Note 4 - Accounting for Stock-based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 4:-

ACCOUNTING FOR STOCK-BASED COMPENSATION

Share Option Plan

Under the Company's Digital Power 2012 (as amended) (“Incentive Share Option Plan”), options my be granted

to employees, officers, consultants, service providers and directors of the Company or its subsidiary.

As of September 30, 2015, the Company had authorized according to the Incentive Share Option Plan, the grant of options to officers, management, other key employees and others of up to 1,372,630 options for the Company’s common shares. The maximum term of the options is ten years from date of grant. As of September 30, 2015, an aggregate of 670,130 shares of the Company’s common stock were still available for future grant.

The options granted generally become fully exercisable after four years and expire no later than 10 years from the date of the option grant. Any options that are forfeited or cancelled before expiration become available for future grants

The fair value for options granted during the 3 and nine months ended September 30, 2015 amortized over their vesting period using a straight-line recognition method and estimated at the date of grant with the following assumptions:

	Nine months ended						Three months ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014


Weighted Average fair value	$	0.43		$	1.14		$	0.43			-
Dividend yield		0	%		0	%		0	%		-
Expected volatility		71.6	%		77.6	%		71.6	%		-
Expected life (years)		6.25			6.25			6.25			-

A summary of the Company’s employee share option activity (except options to consultants and service providers) and related information is as follows:

	Nine months ended September 30, 2015
	Amount of options		Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value (*) In thousends
Outstanding at the beginning of the period		1,262,763	$	1.57		7.65	$	40.57
Granted		135,000	$	0.68
Fortfeited		150,000	$	1.44
Outstanding at the end of the period		1,247,763	$	1.48		7.08	$	1

Exercisable options at the end of the period		656,513	$	1.52		5.61	$	-

(*) Calculation of aggregate intrinsic value is based upon the share price of the Company’s common stock as of

September 30, 2015 ($0.67) per share).

Under the provisions of ASC 718, the fair value of each option is estimated on the date of grant using a Black-Sholes option valuation model that uses the assumptions such as stock price on the date of the grant, exercise price, risk-free interest rate, expected volatility, expected life and expected dividend yield of the option. Expected volatility is based exclusively on historical volatility of the entity's stock as allowed by ASC 718. The Company uses historical information with respect to the employee options exercised to estimate the expected term of options granted, representing the period of time that options granted are expected to be outstanding. The risk-free interest rate of the period within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

135,000 options were granted during the first nine months of 2015.

The total employee’s equity-based compensation expense related to all of the Company’s equity-based awards recognized for the nine months and three months ended September 30, 2015 and 2014 is comprised as follows:

	Nine months ended				Three months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	Unaudited		Unaudited		Unaudited		Unaudited

Cost of goods sold		4		-		1		-
Sales and marketing expenses		8		10		2		5
Research and development		14		13		3		6
General and administrative		155		129		38		59
Total employees equity-based compensation expense		181		152		44		70

As of September 30, 2015, there was $486 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the share option plans. That cost is expected to be recognized over a period of the next 2.74 years.