| STOCKHOLDERS' EQUITY (DEFICIENCY) | NOTE 9:- STOCKHOLDERS’
EQUITY (DEFICIENCY)
a. Common Stock: The
Common stock confers upon the holders the right to receive notice to participate and vote in general meetings of the Company,
and the right to receive dividends, if declared, and to participate in the distribution of the surplus assets and funds of the
Company in the event of liquidation, dissolution or winding up of the Company.
b. Series C Preferred
Stock: Each
share of Series C Preferred stock is convertible into one share of Common stock (subject to adjustment) at any time at the option
of the holders, provided that each holder would be prohibited from converting Series C Preferred stock into shares of Common stock
if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number
of shares of Common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s
provision of not less than 61 days’ prior written notice to the Company. In
the event of liquidation, dissolution, or winding up, each holder of Series C Preferred stock could elect to receive either (i)
in preference to any payments made to the holders of Common stock and any other junior securities, a payment for each share of
Series C Preferred stock then held equal $ 0.001, plus an additional amount equal to any dividends declared but unpaid on such
shares, and any other fees or liquidated damages then due and owing thereon or (ii) the amount of cash, securities or other property
to which such holder would be entitled to receive with respect to each share of Series C Preferred stock if such share of Series
C Preferred stock had been converted to Common stock immediately prior to such liquidation, dissolution, or winding up (without
giving effect to any conversion limitations). Shares
of Series C Preferred stock are not entitled to receive any dividends, unless and until specifically declared by the board of
directors. However, holders of Series C Preferred stock are entitled to receive dividends on shares of Series C Preferred stock
equal (on an as-if-converted-to-Common-stock basis) to and in the same form as dividends actually paid on shares of the Common
stock when such dividends are specifically declared by the board of directors. The Company is not obligated to redeem or repurchase
any shares of Series C Preferred stock. Shares of Series C Preferred stock are not otherwise entitled to any redemption rights,
or mandatory sinking fund or analogous fund provisions. Each
holder of Series C Preferred stock is entitled to the number of votes equal to the number of whole shares of Common stock into
which the shares of Series C Preferred stock held by such holder are then convertible (subject to the beneficial ownership limitations)
with respect to any and all matters presented to the stockholders for their action or consideration. Holders of Series C Preferred
stock vote together with the holders of Common stock as a single class, except as provided by law and except that the consent
of holders of a majority of the outstanding Series C Preferred stock is required to amend the terms of the Series C Preferred
stock.
c. Series D Preferred
Stock: Each
share of Series D Preferred Stock is convertible into 1,000 shares of common stock (subject to the beneficial ownership limitations
and adjustment as provided in the certificate of designation) at any time at the option of the holders, provided that each holder
would be prohibited from converting Series D Preferred Stock into shares of common stock if, as a result of such conversion, any
such holder, together with its affiliates, would own more than 4.99% of the total number of shares of common stock then issued
and outstanding. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%,
provided that any increase in such percentage shall not be effective until the 61st day after such notice to the Company. In
the event of our liquidation, dissolution, or winding up, each holder of Series D Preferred Stock will be entitled to receive
the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares
of Series D Preferred Stock if such shares had been converted to common stock immediately prior to such event (without giving
effect for such purposes to the 4.99% or 9.99% beneficial ownership limitation, as applicable) subject to the preferential rights
of holders of any class or series of the Company’s capital stock specifically ranking by its terms senior to the Preferred
D stock as to distributions of assets upon such event, whether voluntarily or involuntarily. Shares
of Series D Preferred Stock are not entitled to receive any dividends, unless and until specifically declared by the board of
directors. However, holders of Series D Preferred Stock are entitled to receive dividends on shares of Series D Preferred Stock
equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common
stock when such dividends are specifically declared by the board of directors, except for stock dividends or distributions payable
in shares of common stock on shares of common stock or any other common stock equivalents for which the conversion price will
be adjusted. The Company is not obligated to redeem or repurchase any shares of Series D Preferred Stock. Shares of Series D Preferred
Stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provision. The
holders of the Series D Preferred Stock have no voting rights, except as required by law. The Company may not alter or change
adversely the powers, preferences and rights of the Series D Preferred Stock or amend the certificate of designation or amend
its certificate of incorporation or bylaws in any manner that adversely affects any right of the holders of the Series D Preferred
Stock without the affirmative vote of the holders of a majority of the shares of Series D Preferred Stock then outstanding. The
Company is obligated to deliver shares of common stock upon conversion of the Series D Preferred Stock (the “Conversion
Shares”), within the time period specified in the certificate of designation. Failure to comply with the timely delivery
requirement triggers certain liquidated damages payable by the Company to each of the Series D Preferred Stock holders. If,
at any time while the Series D Preferred Stock is outstanding, the Company completed a Fundamental Transaction (as defined in
the certificate of designation), then upon any subsequent conversion of the Series D Preferred Stock, the holder will receive,
for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional cash, securities and/or other property or consideration (the “Alternate Consideration”)
receivable by holders of common stock as a result of such Fundamental Transaction for each share of common stock for which this
Series D Preferred Stock is convertible immediately prior to such Fundamental Transaction. For purposes of any such conversion,
the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction. If holders
of common stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series D Preferred
Stock following such Fundamental Transaction. If such Fundamental Transaction is also a Change of Control Transaction in which
the Company is not the surviving entity, then all shares of Series D Preferred Stock shall, upon consummation of such Change of
Control Transaction, automatically be converted into Conversion Shares. Since
the Company has sufficient authorized and unissued shares available to settle its commitments and since all holders of equally
(both preferred stock and common stock) would receive the same form of consideration upon the consummation of a Fundamental Transaction,
and the shares are not otherwise redeemable, the shares of Series D Preferred Stock are classified within permanent equity, consistent
with the guidance of ASC 480.
d. In April 2017, the
Company issued 9,000 restricted shares of Common stock to a consultant as part of the total consideration for its services
associated with the Company’s investor relation services. The restricted shares were fully vested during the year ended
December 31, 2017. The stock based expense recognized in the financial statements for services received from the consultant
in the year ended December 31, 2017 amounted to $49.
e. On October 4, 2017,
the Company issued 358,995 shares of Series C Preferred stock, to the holders of certain warrants to purchase an aggregate
of 563,910 shares of common stock that contained full ratchet anti-dilution price protection in such warrants pursuant to
a cashless exercise of such warrants.
f. On
November 2, 2017, the Company issued 20,987 shares of common stock and 172,886 shares of Series C Preferred Stock to the
holders of certain warrants to purchase an aggregate of 299,733 shares of common stock pursuant to a cashless exercise
of such warrants.
g. On
November 6, 2017, the Company closed the Offering of 897,958 shares of the Company’s common stock, 327 shares of
the Company’s Series D Preferred shares of the Company’s common stock (and common stock equivalents) at an
offering price of $4.90 per share of common stock, and $0.049 per share of Series D Preferred stock, and accompanying
warrant to purchase 0.75 of one share of common stock. Total gross proceeds from the offering totaled approximately $6,000,
and net proceeds of approximately $5,056 after deducting underwriting and estimated offering expenses. Each warrant has
an exercise price of $6.95 per full share of common stock with a life term of five years. The securities were issued pursuant
to the Company’s registration statement on Form S-1 originally filed with the Securities and Exchange Commission
on June 21, 2017, and declared effective on November 1, 2017.
h. Starting from March
1, 2017 through September 30, 2017, the Company completed a series of bridge financings pursuant to which the Company have
received from accredited investors aggregate proceeds of $1,380 in exchange for 2017 Notes in the aggregate principal amount
of $1,380, and seven-year Warrants to purchase an aggregate of 552,000 shares of common stock at an exercise price of $5.90
per share. Upon closing of the Offering, the 2017 Notes were automatically converted and as a result the Company issued an
aggregate of 230,680 shares of common stock (and common stock equivalents), 131 shares of the Company’s Series D preferred
stock and warrants to purchase an aggregate of 271,096 shares of common stock.
i. Warrants issued
to investors:
The following table below summarizes the outstanding
warrants issued to investors as of December 31, 2018 and 2017, respectively:
Warrants
outstanding as of December 31,
2018 2017 Exercise price Expiration
date
$
November
2011 Warrants (1) (2) — 245,893 1.393 November
15, 2018
February 2015 Warrants
(3) 686,667 686,667 3.00/6.00 February
30, 2019
March through September
2017 Warrants (5) 552,000 552,000 5.90 May
through September 2022
November
2017 Warrants (6) 1,296,605 1,250,687 6.90 November
1, 2022
Total
outstanding 2,535,272 2,735,427
1. In November 2011,
the Company issued to some of its stockholders warrants to purchase 2,319,062 shares of Series B-2 Preferred stock with a
fixed exercise price of $ 0.199 per share (reflecting a 30% discount on the fair value of the Company’s Preferred stock
on that date). The warrants expire on November 15, 2018. On May 2014, the Company effected a reverse split of the Company’s
stock of seven to one. In addition, on April 2015 all of the Company’s B-2 warrants were reclassified as warrants to
common shares. As a result, these warrants have a fixed exercise price of $1.393 to purchase 331,293 shares of Common Stock.
During 2017, 85,400 of the Company’s B2 Warrants were exercised. During 2018, an additional 68,799 B2 Warrants were
exercised and the remaining 177,094 B2 Warrants expired.
2. In February 2013
through December 2014, the Company issued to some of its stockholders warrants to purchase 563,910 shares of Common stock.
The exercise price at which the warrant may be exercised is $ 2.66 per share, subject to adjustment for stock splits, fundamental
transactions or similar events. The warrants were to expire in February 2018 through December 2019, based on the issuance
date (see also Note 8a). On October 4, 2017, these warrants were cashless exercised (see also Note 10e).
3. In
February 2015, the Company negotiated a securities purchase agreement which included warrants to purchase 840,000 shares
of Common stock. The exercise price at which the warrant may be exercised is $3 for 420,000 shares and $6 for 420,000
shares, subject to certain adjustments. The warrants to purchase the 840,000 shares were to expire by February 2017. However,
in January 2017, the Company agreed to extend the warrants to purchase the 840,000 shares by additional two years until
February 2019 pursuant to the Warrant Amendment. On November 2, 2017, 153,333 of such warrants were cashless exercised
(see also Note 10f).
4. On
March 25, 2015, the Company issued warrants to purchase up to 61,000 shares of Common stock to a consultant as consideration
for the provision of guidance and assistance in connection with the filing of the Company’s Form 10 and becoming
a public reporting company. The warrants had an exercise price of $2.57 per share, subject to adjustment for stock splits,
fundamental transactions or similar events and were scheduled to expire on March 25, 2020. On November 2, 2017, these
warrants were cashless exercised (see also Note 10f).
5. During
the period March 1, 2017 through September 30, 2017, the Company completed a series of bridge financings pursuant to which
the Company have received from accredited investors aggregate proceeds of $1,380 in exchange for 2017 Notes in the aggregate
principal amount of $1,380, and seven-year Warrants to purchase an aggregate of 552,000 shares of common stock at an exercise
price of $5.90 per share.
6. In conjunction with
the Company’s Offering for the issuance of 1,224,488 shares of the Company’s Common stock, the Company also issued
warrants to purchase up to 918,366 shares of common stock. Additionally, the Company issued to the underwriters a unit purchase
option to purchase units at an exercise price equal to $6.125 pursuant to which an aggregate of 61,224 shares and warrants
to purchase 45,918 shares are issuable to the underwriters. Upon closing of the Offering, the 2017 Notes were automatically
converted and as a result the Company issued an aggregate of 361,462 shares of common stock (and common stock equivalents)
and warrants to purchase an aggregate of 271,096 shares of common stock. The warrants have an exercise price of $6.90 per
share, subject to adjustment for stock splits, fundamental transactions or similar events and shall expire on November 1,
2022.
j. Stock option plan: In
November 2004, the Board of Directors of the Company adopted a stock option plan (“the Plan”), according to which
options may be granted to employees, directors and consultants. Pursuant
to the Plan, the Company reserved for issuance 400,000 shares of Common stock. Each option entitles the holder to purchase one
share of Common stock of the Company and expires after 10 years from the date of grant. Any options that are terminated, cancelled,
forfeited or not exercised, become available for future grants. In
February 2014, the Board of Directors of the Company adopted a new stock option plan (“the New Plan”), according to
which options may be granted to employees, directors and consultants. Pursuant
to the New Plan, the Company reserved for issuance 714,286 shares of Common stock. Each option entitles the holder to purchase
one share of Common stock of the Company and expires after 10 years from the date of grant. Any options that are terminated, cancelled,
forfeited or not exercised, become available for future grants.
On
June 13, 2018 the Company’s shareholders amended the NanoVibronix 2014 Long-Term Incentive Plan (the “2014 Plan”),
to increase the aggregate number of shares of common stock reserved for issuance under the 2014 Plan by an additional 750,000
shares, to a total of 1,464,286 shares (the “Plan Amendment Proposal”). As
of December 31, 2018, under the New Plan, 292,737 options were available for future grants. In
addition, the Company issued options to purchase 275,038 shares of Common Stock outside of the New Plan.
1. Option issued to
employees, consutants and directors A summary of the Company’s
options activity and related information with respect to options granted to employees, consultants, and directors during the years
ended December 31, 2018 and 2017 are as follows:
Number of Weighted Weighted Aggregate
Outstanding - January 1, 2017 1,234,934 $ 3.01 7.18 3,419
2017 Activity:
Granted — $ — — —
Exercised — $ — — —
Expired or Forfeited (7,160 ) $ 10.08 — —
Outstanding - December 31, 2017 1,227,774 $ 3.01 7.18 3,419
2018 Activity:
Granted 338,750 $ 4.75 9.65 735
Exercised (48,017 ) $ 0.07 4.24 —
Expired or Forfeited (71,920 ) $ 4.41 7.16 —
Outstanding - December 31, 2018 1,446,587 $ 3.16 7.87 4,578
Exercisable at end of year - December 31, 2018 1,217,818 $ 3.26 7.09 3,969 Weighted
average fair value of options granted to employees and directors during the years 2018 and 2017 was $ 2.17 and $ 0 per option,
respectively. Aggregate
intrinsic value of unexercised options by employees and directors during the years 2018 and 2017 was $ 0. The Aggregate intrinsic
value of the unexercised options represents the total intrinsic value (the difference between the exercise price and fair value
at the time of measurement) multiplied by the number of options exercised. The
aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s
closing share price on the last trading day of calendar 2018 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, 2018.
This amount is impacted by the changes in the fair market value of the Company’s shares. As
of December 31, 2018, the total unrecognized estimated compensation cost related to non-vested options granted prior to that date
was $ 228 which is expected to be recognized over a weighted average period of approximately 2 years.
3. Total stock-based
compensation: The
fair value for options granted in 2018 is estimated at the date of grant using a Black-Scholes-Merton options pricing model with
the following underlying assumptions:
Year
ended
2018 2017
Risk
free interest 2.77 % —
Dividend yields 0 % —
Volatility 54 % —
Expected term (in
years) 5 — The
Company applies ASC 505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”) with respect to options
and warrants issued to non-employees which requires the use of option valuation models to measure the fair value of the options
and warrants at the measurement date. The
total stock based expense recognized in the financial statements for services received from employees and non-employees is shown
in the following table (refer also to Note 10d):
Year
ended December
31,
2018 2017
Research
and development $ — $ 30
Selling and marketing 16 13
General
and administrative 873 757
Total $ 889 $ 800 |
