SHAREHOLDERS’ EQUITY



	a.	Share option plans:

As of June 30, 2017, and December 31, 2016, the Company had reserved 583,423 and 380,153 ordinary shares, respectively, for issuance to the Company’s and its affiliates’ respective employees, directors, officers and consultants pursuant to equity awards granted under the Company's 2014 Incentive Compensation Plan (the “2014 Plan”).

Options to purchase ordinary shares generally vest over four years, with certain options to non-employee directors vesting quarterly over one year. Any option that is forfeited or canceled before expiration becomes available for future grants under the 2014 Plan.

The fair value for options granted during the six months ended June 30, 2017 and June 30, 2016 was estimated at the date of the grant using a Black-Scholes-Merton option pricing model with the following assumptions:



	Six Months Ended June 30,
	2017	2016
Expected volatility	56% - 58%	53% - 60%
Risk-free rate	1.85% - 2.07%	1.28%-1.60%
Dividend yield	—%	—%
Expected term (in years)	5.31-6.11	5.31-6.11
Share price	$1.3- $2.1	$8.48- $11.88

The fair value of restricted share units (“RSUs”) granted is determined based on the price of the Company's ordinary shares on the date of grant.

A summary of employee options to purchase ordinary shares and RSUs during the six months ended June 30, 2017 is as follows:



	Six Months Ended June 30, 2017
	Number		Average exercise price		Average remaining contractual life (in years) (1)	Aggregate intrinsic value (in thousands)
Options and RSUs outstanding at the beginning of the period	2,251,014		$	6.47	7.80	$	1,740
Options granted	401,846		2.03
RSUs granted	230,484		—
Options exercised (2)	(15,612	)	1.43
RSUs vested (2)	(49,954	)	—
RSUs forfeited	(44,196	)	—
Options forfeited	(138,373	)	3.65

Options and RSUs outstanding at the end of the period	2,635,209		$	5.38	7.54	$	912

Options exercisable at the end of the period	1,217,605		$	5.92	6.36	$	262


(1)	Calculation of weighted average remaining contractual term does not include RSUs, which have an indefinite contractual term.


(2)	During the six months period ended June 30, 2017, the aggregate number of ordinary shares that were issued pursuant to RSUs that became vested and options that were exercised on a net basis was 64,332 ordinary shares.

The weighted average grant date fair value of options granted during the six months ended June 30, 2017 and June 30, 2016 was $1.10 and $4.79, respectively. The weighted average grant date fair value of RSUs granted during the six month period ended June 30, 2017 and June 30, 2016 was $2.01 and $9.36, respectively.

The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders that hold options with positive intrinsic value exercised their options on the last date of the exercise period. Total intrinsic value of options exercised for each of the three months ended June 30, 2017 and June 30, 2016 was $25 thousand and $830 thousand respectively. As of June 30, 2017, there were $5.9 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company's 2012 Equity Incentive Plan and its 2014 Plan. This cost is expected to be recognized over a period of approximately 2.3 years.

The number of options and RSUs outstanding as of June 30, 2017 is set forth below, with options separated by range of exercise price.



Range of exercise price	Options and RSUs outstanding as of June 30, 2017	Weighted average remaining contractual life (years) (1)	Options exercisable as of June 30, 2017	Weighted average remaining contractual life (years) (1)
RSUs only	362,933	—	—	—
$0.82	34,377	3.28	34,377	3.28
$1.32	336,895	4.97	331,301	4.90
$1.47 - $2.20	770,909	8.09	327,940	6.14
$6.80- $8.99	681,254	8.13	298,625	7.69
$9.22- $10.98	202,983	8.61	65,706	8.06
$19.62-$20.97	245,858	7.38	159,656	7.33
	2,635,209	7.54	1,217,605	6.36


(1)	Calculation of weighted average remaining contractual term does not include the RSUs that were granted, which have an indefinite contractual term.

On June 27, 2017, at the annual meeting of shareholders, the Company’s shareholders voted on, and approved by the requisite majority, a one-time equity award exchange program (the “Exchange Program”). If implemented, the Exchange Program will allow the Company to cancel certain outstanding stock options issued under the 2014 Plan currently held by some of the Company's employees and executive officers in exchange for the grant under the 2014 Plan of a lesser number of equity awards, either in the form of stock options with exercise prices equal to the market value of the Company's ordinary shares on the date of grant or in the form of RSUs, as will be determined by the Company's board of directors, prior to commencement of the Exchange Program (collectively, the “New Awards”). The exchange ratio will be designed to result in a “value-for-value” exchange pursuant to which the Company will grant a new equity award with a value approximately equal to the value of the options that are surrendered. The Company will use the 52-week high closing price of its ordinary shares (as measured at the commencement of the Exchange Program) as a threshold for options eligible to be exchanged. The New Awards issued in exchange for outstanding vested or unvested stock options will vest over a three-year period, with one-third (1/3) vesting on the first anniversary of the date of grant and one-third (1/3) on each of the next two successive anniversaries.

Participation in the Exchange Program will be voluntary. The Exchange Program will only be open to certain stock option holders employed by the Company or providing services to the Company at the time of the Exchange Program, including certain officers. The Company's non-employee directors and retirees will not be eligible to participate in the Exchange Program. In addition, the Exchange Program will not be offered to employees located in countries where the Company determines that it is either impractical or undesirable to offer the Exchange Program. Following the approval by the Company's shareholders at the annual meeting of shareholders, the Board will determine whether and when to initiate the Exchange Program and any exchange offer made to implement the Exchange Program. However, the Company must commence the Exchange Program within 12 months following the date of shareholder approval. The stock options exchanged pursuant to the Exchange Program will be canceled and the ordinary shares underlying such options will become available for issuance under the 2014 Plan.



	b.	Share-based awards to non-employee consultants:

The Company granted options to a non-employee consultant on March 12, 2007, which were exercised during the six months ended June 30, 2017. The Company granted 1,500 fully vested RSUs on January 1, 2017 to a non-employee consultant. As of June 30, 2017, there are no outstanding options or RSUs held by non-employee consultants.



	c.	Warrants to purchase ordinary shares:

The following table summarizes information about warrants outstanding and exercisable as of June 30, 2017:



Issuance date	Warrants outstanding	Exercise price per warrant		Warrants exercisable	Contractual term
	(number)			(number)

July 14, 2014 (1)	403,804	$	10.08	403,804	July 13, 2018
December 30, 2015 (2)	119,295	$	9.64	119,295	See footnote (2)
November 1, 2016 (3)	2,437,500	$	4.75	2,437,500	November 1, 2021
December 28, 2016 (4)	47,717	$	9.64	47,717	See footnote (4)
	3,008,316			3,008,316

(1) Represents warrants to purchase ordinary shares at an exercise price of $10.08 per share, which were granted on July 14, 2014 as part of our series E investment round.

(2) Represents a warrant to purchase ordinary shares at an exercise price of $9.64 per share, which was issued on December 31, 2015 to Kreos, in connection with a loan made by Kreos to us. The warrant is currently exercisable (in whole or in part) until the earlier of (i) December 30, 2025 or (ii) immediately prior to the consummation of a merger, consolidation, or reorganization of us with or into, or the sale or license of all or substantially all the assets or shares of us to, any other entity or person, other than a wholly-owned subsidiary of us, excluding any transaction in which our shareholders prior to the transaction will hold more than 50% of the voting and economic rights of the surviving entity after the transaction. None of these warrants had been exercised as of June 30, 2017.

(3) Represents warrants issued as part of our follow-on offering in November 2016.

(4) Represents a warrant in the amount of 47,717 ordinary shares issued to Kreos as part of the $8.0 million drawdown under the Loan Agreement, which occurred on December 28, 2016. See footnote 2 for exercisability terms.



	d.	Share-based compensation expense for employees and non-employees:

The Company recognized non-cash share-based compensation expense for both employees and non-employees

in the consolidated statements of operations for the periods shown below as follows (in thousands):



	Six Months Ended June 30,
	2017		2016
Cost of revenues	$	52	$	48
Research and development, net	232		249
Sales and marketing, net	375		376
General and administrative	1,039		870
Total	$	1,698	$	1,543



	e.	At-the-market offering program:

On May 10, 2016, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Piper Jaffray, pursuant to which it may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $25 million, through Piper Jaffray acting as its agent. Subject to the terms and conditions of the Equity Distribution Agreement, Piper Jaffray will use its commercially reasonable efforts to sell on the Company’s behalf all of the ordinary shares requested to be sold by the Company, consistent with its normal trading and sales practices. Piper Jaffray may also act as principal in the sale of ordinary shares under the Equity Distribution Agreement. Sales may be made under the Company's registration statement on Form S-3, which was declared effective on May 9, 2016 (the “Form S-3”), in what may be deemed “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “ATM Offering Program”). Sales may be made directly on or through the NASDAQ Capital Market, the existing trading market for the Company's ordinary shares, to or through a market maker other than on an exchange or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law, including in privately negotiated transactions. Piper Jaffray is entitled to compensation at a fixed commission rate of 3.0% of the gross sales price per share sold through it as agent under the Equity Distribution Agreement. Where Piper Jaffray acts as principal in the sale of ordinary shares under the Equity Distribution Agreement, such rate of compensation will not apply, but in no event will the total compensation of Piper Jaffray, when combined with the reimbursement of Piper Jaffray for the out-of-pocket fees and disbursements of its legal counsel, exceed 8.0% of the gross proceeds received from the sale of the ordinary shares. The Company is not required to sell any of its ordinary shares at any time.

The Company may raise up to $25 million under its ATM Offering Program pursuant to the terms of its agreement with the sales agent. However, due to limitations under the rules of Form S-3, which have applied to the Company since it filed its annual report on Form 10-K for the fiscal year ended December 31, 2016 on February 17, 2017, taking into account ordinary shares issued and settled under the Company’s ATM Offering Program since February 17, 2017, as of June 30, 2017, the Company may issue up to $7.3 million in primary offerings under its effective shelf registration statement on Form S-3 (File No. 333- 209833) (the “Form S-3”), including its ATM Offering Program, during the 12 months following February 17, 2017, unless and until it is no longer subject to such limitations.

During the six months ended June 30, 2017, the Company issued and sold 3,701,620 ordinary shares at an average price of $1.74 per share under its ATM Offering Program (as defined in Note 8e above). The gross proceeds to the Company were $6.4 million, and the net aggregate proceeds after deducting commissions, fees and offering expenses in the amount of $313 thousand were $6.1 million. As a result, from the inception of the ATM Offering Program in May 2016 until June 30, 2017, the Company had sold 4,393,682 ordinary shares under the ATM Offering Program for gross proceeds of $11.0 million and net proceeds to the Company of $10.2 million (after commissions, fees and expenses). Additionally, as of that date, the Company had paid Piper Jaffray compensation of $330 thousand and had incurred total expenses of approximately $781 thousand in connection with the ATM Offering Program.