Stockholders Equity

12 Months Ended

Dec. 31, 2012

Stockholders Equity [Abstract]

Stockholders Equity

Note 11

Stockholders' Equity:

Preferred Stock

The Company has authorized preferred stock consisting of 5,000,000 shares with a $.01 par value, which shall be designated as blank check preferred. The Board of Directors may authorize the issuance from time to time of one or more classes of preferred stock with one or more series within any class thereof, with such voting powers, full or limited, or without voting powers and with such designations, preferences and relative, participating, optional or special rights and qualifications, limitations or restrictions thereon as shall be set forth in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such preferred shares. At December 31, 2012 and 2011, no shares of preferred stock were outstanding. The Company has no present intention to issue shares of preferred stock.

Common Stock

On August 18, 2012, the Board of Directors approved a stock repurchase program up to a maximum to $25 million. To date, the Company has repurchased 842,961 shares at an average price of $12.76 per share for a total of $10,756.

On December 12, 2011, the stockholders voted to increase the number of authorized shares of common stock from 35,000,000 to 50,000,000 shares.

On December 13, 2011, in conjunction with the reverse acquisition, the Company issued 15,084,370 shares of common stock to the shareholders of Radiancy, Inc. and also, 380,000 shares of restricted stock to two executives of per-merged PhotoMedex. These restricted shares vest over a three-year period.

Common Stock Options

Pre-Reverse Merger

In 1999, Radiancy established a stock option plan (the "Plan") whereby 6,033,748 shares of the Company's common stock were reserved for issuance to eligible employees, directors and consultants. Stock options granted under the Plan generally vest ratably over a three-year period and expire 10 years from the date of the grant.

As of the closing of the reverse acquisition, the Plan was discontinued and all outstanding option grants, not exercised, under the Plan were cancelled.

Post-Reverse Merger

Following the closing of the reverse acquisition, the previous Non-Employee Director Stock Option Plan of PhotoMedex (the acquired entity) was adopted by the group. This plan has authorized 120,000 shares; of which 7,000 shares had been issued or were reserved for issuance as awards of shares of common stock, and 18,951 shares were reserved for outstanding stock options. The directors, who were elected to our Board in connection with the reverse merger, each received a one-time stock award of 5,000 shares of the Company's common stock in January 2012.

In addition, following the closing of the reverse acquisition, the previous 2005 Equity Compensation Plan ("2005 Equity Plan") of Pre-merged PhotoMedex (the acquired entity) was also adopted for use by the group. The 2005 Equity Plan has authorized 3,000,000 shares, of which 753,095 shares had been issued or were reserved for issuance as awards of shares of common stock, and 877,226 shares were reserved for outstanding options.

A summary of option transactions for all of the Company's stock options during the years ended December 31, 2012, 2011 and 2010:

	Number of Stock Options			Weighted Average Exercise Price
Outstanding at January 1, 2010		1,966,965			0.73
Granted		-			-
Exercised		-			-
Expired/cancelled		(16,029	)		5.23
Outstanding at December 31, 2010		1,950,936			0.69
Granted		1,476,279			0.04
Exercised		(2,782,435	)		0.15
Assumed in reverse merger		180,718			19.54
Expired/cancelled		(644,780	)		1.32
Outstanding at December 31, 2011		180,718		$	19.54
Granted		739,000			15.87
Exercised		(10,048	)	$	6.67
Expired/cancelled		(11,129	)	$	20.25
Outstanding and Exercisable at December 31, 2012		898,541		$	16.65

The outstanding and exercisable options at December 31, 2012, have a range of exercise prices and associated weighted remaining contractual life and weighted average exercise price, as follows:

Options Range of Exercise Prices		Outstanding Number of Shares		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Exercisable Number of Shares		Exercisable Weighted Avg. Exercise Price
$	0 - $15.00		535,956		9.04	$	13.51		45,956	$	8.27
$	15.01 - $30.00		345,400		9.12	$	18.79		115,400	$	16.37
$	30.01 - $45.00		2,169		5.02	$	39.41		2,169	$	39.41
$	45.01 - $60.00		3,563		3.97	$	47.07		3,563	$	47.07
$	60.01 - up		11,453		1.50	$	85.78		11,453	$	85.78
Total			898,541		8.94	$	16.65		178,541	$	19.63

The outstanding options will expire, as follows:

Year Ending	Number of Shares		Weighted Average Exercise Price		Exercise Price
2013		4,238	$	72.33	$	64.26 - $97.44
2014		2,499	$	102.48	$	102.48
2015		2,499	$	102.90	$	102.90
2016		2,634	$	69.48	$	48.72 - $93.66
2017 and later		886,671	$	15.89	$	5.70 - $47.88
		898,541	$	16.65	$	5.70 - $102.90

The aggregate intrinsic value for options outstanding and exercisable at December 31, 2012 was immaterial.

The Company uses the Black-Scholes option-pricing model to estimate fair value of grants of stock options with the following weighted average assumptions:

	Year Ended December 31,
	2012			2011			2010
Risk-free interest rate		1.2	%		1.76	%		N/A
Volatility		85.53	%		61.52	%		N/A
Expected dividend yield		0	%		0	%		N/A
Expected life	5 years			5 years				N/A
Estimated forfeiture rate		0	%		0	%		N/A

Prior to the reverse acquisition, Radiancy calculated the expected volatility based on the historic volatility of comparable public companies which operate in the same industry sector. Currently, the Company calculates expected volatility for a share-based grant based on historic daily stock price observations of its common stock. For estimating the expected term of share-based grants made in the years ended December 31, 2012 and 2011, the Company has adopted the simplified method. The Company has used historical data to estimate expected employee behaviors related to option exercises and forfeitures and included these expected forfeitures as a part of the estimate of expense as of the grant date.

With respect to grants of options, the risk-free rate of interest is based on the U.S. zero-coupon US Government bond rates appropriate for the expected term of the grant or award.

On January 26, 2012, the Company issued 30,000 shares of common stock to the six non-employee directors with an aggregate fair value of $405.

On March 18, 2012, the Company granted an aggregate of 509,000 options to purchase common stock to a number of employees and consultants with a strike price of $14, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. Also on March 18, 2012, the Company granted an aggregate of 230,000 non-qualified options to purchase common stock to two executive employees with a strike price of $20, which was set to match the exercise price of the warrants issued in the reverse merger and was higher than the quoted market value of our stock at the date of grant. The aggregate fair value of the options granted was $6,652. The options vest over five years and expire ten years from the date of grant.

On December 13, 2011, as part of the reverse merger, the Company issued 380,000 shares of restricted common stock to two executives of pre-merged PhotoMedex. These restricted shares have a purchase price of $0.01 per share and vest, and cease to be subject to the Company's right of repurchase, over a three-year period. The Company determined the fair value of the awards to be the fair value of the Company's common stock on the date of issuance less the value paid for the award.

As part of the reverse acquisition, the Company assumed 164,000 unvested restricted stock out of 200,000 shares of restricted stock awards that Pre-merged PhotoMedex were issued on March 30, 2011 to two of its senior executives. Based on the terms of the award between Pre-merged PhotoMedex and the grantees, the vesting of 36,000 of the restricted stock awards were accelerated as of December 13, 2011, the date of the reverse merger (the number of shares that could be vested without causing excise taxes under Sec. 4999 of the Internal Revenue Code to be imposed on the executive or the loss in any material respect of a deduction under Section 162(m) of the Internal Revenue Code).

This portion was accounted for as part of the consideration transferred, which was based on the amount of equity interest (shares and warrants) that Radiancy would have had to issue to PhotoMedex equity holders in order to provide the ownership ratio determined for the reverse acquisition.

The remaining 164,000 unvested restricted stock that were assumed by the company were accounted for at fair value as of the reverse acquisition date. Accordingly, the fair value of the awards will be recorded as compensation costs in the post-merger periods - at 3 equal annual installments over a 3-year period, on each anniversary of the closing of the merger, so long as the executive continues to be employed by the Company on each such date.

On June 30, 2011, the Board of Directors of Radiancy approved for its' Chief Executive Officer (i) a stock award of 2,045,571 shares of the Company's common stock and (ii) a cash bonus as a "gross-ups" for compensation of tax payments (tax obligations, withholdings and other tax-related liabilities in connection with the stock award and cash award). The Company recorded stock-based compensation expense of $27.1 million (including the cash bonus in an amount of $12.3 million) in respect to this grant, for the year ended December 31, 2011.

In addition, on June 30, 2011, prior to the reverse acquisition, the Board of Directors of Radiancy approved a grant to certain of its directors, executives and employees of 732,292 stock options at an exercise price of $0.01, to purchase shares of the Company's common stock (each option is exercisable to 2.011 shares of common stock). The fair value estimation of the award was $13.62 per option. The contractual term of each option is 10 years from the date of grant.The vesting periods of the options are as follows:

• 66,667 options vested upon the effective date of grant.  

• 49,470 options will vest on June 30, 2012  

• 616,155 options vest as: (i) 33% of the options on June 30, 2012; and (ii) as to the remaining options, 8 1/3% of the options on each of the end of the following eight consecutive quarters.

Upon consummation of the reverse merger, the Board of Directors accelerated the vesting periods so all outstanding options became fully vested and were available to exercise into shares of common stock. Options that were not exercised on that date were forfeited. Due to this accelerated vesting, 2,740,414 options were exercised into common shares.

Out of the total options exercised into shares of common stock during 2011, the Company shall have the right to repurchase 240,956 shares of common stock (the remaining balance as of December 31, 2012) at a price equal to the par value of such shares ($0.005 per share) in the event of either the resignation or the termination for cause according to the employment agreement of the employees with the Company or its subsidiary. The repurchase right will be subject to the same vesting periods as the option grants themselves. The Company accounted for the replacement of the options, with similar vesting terms, as a modification of an award and determined that the fair value of the replaced award equals the new award and therefore no incremental costs should be recorded. As a result, the stock based compensation of $504 will continue to be expensed over the original vesting period.

Total compensation expense was as $6,197, $34,001 and $392 for the years ended December 31, 2012, 2011 and 2010.

At December 31, 2012, there was $10,639 of total unrecognized compensation cost related to non-vested stock awards that is expected to be recognized over a weighted-average period of 3.43 years.

Common Stock Warrants

Following the closing of the reverse merger, the Company had warrants outstanding, a majority of which were issued in conjunction with the reverse merger on December 13, 2011. As a result of the reverse merger, Pre-merged PhotoMedex shareholders were issued warrants at a ratio of 0.305836 per each outstanding share held or a total of 1,026,435 warrants. The warrants have the following principal terms: (i) a warrant exercise price of $20 per share of common stock, (ii) an exercise period of three years, and (iii) the right of the Company to notify the holders of the warrants of an earlier expiration of the warrants, at any time following such time as the Company's common stock will have had a closing trading price in excess of $30 per share for a period of 20 consecutive trading days, provided that such earlier expiration date shall not be earlier than that date which is 20 trading days following the delivery of such notification by the Company.

A summary of warrant transactions for the years ended December 31, 2012 and 2011 is as follows:

	Number of Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2010		-		$	-
Issued		-			-
Assumed in reverse merger		1,067,240			19.98
Exercised		-			-
Expired/cancelled		-			-
Outstanding at December 31, 2011		1,067,240			19.98
Issued		25,000			20.00
Exercised		(17,756	)		7.50
Expired/cancelled		(11,216	)		47.04
Outstanding at December 31, 2012		1,063,268		$	19.91

At December 31, 2012, all outstanding warrants were exercisable.

If not previously exercised, the outstanding warrants will expire as follows:

Year Ending December 31,	Number of Warrants		Weighted Average Exercise Price
2013		4,589	$	18.48
2014		-		-
2015		32,250		17.19
2016		1,026,429		20.00
		1,063,268	$	19.91

The fair value of the warrants at the date of the consummation of the reverse acquisition was included as part of the calculation of the consideration transferred, as the consideration was determined based on the equity interests Radiancy would have had to issue to the stockholders of Pre-merged PhotoMedex to provide them the same equity interests in the combined company.