Equity

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Equity

NOTE 5 - EQUITY:

On January 30, 2012, the Company appointed a new director (“Director A”) to its board of directors.  In connection with his appointment, the Company issued Director A an option to purchase 100,000 shares of its common stock at an exercise price of $1.95 per share, which will vest one-third annually in 2013, 2014 and 2015 on the anniversary of the date of grant, provided that if he is (i) not reelected as a director at the Company’s 2014 annual meeting of stockholders, or (ii) not nominated for reelection as a director at the Company’s 2014 annual meeting of stockholders, the option vests and becomes exercisable on the date of such failure to be reelected or nominated.

In valuing this option, the Company used the following assumptions: dividend yield of 0%; expected term of 5.5-6.5 years in each year; expected volatility of 58-60%; and risk-free interest rate of 1.01-1.26%. The option has a term of 10 years from the date of grant, and the fair value of the option granted above, using the Black-Scholes option-pricing model, was approximately $106,000.

On March 1, 2012, the Company granted an employee an option to purchase 40,000 shares of common stock at an exercise price of $1.95 per share, which option vests upon the achievement of performance conditions as set on the grant date. The option fair value amortization is recorded under “Research and development” expenses.

In addition, a distributer of the Company was granted an option to purchase 77,915 shares of common stock at an exercise price of $1.23 per share.  The fair value of this share based compensation is to be recorded against revenues.

In valuing the above option grants, the Company used the following assumptions:dividend yield of 0%; expected term of 5.5-6.5 years and 2 years, respectively; expected volatility of 57-58% and 47%, respectively; and risk-free interest rate of 1.03-1.3% and 0.3%, respectively. The options have terms of 10 years and 2 years from the date of grant, respectively, and the fair values of the options granted above, using the Black-Scholes option-pricing model, were approximately $42,000 and $68,000, respectively.

The change in the Company’s equity during the first quarter of 2012, other than the net loss, is mainly attributable to share based compensation in the amount of $1,188,000.