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Equity
 12 Months Ended
Dec. 31, 2015
Equity [Abstract]  
Equity

NOTE 15—EQUITY

 

(a) General

 

At the annual meeting of stockholders on June 10, 2010, the Company’s stockholders approved an amendment to its Certificate of Incorporation to increase the number of authorized shares of capital stock from 20,000,000 shares to 30,000,000 shares, all of which shall be common stock. The increase in authorized shares was done pursuant to a Certificate of Amendment to the Certificate of Incorporation filed with the Secretary of State of the State of Delaware on, and effective as of, June 15, 2010. (See Note 22 – Subsequent Events for the results of a Special Meeting of the stockholders of the Company to amend the Company’s restated certificate of incorporation to increase the number of authorized shares of common stock of the Company from 30,000,000 to 42,000,000).

 

At December 31, 2015 the Company had issued and outstanding 27,325,591 shares of its common stock, par value $0.01 per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company. Holders of common stock do not have subscription, redemption, conversion or other preemptive rights. Holders of the common stock are entitled to elect all of the Directors on the Company’s Board. Holders of the common stock do not have cumulative voting rights, meaning that the holders of more than 50% of the common stock can elect all of the Company’s Directors. Except as otherwise required by Delaware General Corporation Law, all stockholder action is taken by vote of a majority of shares of common stock present at a meeting of stockholders at which a quorum (a majority of the issued and outstanding shares of common stock) is present in person or by proxy or by written consent pursuant to Delaware law (other than the election of Directors, who are elected by a plurality vote).

 

The Company is not authorized to issue preferred stock. Accordingly, no preferred stock is issued or outstanding.

 

(b) Leap Tide Financing Transaction – See Note 3

   

(c) Capital Raise

 

On November 5, 2014, the Company closed on a private placement of unregistered shares of common stock and warrants to purchase common stock. The Company received gross proceeds of $4,500 ($4,007 net of transaction costs) and issued 4,285,714 unregistered shares of common stock at a price per share of $1.05 and warrants to purchase up to 2,142,857 shares of common stock at an exercise price of $1.30 per share. The warrants are non-exercisable for six months from the date of the closing and have a term of five years, six months. At the closing, pursuant to the terms of the Placement Agent Agreement, in addition to its cash fee (included in the transaction costs), the placement agent received warrants to purchase 214,285 shares of the Company’s common stock at an exercise price of $1.26 per share. The placement agent's warrants are non-exercisable for six months from the date of the closing and have a term of five years.

 

Following the November 2014 private placement (noted above), the Company no longer had sufficient authorized shares to satisfy outstanding warrants and option agreements if all such agreements were to be exercised. Accordingly, the Company recognized this as a derivative liability and recorded such liability ($50) using the Black-Scholes valuation method to estimate the fair value of the derivative liability. The Company used a weighted average risk free interest rate of 1.1%, an expected life of 3.3 years, an annual volatility of 70% and no dividends to determine the value of the derivative liability. With the increase in authorized shares noted above, the derivative liability was reversed as of December 31, 2015.

 

(d) Summary Employee Option Information

 

The Company’s stock option plans provide for the grant to officers, directors and other key employees of options to purchase shares of common stock. The purchase price may be paid in cash or at the end of the option term, if the option is "in-the-money", it is automatically exercised "net". In a net exercise of an option, the Company does not require a payment of the exercise price of the option from the optionee, but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by the option exercised. Each option is exercisable to one share of the Company’s common stock. Most options expire within five to ten years from the date of the grant, and generally vest over three year period from the date of the grant. At the annual meeting of stockholders on September 11, 2012, the Company’s stockholders approved an Amendment to the Company’s 2006 Stock Incentive Plan to increase the number of available shares by 1,000,000 and an Amendment to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors to increase the number of available shares by 200,000. At December 31, 2015, 721,438 options were available for grant under the 2006 Amended and Restated Stock Incentive Plan and no options were available for grant under the 2006 Director Plan. In 2014 and 2015, there were no grants to non-employees.

 

The Company did not receive any proceeds in connection with stock option exercises during the year ended December 31, 2014 as all exercises during those years were “net” exercises. The intrinsic value of options exercised in 2014 was $123. No options were exercised in the year ended December 31, 2015. The intrinsic value of options outstanding and of options exercisable at December 31, 2015 was $0 and $0, respectively.

 

The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective years (all in weighted averages):

 

    2014     2015  
Risk-free interest rate     2.1 %     2.1 %
Expected term of options, in years     7.0       8.6  
Expected annual volatility     64 %     63 %
Expected dividend yield     — %     — %
Determined weighted average grant date fair value per option   $ 1.36     $ 0.51  

 

The expected term of the options is the length of time until the expected date of exercising the options. With respect to determining expected exercise behavior, the Company has grouped its option grants into certain groups in order to track exercise behavior and establish historical rates. The Company estimated volatility by considering historical stock volatility over the expected term of the option. The risk-free interest rates are based on the U.S. Treasury yields for a period consistent with the expected term. The Company expects no dividends to be paid. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in determining the estimated fair value of the Company’s stock options granted in the years ended December 31, 2014 and 2015. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

 

(e) Non-Employee Options

 

In the years ended December 31, 2014 and 2015, the Company included $37 and $0 respectively, of stock-based compensation expense in selling, general and administrative expense in its Consolidated Statements of Operations with respect to options granted to non-employees.

 

(f) Summary Employee and Non-Employee Option Information

 

A summary of the Company’s option plans as of December 31, 2014 and 2015, as well as changes during each of the years then ended, is presented below:

 

    2014     2015  
    Number of Options
(in shares)		     Weighted Average Exercise Price     Number of Options
(in shares)		     Weighted Average Exercise Price  
Outstanding at beginning of year     1,401,658     $ 5.49       1,812,428     $ 4.51  
Granted at market price     664,103       2.14       687,654       0.75  
Exercised *     (33,938 )     2.51       —       —  
Forfeited or expired     (219,395 )     3.96       (135,164 )     2.91  
Outstanding at end of year     1,812,428       4.51       2,364,918       3.51  
Exercisable at end of year     1,128,434     $ 5.56       1,778,503     $ 4.16  

 

* All shares issued in connection with option exercises were newly issued shares.

 

The breakdown of option exercises between cashless net exercises and cash exercises is as follows the year ended December 31, 2014 (there were no option exercises in the year ended December 31, 2015):

 

    Shares granted in net exercise of options     Options forfeited in net exercise of options     Total net exercise options     Weighted average exercise price for net exercise options     Options exercised for cash     Weighted average exercise price for options exercised for cash  
Year ended December 31, 2014     33,938       76,062       110,000     $ 2.51       —       —  
                                                 

 

Summary information regarding the options outstanding and exercisable at December 31, 2015 is as follows:

 

    Outstanding     Exercisable  
Range of Exercise Prices   Number Outstanding     Weighted Average Remaining Contractual Life     Weighted Average Exercise Price     Number Exercisable    

Weighted

Average

Exercise

Price

  
    (in shares)     (in years)           (in shares)        
$0.20 – $1.06     802,454       7.8     $ 0.79       362,025     $ 0.85  
$1.68 – $2.56     342,152       5.6     $ 1.76       288,818     $ 1.77  
$3.51 – $5.00     426,264       3.4     $ 4.19       361,946     $ 4.22  
$5.05 – $5.91     320,000       2.4     $ 5.21       320,000     $ 5.21  
$6.31 - $7.57     310,689       4.1     $ 6.95       290,689     $ 6.91  
$7.60 - $11.42     163,359       3.8     $ 8.82       155,025     $ 8.87  
      2,364,918                       1,778,503          

 

Stock-based compensation expense included in the Company’s Consolidated Statements of Operations was:

 

    Year ended
December 31,		  
    2014     2015  
Cost of sales*   $ 2     $ 16  
Research and development expense*     33       4  
Selling, general and administrative expense*     830       641  
Total   $ 865     $ 661  

 

* Includes $16, $4 and $59 in in Cost of sales, Research and development expense and Selling, general and administrative expense, respectively, for the year ended December 31, 2015 with respect to DSIT. Includes $2 in Cost of sales in the year ended December 31, 2014 with respect to DSIT. See Note 4 with respect to stock-based compensation expense associated with discontinued operations.

 

As of December 31, 2015, the total compensation cost related to non-vested awards not yet recognized was approximately $250 which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

 

(g) DSIT Stock Option Plan

 

In November 2006, the Company adopted a Key Employee Stock Option Plan (the “DSIT Plan”) for its DSIT subsidiary to be administrated by a committee of board members of DSIT, currently comprised of the entire board of directors of DSIT. The purpose of the DSIT Plan and associated grants is to provide incentives to key employees of DSIT to further the growth, development and financial success of DSIT.

 

A summary status of the DSIT Plan as of December 31, 2014 and 2015, as well as changes during the years then ended, is presented below:

 

    2014   2015  
    Number of Options
(in shares)		     Weighted Average Exercise Price       Number of Options
(in shares)  		     Weighted Average Exercise Price  
Outstanding at beginning of year     243,924     $ 1.78       239,524     $ 1.67  
Granted at fair value     —     $ —       —     $ —  
Exercised     —     $ —       —     $ —  
Forfeited     (4,400 )   $ 2.41       —     $ —  
Outstanding at end of year     239,524     $ 1.67       239,524     $ 1.65  
Exercisable at end of year     101,904     $ 1.45       239,524     $ 1.65  

 

 

Summary information regarding the options under the Plan outstanding and exercisable at December 31, 2015 is as follows:

 

    Outstanding     Exercisable  
Range of Exercise Prices   Number Outstanding     Weighted Average Remaining Contractual Life     Weighted Average Exercise Price     Number Exercisable     Weighted Average Exercise Price  
    (in shares)     (in years)           (in shares)        
$1.05 – $1.26     147,770       2.6     $ 1.18       147,770     $ 1.18  
$2.40*     91,754       2.6     $ 2.40       91,754     $ 2.40  
      239,524             $ 1.65       239,524     $ 1.65  

 

*The exercise price of these options are NIS 9.38 translated to US dollars using the year end exchange rates (NIS 3.89 and NIS 3.90 for the years ended December 31, 2014 and 2015, respectively).

 

In January 2016, the Company converted all DSIT preferred stock to DSIT common stock. The Company currently owns approximately 88.3% of DSIT. If all the options to purchase all shares of DSIT ordinary stock granted under the DSIT Option Plan are exercised, the Company would own approximately 78.7% of DSIT on a fully-diluted basis.

 

(h) Warrants

 

The Company has issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows:

 

    2014     2015  
    Number of shares underlying warrants     Weighted Average Exercise Price     Number of shares underlying warrants     Weighted Average Exercise Price  
Outstanding at beginning of year     285,281     $ 3.18       2,642,423     $ 1.50  
Granted     2,357,142     $ 1.30       —       —  
Exercised     —       —       —       —  
Forfeited or expired     —       —       (23,000 )   $ 3.68  
Outstanding and exercisable at end of year     2,642,423     $ 1.50       2,619,423     $ 1.48  

 

The warrants outstanding at December 31, 2015 have a weighted average remaining contractual life of 4.2 years.

 

The 2,142,847 warrants that were granted in connection with the November 2014 Capital Raise (see Note 15(c)) are exercisable for shares of the Company’s Common Stock. The warrants are non-exercisable for six months from the date of the closing and have a term of five years, six months and an exercise price of $1.30 per share. The Company allocated $1,018 to the value of the warrants based on a Black Scholes calculation using a five and a half year expected life, an annual volatility of 63%, a discount rate of 1.6% and no dividends. The value allocated to the warrants was offset against additional paid-in-capital.

 

In addition, the 214,285 warrants that were granted to the placement agent in connection with the November 2014 Capital Raise (see Note 15(c)) are exercisable for shares of the Company’s Common Stock. The placement agent's warrants are non-exercisable for six months from the date of the closing and have a term of five years and an exercise price of $1.26 per share. The Company allocated $97 to the value of the warrants based on a Black Scholes calculation using a five year expected life, an annual volatility of 62%, a discount rate of 1.6% and no dividends. The value allocated to the warrants was offset against additional paid-in-capital.

 

No warrants were exercised in 2014 or 2015.