Note 12 - Shareholders' Equity

Capital and reserves

On May 2, 2019, the Company's Board of Directors authorized and began implementation of a one-year share repurchase plan to repurchase up to $15 million of the Company's ordinary shares. On April 30, 2020 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. On April 29, 2021 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. On May 1, 2023, the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan began on May 8, 2023. On May 2, 2024, the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan began on May 8, 2024. Repurchases may be made in the open market and will be in accordance with applicable securities laws and regulations. The timing and amount of each repurchase transaction may depend on a variety of factors. The share repurchase plan does not obligate the Company to acquire any specific number of ordinary shares and may be suspended or terminated at any time at management’s discretion.

Share based compensation

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 2013 Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. In January 2018, the Board approved the increase of the number of ordinary shares reserved for issuance under the 2013 Plan by 600,000 additional ordinary shares, and on January 27, 2022, the Board increased the number of the ordinary shares available for issuance by an additional 750,000 Ordinary shares. In October 2023, the Board approved the extension of the Global Share Incentive Plan (2013) by an additional ten years and increased the number of the ordinary shares available for issuance by an additional 375,000 ordinary shares. 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.

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.

During 2022, 2023 and 2024, the Company granted 16,000, 86,000 and 2,969 RSUs respectively to certain of its directors, employees and consultants under the 2013 Plan. In relation to those grants:

The vesting period of the RSUs ranges between 2 to 3 years from the date of grant.

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.

The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, assuming that no dividend yield is expected in any of the years.

On January 27, 2022, the Company granted, in the aggregate, 121,508 options to certain of its employees under the 2013 Plan. In relation to this grant:

The exercise price for the options (per ordinary share) was US$ 47.98 and the Option expiration date was the earlier to occur of: (a) January 27, 2030; and (b) the closing price of the shares falling below US$ 23.99 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.

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)	1.79	%
Expected dividend yield	0.0	%
Average expected volatility ^(b)	44.38	%
Termination rate	9	%
Suboptimal factor ^(c)	3.16

	(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 factor 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 factor of the Company and similar companies.

On June 7, 2022, the Company granted, in the aggregate, 26,666 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

The exercise price for the options (per ordinary share) was US$ 35.69 and the Option expiration date was the earlier to occur of: (a) June 7, 2030; and (b) the closing price of the shares falling below US$ 17.85 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.

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)	3.01	%
Expected dividend yield	0.0	%
Average expected volatility ^(b)	43.93	%
Termination rate	9	%
Suboptimal factor ^(c)	3.14

	(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 factor 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 factor of the Company and similar companies.

On July 1, 2022, the Company granted, in the aggregate, 50,000 options to certain of its employee under the 2013 Plan. In relation to this grant:

The exercise price for the options (per ordinary share) was US$ 34.90 and the Option expiration date was the earlier to occur of: (a) July 1, 2030; and (b) the closing price of the shares falling below US$ 17.45 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.

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)	2.91	%
Expected dividend yield	0.0	%
Average expected volatility ^(b)	44.02	%
Termination rate	9	%
Suboptimal factor ^(c)	3.14

	(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 factor 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 factor of the Company and similar companies.

On June 14, 2023, the Company granted, in the aggregate, 137,911 options to certain of its employee under the 2013 Plan. In relation to this grant:

The exercise price for the options (per ordinary share) was US$ 35.12 and the Option expiration date was the earlier to occur of: (a) July 1, 2031; and (b) the closing price of the shares falling below US$ 17.56 at any time after the date of grant and remains at such price or at a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant. All such outstanding options have expired by their terms in 2023.

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)	3.91	%
Expected dividend yield	0.0	%
Average expected volatility ^(b)	41.78	%
Termination rate	7	%
Suboptimal factor ^(c)	2.76

	(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 factor 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 factor of the Company and similar companies.

On June 18, 2024, the Company granted, in the aggregate, 410,714 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

The exercise price for the options (per ordinary share) was US$ 16.42 and the Option expiration date is June 18, 2032. The options vest and become exercisable in two equal portions: 50% on the second anniversary of the date of grant, and 50% on the third anniversary of the date of grant.

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)	4.22	%
Expected dividend yield	0.0	%
Average expected volatility ^(b)	42.84	%
Post-vesting termination rate	7	%
Suboptimal factor ^(c)	2.76

	(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 factor 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 factor of the Company and similar companies.

The following table summarizes information regarding stock options as at December 31, 2024:

Options outstanding

Options exercisable

Weighted average

remaining

Exercise price

Number

contractual life

Number

contractual life

US$

of options

(in years)

of options

(in years)

33.27

10,148

1.3

10,148

1.3

16.42

395,422

7.5

The aggregate intrinsic value of options outstanding as of December 31, 2023 and 2024 is US$ 0 thousand and US$ 0 thousand, respectively.

The aggregate intrinsic value of options exercisable as of December 31, 2023 and 2024 is US$ 0 thousand and US$ 0 thousand, respectively.

The total intrinsic value of options exercised during the year ended December 31, 2023 and 2024, is US$ 401 thousand and US$ 0 thousand, respectively.

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, 2022		579,521

Granted		198,174			40.82		15.13
Exercised		(66,298	)		33.09		13.21
Forfeited		(50,335	)		41.67		15.75

Balance at December 31, 2022		661,062

Granted		137,911			35.12		15.84
Exercised		(45,474	)		29.91		12.33
Forfeited		(14,256	)		40.40		15.90
Expired		(729,095	)		37.80		15.05

Balance at December 31, 2023		10,148

Granted		410,714			16.42		7.08
Forfeited		(15,292	)		16.42		7.08

Balance at December 31, 2024		405,570
Exercisable at December 31, 2024		10,148

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

				Weighted
	Number of			average
	Restricted			grant date
	Share Units			fair value
				US$

Balance at January 1, 2022		86,000

Granted		16,000			43.02
Forfeited		(2,000	)		35.33
Vested		(43,000	)		35.33

Balance at December 31, 2022		57,000

Granted		86,000			36.24
Forfeited		(8,000	)		36.24
Vested		(41,000	)		35.33

Balance at December 31, 2023		94,000

Granted		2,969			15.42
Forfeited		(500	)		43.02
Vested		(8,000	)		36.24

Balance at December 31, 2024		88,469

The aggregate intrinsic value of RSUs outstanding as of December 31, 2023 and December 31, 2024 is US$ 1,701 thousand and US$ 1,443 thousand, respectively.

During 2022, 2023 and 2024, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:

	Year ended December 31
	2022		2023		2024
	US$ thousands

Cost of sales		638		428		276
Research and development costs		1,454		1,423		1,373
Selling and marketing expenses		774		747		728
General and administrative expenses		711		755		789

		3,577		3,353		3,166

As of December 31, 2024, there were US$ 3,475 thousand of unrecognized compensation costs related to stock options and RSUs to be recognized over a weighted average period of 1.51 years.

The total tax benefit recognized in the consolidated statements of operations related to share based compensation expenses amounted to US$ 81 thousand and US$ 2 thousand for the year ended December 31, 2023 and December 31, 2024.