NOTE 10—SHARE CAPITAL:
| a. | Composed of shares of NIS 0.01 par value, as follows: |
| Number of shares | ||||||||
| December 31 | ||||||||
| 2017 | 2016 | |||||||
| Authorized: | ||||||||
| Ordinary Shares | 70,000,000 | 70,000,000 | ||||||
| Issued: | ||||||||
| Ordinary Shares (1) | 29,879,323 | 26,902,285 | ||||||
| (1) | The Ordinary Shares confer upon their holders the following rights: (i) the right to vote in any general meeting of the Company; (ii) the right to receive dividends; and (iii) the right to receive upon liquidation of the Company a sum equal to the nominal value of the share, and if a surplus remains, to receive such surplus. |
| b. | On November 3, 2015, the Company entered into an underwritten offering of 2,500,000 ordinary shares together with accompanying warrants to purchase an aggregate of 1,250,000 ordinary shares. The ordinary shares and warrants were sold in combination, with one warrant for each ordinary share sold, and represented the right to purchase 0.50 of an ordinary share. The combined offering price of each ordinary share and accompanying warrant was $6.00. The net proceeds from this offering, which closed on November 6, 2015 were $13.6 million after deducting the underwriting discounts and commissions and offering costs payable by the Company. The warrants are exercisable beginning on May 6, 2016 and will expire on May 6, 2021 at an exercise price of $7.50 per one ordinary share. The ordinary shares and warrants were immediately separable and were issued separately. The fair value of the separable warrants on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the warrants are mainly as follows: ordinary share price based on the share’s price at the stock market on November 3, 2015: $6.01; expected volatility based on comparable companies in the healthcare sector: 69.0%; risk-free interest rate: 1.59% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the warrants); expected dividend: zero; and expected life to exercise of 5.5 years. The consideration was allocated between ordinary shares and warrants based on the ratio of the warrants’ fair value and the ordinary share price. |
| c. | On June 7, 2016, the Company entered into a securities purchase agreement related to a registered direct offering for an aggregate of 4,359,091 ordinary shares, NIS 0.01 par value, at a purchase price of $5.50 per share. The net proceeds from this offering, which closed on June 10, 2016 were approximately $21.9 million after subtracting placement agent fees and offering costs. |
| d. | On December 1, 2016, the Company entered into a separate Equity Distribution Agreements with JMP Securities LLC and Chardan Capital Markets, LLC (collectively as the “Agents”) to implement an “at the market offering” program under which the Company, from time to time, may offer and sell its ordinary shares, NIS 0.01 par value, having an aggregate offering price of up to $20,000,000 (the “Shares”) through the Agents. The Company has provided the Agents with customary indemnification rights, and the Agents will be entitled to a fixed commission of 3.0% of the aggregate gross proceeds from the Shares sold. The “at the market offering” is effective through October 2018. For the year ended December 31, 2017, the Company sold an aggregate of 224,695 ordinary shares under its at-the-market equity facility. The total consideration amounted to $1,322 thousand, net of issuance costs. |
| e. | On November 16, 2017, the Company entered into an underwriting agreement with Piper Jaffray & Co. related to the underwritten offering of an aggregate of 2,500,000 ordinary shares, NIS 0.01 par value (the “Ordinary Shares”). The public offering price for each Ordinary Share was $7.50. The purchase price to be paid by the underwriters to the Company for each Ordinary Share was $7.20. The net proceeds from the sale of the Ordinary Shares, which closed on November 21, 2017, was approximately $17.9 million after deducting underwriting discounts and commissions and estimated offering expenses. |
| f. | Share based compensation plans |
In February 2000, the Company’s board of directors approved an option plan (the “Plan”) as amended through 2008. Under the Plan, the Company reserved up to 1,423,606 Ordinary Shares of NIS 0.01 par value of the Company for allocation to employees and non-employees. Each option is exercisable to acquire one Ordinary Share.
In April 2011, the Company’s board of directors approved a new option plan (the “New Plan”). Under the New Plan, the Company reserved up to 766,958 Ordinary Shares (of which 159,458 Ordinary Shares shall be taken from the unallocated pool reserved under the Plan) for allocation to employees and non-employees.
In September 2014, the Company’s shareholders approved the adoption of the Employee Share Ownership and Option Plan (2014) (“2014 Plan”) effective as of the closing of the public offering. Under the 2014 Plan, the Company reserved up to 928,000 Ordinary Shares (of which 28,000 Ordinary Shares shall be taken from the unallocated pool reserved under the New Plan). The Ordinary Shares to be issued upon exercise of the options confer the same rights as the other Ordinary Shares of the Company, immediately upon allotment. Any option granted under the Plan that is not exercised within ten years from the date upon which it becomes exercisable, will expire. Any option which was granted under the New Plan, and was not exercised within twenty years from the date when it becomes exercisable, will expire.
Option exercise prices and vesting periods shall be as determined by the board of directors of the Company on the date of the grant.
The options granted to employees through December 31, 2002 are subject to the terms stipulated by section 102 of the Israeli Income Tax Ordinance (the “Ordinance”). Among other things, the Ordinance provides that the Company will be allowed to claim as an expense for tax purposes the amounts credited to the employees as a benefit upon sale of the shares allotted under the plans at a price exceeding the exercise price, when the related tax is payable by the employee.
The options granted to employees after December 31, 2002, are subject to the terms stipulated by section 102(b)(2) of the Ordinance. According to these provisions, the Company will not be allowed to claim as an expense for tax purposes the amounts credited to the employees as a capital gain benefit in respect of the options granted.
Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance. The Company will be allowed to claim as an expense for tax purposes the amounts equal to the expenses it recorded in the financial statements in the year in which the related parties or non-employees exercised the options into shares.
In April 2016, the board of directors approved the increase of 620,824 Ordinary Shares to the number of shares available for issuance under the 2014 Plan, effective January 1, 2016.
In March 2017, the Board of Directors approved the increase of 1,027,911 Ordinary Shares to the number of shares available for issuance under the 2014 Plan. As of December 31, 2017, options to purchase 5,091 of Ordinary Shares were reserved for future grant under the 2014 Plan.
Options granted in 2015:
|
Number of options granted according to option plan of the Company |
Exercise price per Ordinary |
The fair value of options on date |
||||||||||||||||||
| Date of grant |
Other than directors |
To directors |
Total |
Share ($) |
of grant (in thousands) |
|||||||||||||||
| 1) February 2015 | — | 60,000 | 60,000 | $ | 6.03 | $ | 722 | |||||||||||||
| 2) November 2015 | 432,470 | — | 432,470 | $ | 7.52 | $ | 1,916 | |||||||||||||
| 1) | 60,000 options were allocated to two external directors of the Company. |
| a. | The options will vest over 3 years from the date of grant; 1/12 of the options at the end of each quarter in the course of the 3 years. | |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $6.03, fair value of these options was estimated at $722 thousand with expected volatility based on comparable companies in the healthcare sector: 69.0%; risk-free interest rate: 1.99% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 2) | 432,470 options were allocated to employees and officers of the Company: |
| a. | The options will vest by 4 years with 50% on the second year anniversary; the remaining 50% at 1/8 of the options at the end of each quarter over the course of the last 2 years. | |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $7.52, fair value of these options was estimated at $1,916 thousand with expected volatility based on comparable companies in the healthcare sector: 86.0%; risk-free interest rate: 2.28% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
Options and Restricted Stock Units (“RSUs”) granted in 2016:
|
Number of options and RSUs granted according to option plan of the Company |
Exercise price per Ordinary |
The fair value of options and RSUs on date |
||||||||||||||||||
| Date of grant |
Other than directors |
To directors |
Total |
Share ($) |
of grant (in thousands) |
|||||||||||||||
| 1) February 2016 | — | 20,000 | 20,000 | $ | 3.48 | $ | 51 | |||||||||||||
| 2) May and June 2016 | 70,000 | — | 70,000 | $ | 3.30 - $3.40 | $ | 230 | |||||||||||||
| 3) March 2016 | 114,129 | — | 114,129 | $ | 0.002 | $ | 412 | |||||||||||||
| 4) November 2016 | 725,000 | — | 725,000 | $ | 5.08 | $ | 3,232 | |||||||||||||
| 5) November 2016 | 100,000 | — | 100,000 | $ | 0.002 | $ | 492 | |||||||||||||
| 1) | 20,000 options were allocated to two external directors of the Company: |
| a. | The options will vest over 3 years from the date of grant; 1/12 of the options at the end of each quarter in the course of the 3 years. | |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $3.48, fair value of these options was estimated at $51 thousand with expected volatility based on comparable companies in the healthcare sector: 86.0%; risk-free interest rate: 1.64% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 2) | 70,000 options were allocated to two Consultants: |
| a. | The options will vest between 3 to 5 years. | |
| b. | Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of the applicable options. The value of such services is estimated based on the additional cash compensation the Company would need to pay if such options were not granted. The fair value of these options on the date of grant was approximately $230 thousand. |
| 3) | 114,129 restricted stock units (“RSUs”) were allocated to officers of the Company: |
| a. | The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. | |
| b. | The fair value of these RSUs on the date of grant was approximately $412 thousand, using the quoted closing market share price of $3.61on the Nasdaq Global Market. |
| 4) | 725,000 options were allocated to employees and officers of the Company: |
| a. | The options will vest by 4 years with 50% on the second year anniversary; the remaining 50% at 1/8 of the options at the end of each quarter over the course of the last 2 years. | |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $5.08, fair value of these options was estimated at $3,232 thousand with expected volatility based on comparable companies in the healthcare sector: 97.0%; risk-free interest rate: 1.78% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 5) | 100,000 RSUs were allocated to officers of the Company: |
| a. | The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. | |
| b. | The fair value of these RSUs on the date of grant was approximately $492 thousand, using the quoted closing market share price of $4.92 on the Nasdaq Global Market. |
Options and Restricted Stock Units (“RSUs”) granted in 2017:
|
Number of options granted according to option plan of the Company |
Exercise price per Ordinary |
The fair value of options on date |
||||||||||||||||||
| Date of grant |
Other than directors |
To directors | Total |
Share ($) |
of grant (in thousands) |
|||||||||||||||
| 1) February 2017 | — | 20,000 | 20,000 | $ | 5.22 | $ | 100 | |||||||||||||
| 2) March 2017 | 10,000 | — | 10,000 | $ | 5.43 | $ | 30 | |||||||||||||
| 3) March 2017 | — | 65,000 | 65,000 | $ | 5.71 | $ | 337 | |||||||||||||
| 4) June 2017 | 100,000 | — | 100,000 | $ | 5.39 | $ | 437 | |||||||||||||
| 5) June 2017 | 36,000 | — | 36,000 | $ | 0.002 | $ | 175 | |||||||||||||
| 6) October 2017 | 700,000 | — | 700,000 | $ | 5.99 | $ | 4,113 | |||||||||||||
| 7) October 2017 | 140,000 | — | 140,000 | $ | 0.002 | $ | 903 | |||||||||||||
| 1) | 20,000 options were allocated to two independent directors of the Company: |
| a. | The options will vest over 3 years from the date of grant; 1/12 of the options at the end of each quarter in the course of the 3 years. |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $5.22, fair value of these options was estimated at $100 thousand with expected volatility based on comparable companies in the healthcare sector: 97.0%; risk-free interest rate: 2.41% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 2) | 10,000 options was allocated to a Consultant: |
| a. | The options will vest over 3 years. |
| b. | Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of the applicable options. The value of such services is estimated based on the additional cash compensation the Company would need to pay if such options were not granted. The fair value of these options on the date of grant was approximately $30 thousand. |
| 3) | 65,000 options were allocated to four independent directors of the Company: |
| a. | The options will vest by 4 years with 50% on the second year anniversary; the remaining 50% at 1/8 of the options at the end of each quarter over the course of the last 2 years. |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $5.71, fair value of these options was estimated at $337 thousand with expected volatility based on comparable companies in the healthcare sector: 97.0%; risk-free interest rate: 2.44% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 4) | 100,000 options was allocated to an officer of the Company: |
| a. | The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the course of the last 3 years. |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $5.39, fair value of these options was estimated at $437 thousand with expected volatility based on comparable companies in the healthcare sector: 97.0%; risk-free interest rate: 2.15% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 5) | 36,000 restricted stock units (“RSUs”) were allocated to an officer of the Company: |
| a. | The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. |
| b. | The fair value of these RSUs on the date of grant was approximately $175 thousand, using the quoted closing market share price of $4.85 on the Nasdaq Global Market. |
| 6) | 700,000 options were allocated to employees and officers of the Company: |
| a. | The options will vest by 4 years with 25% on the first year anniversary; the remaining 75% at 1/12 of the options at the end of each quarter over the course of the last 3 years. |
| b. | The fair value of the options on the date of grant was computed using the Black-Scholes model. The underlying data used for computing the fair value of the options are mainly as follows: an exercise price equal to $5.99, fair value of these options was estimated at $4,113 thousand with expected volatility based on comparable companies in the healthcare sector: 97.0%; risk-free interest rate: 2.41% (the risk-free interest rate is determined based on rates of return on maturity of unlinked treasury bonds with time to maturity that equals the average life of the options); expected dividend: zero; and the expected term; 11 years. |
| 7) | 140,000 RSUs were allocated to officers of the Company: |
| a. | The RSUs vesting period is dependent on the achievement of certain clinical performance milestones. |
| b. | The fair value of these RSUs on the date of grant was approximately $903 thousand, using the quoted closing market share price of $6.45 on the Nasdaq Global Market. |
| g. | Changes in the number of options, warrants and RSUs and weighted average exercise prices are as follows: |
| Year ended December 31 | ||||||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||||||
|
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|||||||||||||||||||
| Outstanding at beginning of year | 3,241,535 | $ | 3.41 | 2,304,179 | $ | 3.17 | 1,885,123 | $ | 2.01 | |||||||||||||||
| Granted | 1,071,000 | 4.91 | 1,029,129 | 3.87 | 492,470 | 7.34 | ||||||||||||||||||
| Exercised | (252,343 | ) | 1.91 | (72,873 | ) | 1.66 | (71,647 | ) | 1.32 | |||||||||||||||
| Forfeited | (24,097 | ) | 4.18 | (18,900 | ) | 6.92 | (1,767 | ) | 3.32 | |||||||||||||||
| Outstanding at end of year | 4,036,095 | $ | 3.88 | 3,241,535 | $ | 3.41 | 2,304,179 | $ | 3.17 | |||||||||||||||
| Exercisable at end of year | 1,844,283 | $ | 2.97 | 1,718,713 | $ | 2.16 | 1,688,773 | $ | 2.05 | |||||||||||||||
| h. | The following is information about exercise price and remaining contractual life of outstanding options, warrants and RSUs at year-end: |
| December 31, 2017 | December 31, 2016 | December 31, 2015 | ||||||||||||||||||||||||||||||||
| Number of options outstanding at end of year | Exercise price |
Weighted average of remaining contractual life |
Number of options outstanding at end of year |
Exercise Price |
Weighted average of remaining contractual life | Number of options outstanding at end of year | Exercise price | Weighted average of remaining contractual life | ||||||||||||||||||||||||||
| 758,928 | $ | 0.002 | 8.29 | 620,970 | $ | 0.002 | 10.73 | 406,841 | $ | 0.002 | 17.39 | |||||||||||||||||||||||
| 98,657 | $ | 1.21 | 6.78 | 117,990 | $ | 1.21 | 7.65 | 171,990 | $ | 1.21 | 8.84 | |||||||||||||||||||||||
| 513,969 | $ | 2.47 | 10.45 | 713,282 | $ | 2.47 | 1.12 | 721,632 | $ | 2.47 | 2.30 | |||||||||||||||||||||||
| 584,871 | $ | 3.30 - $3.48 | 14.96 | 588,023 | $ | 3.30 - $3.48 | 15.96 | 511,246 | $ | 3.32 | 17.75 | |||||||||||||||||||||||
| 60,000 | $ | 6.03 | 17.13 | 60,000 | $ | 6.03 | 18.13 | 60,000 | $ | 6.03 | 19.13 | |||||||||||||||||||||||
| 409,670 | $ | 7.52 | 17.88 | 416,270 | $ | 7.52 | 18.88 | 432,470 | $ | 7.52 | 19.89 | |||||||||||||||||||||||
| 1,610,000 | $ | 5.08 - $5.99 | 19.38 | 725,000 | $ | 5.08 | 19.87 | |||||||||||||||||||||||||||
| 4,036,095 | 3,241,535 | 2,304,179 | ||||||||||||||||||||||||||||||||
| i. | Expenses for share based compensation recognized in statements of comprehensive loss were as follows: |
|
Year ended December 31 |
||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
|
U.S. dollars in thousands |
||||||||||||
| Research and development expenses | $ | 2,027 | $ | 900 | $ | 385 | ||||||
| Administrative and general expenses | 1,977 | 520 | 656 | |||||||||
| Marketing expenses | 148 | — | — | |||||||||
| $ | 4,152 | $ | 1,420 | $ | 1,041 | |||||||
The remaining unrecognized compensation expenses as of December 31, 2017 are $6,444 thousand; this amount will be expensed in full by December 2021.