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Shareholders' Equity
 12 Months Ended
Dec. 31, 2014
Shareholders' Equity [Abstract]  
Shareholders' Equity

Note 11 - 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. Options or RSUs 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.


Capital gains on awards granted under the plans are subjected to tax of 25% to be paid by the employee, and the Company is not entitled to a tax deduction.
Gains which are not capital gains on awards under the plans are subjected to regular tax rates on individuals, and the Company is entitled to a tax deduction for such gains.

 


 C. 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. No expenses were incurred during the year ended December 31, 2014 in relation to this grant. As at December 31, 2014, all expenses related to this grant were recognized.

 


 D. 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, 2014 in relation to this grant were approximately US$ 424 thousand. As at December 31, 2014, there were approximately US$ 142 thousand of unrecognized compensation costs related to this grant to be recognized over a period of 0.7 years.

 


 E. On April 30, 2014, the Company granted, in the aggregate, 74,000 RSUs to certain of its directors, employees and consultants under the 2013 Plan. In relation to this grant:

 
1. 50% of the RSUs vest on the second anniversary of the date of grant and the additional 50% of the RSUs vest on the third anniversary of the date of the grant.

 
2. The fair value of RSUs is estimated based on the market value of the Company's stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting.

 
3. The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, with the following assumptions:

 



Expected dividend yield

2.06%




Termination rate

4.35%



4. Compensation expenses incurred during the year ended December 31, 2014 in relation to this grant were approximately US$ 843 thousand. As at December 31, 2014, there were approximately US$ 2,194 thousand of unrecognized compensation costs related to this grant to be recognized over a weighted average period of 1.85 years.

 


 F. The following table summarizes information regarding stock options as at December 31, 2014:

 

    

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)

                    

15.28

 

192,130

 

5.7

 

78,130

 

5.7

     


 The aggregate intrinsic value of options outstanding as of December 31, 2013 and 2014 is US$ 8,152 thousand and US$ 3,825 thousand, respectively.

The aggregate intrinsic value of options exercisable as of December 31, 2013 and 2014 is US$ 1,143 thousand and US$ 1,556 thousand, respectively.

The total intrinsic value of options exercised during the year ended December 31, 2013 and 2014, is US$ 1,119 thousand and US$ 2,400 thousand, respectively.

The intrinsic value of the options at the date of grant is zero.


G. The following table summarizes information regarding Restricted Share Units as at December 31, 2014:

 






Restricted

Vested

 


 

 

 

 

 

Share Units



Restricted

 


 

 

 

 

 

Outstanding



Share Units









 

 

 

 

 

 

 

 

74,000



 -


 


 The aggregate intrinsic value of RSUs outstanding as of December 31, 2014 is US$ 2,604 thousand.

                        


 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, 2012

      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        
               

Exercised

      (78,620)     17.19     7.70

Forfeited

      (2,000)     15.28     6.54
               

Balance at December 31, 2014

      192,130        

Exercisable at December 31, 2014

      78,130        


I. The Restricted Share Units activity under the abovementioned plans is as follows:

 

               

Weighted

           

Number of

   

average

           

Restricted

   

grant date

           

Share Units

   

fair value

            US$     US$

Balance at January 1, 2014

          -    

Granted

          74,000     46.07

Balance at December 31, 2014

          74,000    


J. During 2012, 2013 and 2014, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:

 

       

Year ended December 31

       

2012

 

2013

 

2014

       

US$ thousands

 

US$ thousands

 

US$ thousands

                 
   

Cost of sales

 

46

 

103

 

124

   

Research and development costs

 

130

 

193

 

340

   

Selling and marketing expenses

 

159

 

177

 

366

   

General and administrative expenses

 

209

 

195

 

436

       

544

 

668

 

1,266