NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
Under the 2007 Stock Option Plans some of the options are vested in contingent upon meeting various departmental and Company’s wide performance goals. The fair value of each option grant with performance goals was estimated on the date of grant using the same option valuation model used for options granted without performance goals. If such goals are not met, no compensation cost is recognized and any recognized compensation cost is reversed.
As of December 29, 2005, all of the unvested out-of-the-money options, which amounted to 611,517, with an average exercise price of $3.46 per share with related vesting period from January 1, 2006 through March 2009 had been accelerated. The shares which may be purchased by exercise of the accelerated options shall be subject to a holding period according to which the employees shall only be entitled to sell a monthly fraction of such numbers of shares (1/36 per month).
The Company’s decision to accelerate the vesting of those options and to grant fully vested options was based primarily upon the issuance of SFAS No. 123R, which requires the Company to treat all unvested stock options as compensation expense effective January 1, 2006. The Company believes that the acceleration of vesting of those options will enable the Company to avoid recognizing stock-based compensation expense associated with these options in future periods. Additional purposes of the fully vested grant and for the acceleration were to make the options more attractive to the recipients, and to avoid discrimination between groups of option holders, respectively.
The acceleration had no impact on the Company’s statement of operations, however the impact of vesting accelerating on proforma stock-based compensation required to be disclosed in the financial statement footnotes under the provisions of SFAS No. 123, was to increase such disclosed compensation cost by approximately $1,021 for the year ended December 31, 2005.
MAGIC SOFTWARE ENTERPRISES LTD.
AND ITS SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
A summary of the Company’s stock option activity and related information for the years ended December 31, 2005, 2006 and 2007 is as follows:
Outstanding at the end of the year 3,061,216 $ 2.62 2,352,632 $ 2.52 3,673,528 $ 2.22
Vested and expected to vest at the end of the year 3,061,216 $ 2.62 2,336,982 $ 2.52 3,489,741 $ 2.21
Exercisable at the end of the year 3,061,216 $ 2.62 2,290,632 $ 2.54 2,407,532 $ 2.22
Out of the above Company’s stock option activity, during 2007 the Company granted selected executives and other key employees 500,000 share option awards whose vesting is contingent upon meeting various departmental and companywide performance goals, including revenue growth and net gain index. The options are granted at-the-money, contingently vest over a period of 4 years, and have contractual lives of 10 years. The fair value of those options was estimated on the date of grant using the same option valuation model used for the other options granted. If such goals are not met, no compensation cost is recognized and any recognized compensation cost is reversed. The inputs for expected volatility, expected dividends, expected term and risk-free rate used in estimating those options’ fair value are the same as those noted in the table related to options issued under the Share Option Plan.
MAGIC SOFTWARE ENTERPRISES LTD.
AND ITS SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
NOTE 12:- SHAREHOLDERS’ EQUITY (Cont.)
The weighted-average grant-date fair value of options granted during the twelve months ended December 31, 2005, 2006 and 2007 were $1.3, $0.98 and $1.08, respectively. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company ordinary shares on December 31, 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2007. This amount is changed based on the fair market value of the Company’s shares. Total intrinsic value of options exercised for the twelve months ended December 31, 2005, 2006 and 2007 were $107, $161 and $168, respectively. As of December 31, 2007, there was $1,436 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plans. That cost is expected to be recognized over a period of approximately 3 years.
The options outstanding as of December 31, 2007, have been separated into ranges of exercise price categories, as follows:
During the year ended December 31, 2007, 25,000 fully exercisable warrants, at an exercise price of $1.69, were granted to a consultant of the Company. As of December 31, 2007, those warrants were not exercised or forfeited.
The fair value for these warrants was estimated on the date of grant using Black-Scholes option pricing model, with the following weighted-average assumptions for the year ended December 31, 2007: weighted average volatility of 58.3%, risk-free interest rates of 4.7%, dividend yields of 0%
and a weighted average life of the options of 3 years.
Stock-based compensation expense, recognized as general and administrative expense, in respect of options granted to non employees amounted to
$19 for the year ended December 31, 2007.
e. Dividends:
The Company does not intend to pay cash dividends in the foreseeable future.
MAGIC SOFTWARE ENTERPRISES LTD.
Accumulated realized and unrealized gain (loss) on available-for-sale securities, net $ (83) $ 85
Accumulated foreign currency translation adjustments (1,254)
(581)
Cumulative effect of changes in accounting for uncertainties in income taxes (FIN 48) -
(530)
Total other comprehensive loss $ (1,337) $ (1,026)
NOTE 13:- GEOGRAPHIC INFORMATION