptimal rate (c)
3.2
 
 
(a)
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
 
(b)
Expected average volatility represents a weighted average standard deviation rate for the price of the Company's ordinary shares on the NASDAQ National Market.
 
(c)
Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.
 
 
3.
Compensation expenses incurred during the year ended December 31, 2013 in relation to this grant were approximately US$ 519 thousand. As at December 31, 2013, there was approximately US$ 566 thousand of unrecognized compensation costs related to this grant to be recognized over a weighted average period of 1.19 years.
 
 
 
 
G.
The following table summarizes information regarding stock options as at December 31, 2013:
 
 
  
Options outstanding
    
Options exercisable
 
  
 
    
Weighted average
    
 
    
Weighted average
 
  
 
    
remaining
    
 
    
remaining
Exercise price
  
Number
    
contractual life
    
Number
    
contractual life
US$
  
of options
    
(in years)
    
of options
    
(in years)
 
  
 
    
 
    
 
    
 
  
18.82 
     42,500       4.97       42,500       4.97  
15.28 
     230,250       6.70       -       -  
 
                                
 
     272,750               42,500          

The aggregate intrinsic value of options outstanding as of December 31, 2012 and 2013 is US$ 1,199 thousand and US$ 8,152 thousand, respectively.
 
The aggregate intrinsic value of options exercisable as of December 31, 2012 and 2013 is US$ 566 thousand and US$ 1,143 thousand, respectively.
 
The total intrinsic value of options exercised during the year ended December 31, 2012 and 2013, is US$ 1,191 thousand and US$ 1,119 thousand, respectively.
 
The intrinsic value of the options at the date of grant is zero.
 
 
 
 
H. 
The stock option activity under the abovementioned plans is as follows:
 
 
  
 
    
 
    
Weighted
  
 
  
 
    
Weighted
    
average
  
 
  
Number
    
average
    
grant date
  
 
  
of options
    
exercise price
    
fair value
  
 
  
 
    
US$
    
US$
  
 
  
 
    
 
    
 
  
Balance at January 1, 2011
     305,825    
 
    
 
  
 
          
 
    
 
  
Exercised
     (45,400 )     3.62       1.75  
Forfeited
     (3,000 )     16.32       7.54  
 
                        
Balance at December 31, 2011
     257,425                  
 
                        
Granted
     240,000       15.28       6.54  
Exercised
     (82,338 )     3.35       1.81  
Forfeited
     (2,000 )     15.28       6.54  
 
                        
Balance at December 31, 2012
     413,087                  
 
                        
Exercised
     (132,587 )     14.28       6.61  
Forfeited
     (7,750 )     15.28       6.54  
 
                        
Balance at December 31, 2013
     272,750                  
Exercisable at December 31, 2013
     42,500                  
 
 
I. 
During 2011, 2012 and 2013, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:
 
 
  
Year ended December 31
  
 
  
2011
    
2012
    
2013
  
 
  
US$ thousands
    
US$ thousands
    
US$ thousands
  
 
  
 
    
 
    
 
  
Cost of sales
     24       46       103  
Research and development costs
     96       130       193  
Selling and marketing expenses
     134       159       177  
General and administrative expenses
     183       209       195  
 
                        
 
     437       544       668