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Equity
 12 Months Ended
Dec. 31, 2016
Equity [Abstract]  
Equity

NOTE 16—EQUITY

 

(a) General

 

At a special meeting of the stockholders on March 16, 2016, the Company’s stockholders approved an amendment to its restated certificate of incorporation to increase the number of authorized shares of capital stock from 30,000,000 shares to 42,000,000 shares, all of which shall be common stock.

 

At December 31, 2016 the Company had issued and outstanding 29,322,574 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).

 

On July 21, 2016, the Company’s stockholders approved an amendment to the Company’s restated certificate of incorporation to authorize a reverse split of the Company’s common stock at any time prior to July 21, 2017, at a ratio between one-for-ten and one-for-twenty, if and as determined by the Company’s Board of Directors.

 

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

 

(b) Leap Tide Financing Transaction – See Note 5.

 

(c) Conversion of director loan to common stock – See Note 19.

 

(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, 2016, 979,650 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 2015 and 2016, there were no grants to non-employees.

 

No options were exercised in the years ended December 31, 2015 or 2016. The intrinsic value of options outstanding and of options exercisable at December 31, 2016 was $2 and $2, 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):

 

    2016     2015  
Risk-free interest rate     1.5 %     2.1 %
Expected term of options, in years     6.5       8.6  
Expected annual volatility     80 %     63 %
Expected dividend yield     — %     — %
Determined weighted average grant date fair value per option   $ 0.11     $ 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, 2015 and 2016. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

 

(e) Summary Option Information

 

A summary of the Company’s option plans as of December 31, 2016 and 2015, as well as changes during each of the years then ended, is presented below:

 

    2016     2015  
    Number of Options
(in shares)		     Weighted Average Exercise Price     Number of Options
(in shares)		     Weighted Average Exercise Price  
Outstanding at beginning of year     2,364,918     $ 3.51       1,812,428     $ 4.51  
Granted at market price     65,000       0.15       687,654       0.75  
Exercised     —       —       —       —  
Forfeited or expired     (379,549 )     2.29       (135,164 )     2.91  
Outstanding at end of year     2,050,369       3.62       2,364,918       3.51  
Exercisable at end of year     2,004,534     $ 3.69       1,778,503     $ 4.16  

 

Summary information regarding the options outstanding and exercisable at December 31, 2016 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)        
$0.14 – $1.06       677,301       5.8     $ 0.74       644,800     $ 0.76  
$1.68 – $2.49       307,985       4.7     $ 1.74       294,651     $ 1.75  
$3.51 – $5.00       279,368       3.5     $ 4.22       279,368     $ 4.22  
$5.05 – $5.91       320,000       1.4     $ 5.21       320,000     $ 5.21  
$6.31 - $7.57       302,356       3.2     $ 6.90       302,356     $ 6.97  
$7.60 - $11.42       163,359       2.8     $ 8.82       163,359     $ 8.82  
        2,050,369                       2,004,534          

 

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

 

Year ended
December 31,		    
    2016     2015  
Cost of sales*   $ —     $ 16  
Research and development expense*     —       4  
Selling, general and administrative expense*     89       641  
Total   $ 89     $ 661  

 

* Includes $16, $4 and $59 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. See Note 4 with respect to stock-based compensation expense associated with discontinued operations.

 

As of December 31, 2016, the total compensation cost related to non-vested awards not yet recognized was approximately $6 which the Company expects to recognize over a weighted-average period of approximately 0.8 years.

 

(f) 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, 2016 and 2015, as well as changes during the years then ended, is presented below:

 

    2016     2015  
    Number of Options
(in shares)*		     Weighted Average Exercise Price      Number of Options
(in shares)* 		    Weighted Average Exercise Price  
Outstanding at beginning of year     239,524     $ 1.65       239,524     $ 1.67  
Granted at fair value     —     $ —       —     $ —  
Exercised     (239,524 )   $ 1.63       —     $ —  
Forfeited     —     $ —       —     $ —  
Outstanding at end of year     —     $ —       239,524     $ 1.65  
Exercisable at end of year     —     $ —       239,524     $ 1.65  

 

*The exercise price of 91,754 of these options was NIS 9.38 translated to US dollars using following exchange rates: NIS 3.89 for December 31, 2014, NIS 3.90 for December 31, 2015, and 3.97 for the Closing Date.

 

(g) 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:

 

    2016     2015  
    Number of shares underlying warrants     Weighted Average Exercise Price     Number of shares underlying warrants     Weighted Average Exercise Price  
Outstanding at beginning of year     2,619,423     $ 1.48       2,642,423     $ 1.50  
Granted     35,000     $ 0.13       —       —  
Exercised     —       —       —       —  
Forfeited or expired     —       —       (23,000 )   $ 3.68  
Outstanding and exercisable at end of year     2,654,423     $ 1.46       2,619,423     $ 1.48  

 

The warrants outstanding at December 31, 2016 have a weighted average remaining contractual life of 3.2 years.

 

The fair value of the warrants granted ($0.08 per warrant) was estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

Risk-free interest rate     1.79 %
Expected term of warrants     7.0 years  
Expected annual volatility     78 %
Expected dividend yield     — %