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Note 1: Organization and Basis of Presentation
NovoCure Limited (including its consolidated subsidiaries, the “Company”) was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of tumor treating fields (“TTFields”) for the treatment of solid tumors. The Company has regulatory approvals and clearances in certain countries for Optune, its first TTFields delivery system, to treat adult patients with glioblastoma (“GBM”).
In September 2015, the Company’s shareholders approved the restructuring of the Company’s share capital by converting the Company’s ordinary and preferred shares to no par value shares and by effecting a sub division of the issued and outstanding share capital of the Company based on a proportion of 1: 5.913 (“Share Split Ratio”), such that each ordinary and preferred share nominal value of £0.01 of the Company, was divided into 5.913 shares of such applicable class of shares of the Company each with no par value. It was also resolved to apply the Split Ratio to the Company’s outstanding options and warrants, in accordance with their terms. All share and per share information included in these consolidated financial statements has been retroactively adjusted to reflect the conversion to no par value shares and the Share Split Ratio.
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Note 2: Significant accounting policies
The consolidated financial statements are prepared according to United States generally accepted accounting principles (“U.S. GAAP”).
a. Use of estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, tax liabilities, useful-life of field equipment, revenue recognition and the estimations required in accrual base accounting, and share-based compensation costs. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.
b. Financial statements in U.S. dollars:
The accompanying financial statements have been prepared in U.S. dollars in thousands, except for share and per-share data.
The Company finances its operations in U.S. dollars and a substantial portion of its costs and revenues from its primary markets is incurred in U.S. dollars. As such, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which NovoCure Limited and certain subsidiaries operate. The Company’s reporting currency is U.S. dollars.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Accounting Standards Codification (ASC) No. 830-10, “Foreign Currency Matters.” All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the consolidated statements of operations as financial income or expenses, as appropriate.
For a subsidiary whose functional currency has been determined to be its local currency, assets and liabilities are translated at year-end exchange rates and statement of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.
c. Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances, including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.
d. Cash equivalents:
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with an original maturity of three months or less at the date acquired.
e. Short-term investments and restricted cash:
1. Short-term investments:
The Company accounts for investments in debt securities in accordance with ASC 320, “Investments-Debt and Equity Securities.” Management determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. For the years ended December 31, 2016 and 2015, all securities are classified as held-to-maturity since the Company has the intent and ability to hold the securities to maturity and, accordingly, debt securities are stated at amortized cost.
The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any other than temporary impairment losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.
For the three years ended December 31, 2016, no impairment losses have been identified.
2. Restricted cash:
The Company has restricted cash used as security for the use of Company credit cards, presented in short-term assets. Additionally, the Company has pledged bank deposits to cover bank guarantees related to facility rental agreements, fleet lease agreements and customs payments presented in other long-term assets (see Note 12).
f. Trade Receivables:
Revenues from the use of Optune are recorded on an accrual basis for payers that meet the revenue recognition criteria for accrual basis where an agreement exists and collectability is reasonably assured. The Company considers receivables past due based on payment terms and reserve specific receivables if collectability is no longer reasonably assured. The Company evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed uncollectible, such balance is charged against the reserve. For the year ended December 31, 2016, the allowance for doubtful accounts is $0.
g. Inventories:
Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. The Company regularly evaluates the ability to realize the value of inventory. If actual demand for the Company’s delivery systems deteriorates, or market conditions are less favorable than those projected, inventory write-offs may be required.
Inventory write-offs of $774, $0 and $0, respectively, were identified for the years ended December 31, 2016, 2015 and 2014.
h. Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:
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% |
Computers and laboratory equipment |
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15 - 33 |
Office furniture |
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6 - 33 |
Production equipment |
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20 |
Leasehold improvements |
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Over the shorter of the term of the lease or its useful life |
i. Field equipment under operating leases:
Field equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the field equipment which was determined to be 18 to 36 months. Field equipment consists of equipment being utilized under rental agreements accounted for in accordance with ASC 840 on a monthly basis as an operating lease, as well as “service pool” equipment. Service pool equipment is equipment owned and maintained by the Company that is swapped for equipment that needs repairs or maintenance by the Company while being rented by a patient. The Company records a provision for any excess, lost or damaged equipment when warranted based on an assessment of the equipment. Write-downs for equipment are included in cost of revenues. During the years ended December 31, 2016, 2015 and 2014, write downs for $6,436 (see Note 7), $36 and $12, respectively, were identified.
j. Impairment of long-lived assets:
The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. During the three years ended December 31, 2016, no impairment losses have been identified other than the impairment of field equipment described below in Note 7.
k. Other long-term assets:
Long term lease deposits in respect of office rent and vehicles under operating leases and restricted deposits are presented in other long-term assets.
l. Revenue recognition:
The TTFields delivery system for GBM, Optune, is comprised of two main components: (1) an Electric Field Generator (the “device”) and (2) Transducer Arrays and related accessories that are disposable supplies to the device (“disposables”). Title is retained by the Company for the device and the patient is provided replacement disposables and technical support for the device during the rental period. The device and disposables are always supplied and functioning together and are not sold on a standalone basis.
Revenues are recognized when persuasive evidence of an arrangement exists, delivery of Optune has occurred, the fee is fixed or determinable and collectability is reasonably assured. The evidence of an arrangement generally consists of a prescription, a patient service agreement and the verification of eligibility and insurance with the patient’s third-party insurance company (“payer”). The Company assesses whether the fee is fixed or determinable based on whether there is sufficient history with payers to reliably estimate their individual payment patterns or contractual arrangements exist and whether it can reliably estimate the amount that would be ultimately collected. Once the Company can reliably estimate the amounts that would be ultimately collected per payer and the above criteria are met, the Company recognizes revenues from the use of Optune on an accrual basis ratably over the lease term. During 2016, the Company began to recognize net revenues on an accrual basis for certain payers in the amount of $8,458 that met the criteria above. Revenues are recognized when cash is collected when the revenue criteria above are not met, such as when the price is not fixed or determinable or the collectability cannot be reasonably assured. Patients have out-of-pocket costs for the amount not covered by their payer and the Company bills the patient directly for the amounts of their co-pays and deductible, subject to the Company’s patient assistance programs. The Company currently recognizes revenue from patients at the time cash is collected.
Deferred revenues include amounts invoiced for days of therapy to be provided in future periods.
Revenues are presented net of indirect taxes, which include excise taxes of $105, $1,457, and $1,010 for the years ended December 31, 2016, 2015 and 2014, respectively, and other indirect taxes of $867, $818 and $266 for the years ended December 31, 2016, 2015 and 2014, respectively.
m. Charitable care:
The Company provides Optune to patients who meet certain criteria under its charitable care policy without charge. Because the Company does not pursue collection of amounts determined to qualify as charity, they are not reported as revenue. The Company's costs of care provided under charitable care were: $1,675, $1,376 and $836 for the years ended December 31, 2016, 2015 and 2014, respectively. These estimates were determined by applying a ratio of costs to gross charges multiplied by the Company's gross charitable care charges.
n. Shipping and handling costs:
The Company does not bill its customers for shipping and handling costs associated with shipping Optune to its customers. These direct shipping and handling costs of $3,389, $1,385 and $553 for the years ended December 31, 2016, 2015 and 2014, respectively are included in selling and marketing costs.
o. Accounting for share-based payments:
The Company accounts for share-based compensation in accordance with ASC 718, “Compensation—Stock Compensation.” ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.
The Company recognizes compensation costs net of a forfeiture rate only for the value of awards granted using the accelerated method over the requisite service period of the award, which is generally the option vesting term of four years. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company selected the Black-Scholes option-pricing model as the most appropriate fair value method for its option awards and Employee Share Purchase Plan. The option-pricing model requires a number of assumptions, of which the most significant are the share price expected, expected volatility and the expected option term.
Prior to NovoCure Limited’s initial public offering (“IPO”), the fair value of ordinary shares underlying the options was historically determined by management and the board of directors. Because there was no public market for the Company’s ordinary shares, the board of directors determined fair value of an ordinary share at the time of grant of the option by considering a number of objective and subjective factors including operating and financial performance, the lack of liquidity of share capital, general and industry specific economic outlook and valuations performed amongst other factors. For the period from January 1, 2015 through the IPO and for the year ended December 31, 2014, the Company’s board of directors determined the fair value of ordinary shares for the reported periods, among other factors, based on valuations performed using the hybrid method, which is the hybrid between the probability weighted expected return method (PWERM) and the option pricing method.
The computation of expected volatility is based on actual historical share price volatility of comparable companies. Expected term of options granted is calculated using the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.
p. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, short-term investments, restricted cash, receivables and prepaid expenses, trade receivables, trade payables and other accounts payable and accrued expenses approximate their fair value due to the short-term maturity of such instruments. Based upon the borrowing terms and conditions currently available to the Company, the carrying values of the long-term loans approximate fair value.
The Company accounts for certain assets and liabilities at fair value under ASC 820, “Fair Value Measurements and Disclosures.” Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data; and
Level 3 - Unobservable inputs which are supported by little or no market activity.
The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the type of instrument, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the instrument are categorized as Level 3.
q. Basic and diluted net loss per share:
The Company applies the two class method as required by ASC 260-10, “Earnings per Share.” ASC 260-10 requires the income or loss per share for each class of shares (ordinary and preferred shares) to be calculated assuming 100% of the Company’s earnings are distributed as dividends to each class of shares based on their contractual rights. No dividends were declared or paid during the reported periods.
According to the provisions of ASC 260-10, the Company’s preferred shares are not participating securities in losses and, therefore, are not included in the computation of net loss per share.
Basic and diluted net loss per share is computed based on the weighted average number of ordinary shares outstanding during each year. Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus dilutive potential shares considered outstanding during the period, in accordance with ASC 260-10. Basic and diluted net loss per ordinary share was the same for each period presented as the inclusion of all potential ordinary shares (all options and warrants) outstanding was anti-dilutive.
r. Income taxes:
The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes.” ASC 740-10 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value, if needed.
The Company established reserves for uncertain tax positions based on the evaluation of whether or not the Company’s uncertain tax position is “more likely than not” to be sustained upon examination. The Company records interest and penalties pertaining to its uncertain tax positions in the financial statements as income tax expense.
s. Concentration of risks:
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash, short-term investments and trade receivables.
Cash and cash equivalents and restricted cash are invested in major banks or financial institutions in Jersey, the United States, Israel, Luxemburg, Switzerland, Japan and Germany. Such investments may be in excess of insured limits and are not insured in other jurisdictions. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.
The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
In 2016, two payers represented $10,393,$7,010 or 13 %, 9 % of net revenues, respectively. In 2015, the same two payers represented $5,595 and $2,512 or 17% and 8% of net revenues, respectively. In 2014, the same two payers represented $2,372 and $2,014 or 15% and 12% of net revenues, respectively. Credit risk with respect to trade receivables is limited.
t. Retirement, pension and severance plans:
The Company has a 401(k) retirement savings plan for its U.S. employees. Each eligible employee may elect to contribute a portion of the employee’s compensation to the plan. The Company historically has not and currently does not make any matching contributions to this plan.
The Company has a defined benefit plan with a pension fund for its Swiss employees, whereby the employee and the Company contribute to the pension fund. The Company accounts for its obligation, in accordance with ASC 715, "Compensation – Retirement Benefits" (see note 9).
The pension expense for the years ended December 31, 2016, 2015 and, 2014 was $529, $404 and $205, respectively.
Israeli law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Company makes ongoing deposits into employee pension plans to fund its severance liabilities. According to Section 14 of Israel Severance Pay Law, the Company makes deposits on behalf of its employees with respect to the Company’s severance liability and therefore no obligation is provided for in the financial statements. Severance pay liabilities with respect to employees who are not subject to Section 14, are provided for in the financial statements based upon the number of years of service and the latest monthly salary and the related deposits are recorded as an asset based on the cash surrender value. Severance expense for the years ended December 31, 2016, 2015 and 2014 amounted to $430, $356 and $307, respectively.
u. Contingent liabilities:
The Company accounts for its contingent liabilities in accordance with ASC 450, “Contingencies.” A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated (see Note 14 c).
With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2016 and 2015, the Company was not a party to any ligation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
v. Other comprehensive loss:
The Company accounts for comprehensive loss in accordance with ASC 220, "Comprehensive Income". ASC 220 establishes standards for the reporting and display of comprehensive loss and its components. Comprehensive loss generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The accumulated other comprehensive loss, net of taxes, relates to a pension liability and foreign currency translation adjustments.
w. Going concern:
In 2016, the Company adopted ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), that provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. The adoption of ASU 2014-15 don’t have any impact on the consolidated financial statements or related disclosures.
x. Recently issued accounting pronouncements:
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The new revenue recognition standard will be effective in the first quarter of 2018, with the option to adopt it in the first quarter of 2017. The Company currently anticipates adopting the new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the standard using the modified retrospective method. While the Company is still in the process of completing its assessment on the impact this guidance will have on its consolidated financial statements and related disclosures, the Company expects that the most significant impact relates to the accounting for revenue transactions whereby there is variable consideration.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02-Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840. The standard is effective on January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 affect all entities that issue share-based payment awards to their employees and involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 covers two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals. In addition, in May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is currently evaluating the impact of the adoption of both revenue standards on its consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13 also applies to employee benefit plan accounting, with an effective date of the first quarter of fiscal 2022. The amendments in this update are effective for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements, footnote disclosures and employee benefit plans’ accounting.
In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be prospectively as of the earliest date practicable. The standard is effective on January 1, 2019. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements and footnote disclosures.
In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This standard requires the presentation of the statement of cash flows to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. The standard is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effects of the adoption of this ASU on the consolidated financial statements.
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Note 3: Cash and Cash equivalents and Short-term investments
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a. |
Cash and cash equivalents: |
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|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cash |
|
$ |
29,915 |
|
|
$ |
75,421 |
|
Money market funds |
|
|
69,865 |
|
|
|
44,002 |
|
Total cash and cash equivalents |
|
$ |
99,780 |
|
|
$ |
119,423 |
|
|
b. |
Short-term investments |
The Company invests in marketable U.S. Treasury Bills (“T-bills”) that are classified as held-to-maturity securities. The amortized cost and recorded basis of the T-bills are presented as short-term investments in the amount of $119,854 and $150,001, as of December 31, 2016 and 2015, respectively and their estimated fair value as of December 31, 2016 and 2015 was $119,825 and $149,978, respectively.
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Note 4: Receivables and prepaid expenses
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Advances and receivables from suppliers |
|
$ |
5,829 |
|
|
$ |
7,323 |
|
Government authorities |
|
|
1,867 |
|
|
|
1,955 |
|
Prepaid expenses |
|
|
2,238 |
|
|
|
1,290 |
|
Others |
|
|
150 |
|
|
|
231 |
|
|
|
$ |
10,084 |
|
|
$ |
10,799 |
|
|
Note 5: Inventories
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Raw materials |
|
$ |
5,243 |
|
|
$ |
3,518 |
|
Work in process |
|
|
8,292 |
|
|
|
4,618 |
|
Finished goods |
|
|
12,014 |
|
|
|
5,458 |
|
|
|
$ |
25,549 |
|
|
$ |
13,594 |
|
|
Note 6: Property and equipment, net
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cost: |
|
|
|
|
|
|
|
|
Computers and laboratory equipment |
|
$ |
10,121 |
|
|
$ |
6,734 |
|
Office furniture |
|
|
1,931 |
|
|
|
1,245 |
|
Production equipment |
|
|
1,179 |
|
|
|
857 |
|
Leasehold improvements |
|
|
2,885 |
|
|
|
1,653 |
|
Total cost |
|
$ |
16,116 |
|
|
$ |
10,489 |
|
Accumulated depreciation and amortization |
|
|
(6,304 |
) |
|
|
(3,937 |
) |
Depreciated cost |
|
$ |
9,812 |
|
|
$ |
6,552 |
|
Depreciation expense was $1,673, $1,348 and $886 for the years ended December 31, 2016, 2015 and 2014, respectively.
In 2015, the Company implemented a new Enterprise Resource Planning (ERP) system and capitalized costs incurred related to the system according to FASB ASC 350-40, "Accounting for the costs of Computer Software Developed or Obtained for Internal Use". As of December 31, 2016 and 2015, the Company capitalized an accumulated amount of $4,742 and $2,803, respectively. Amortization for the year ended December 31, 2016 and 2015 was $731 and 250, respectively.
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Note 7: Field equipment, net
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Field equipment |
|
$ |
11,167 |
|
|
$ |
9,226 |
|
Less: accumulated depreciation |
|
|
(2,359 |
) |
|
|
(3,197 |
) |
Field equipment, net |
|
$ |
8,808 |
|
|
$ |
6,029 |
|
Depreciation expense was $3,248, $1,555 and $1,076 for the years ended December 31, 2016, 2015 and 2014, respectively. Write downs of $6,436, $36, and $12 were identified for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company received U.S. Food and Drug Administration (“FDA”) approval on its Premarket Approval supplement application to market its second generation Optune system in the United States on July 13, 2016. The Company made the second generation Optune system available to all patients in the United States during the quarter ended September 30, 2016. Manufacturing of the first generation Optune system has been terminated. In 2016, the Company recorded an impairment loss with respect to the write-down of first generation Optune system field equipment in the amount of $6,412 (finished goods and production stage goods in the amount of $4,830 and $1,582, respectively) presented in cost of revenues.
|
Note 8: Other payables and accrued expenses
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Employees and payroll accruals |
|
$ |
7,541 |
|
|
$ |
8,258 |
|
Taxes payable and others |
|
|
3,142 |
|
|
|
2,850 |
|
Provision for settlement (Note 14c) |
|
|
5,500 |
|
|
|
- |
|
Deferred revenues |
|
|
2,267 |
|
|
|
52 |
|
Other |
|
|
76 |
|
|
|
712 |
|
|
|
$ |
18,526 |
|
|
$ |
11,872 |
|
|
Note 9: Employee benefit obligations
The Company sponsors a defined benefit plan (the “Swiss Plan”) for all its employees in Switzerland for retirement benefits, as well as benefits on death or long-term disability. The liability in respect of the Swiss Plan is the projected benefit obligation calculated using the projected unit credit method. The projected benefit obligation as of December 31, 2016 represents the actuarial present value of the estimated future payments required to settle the obligation that is attributable to employee service rendered before that date. Swiss Plan assets are recorded at fair value. Pension expense is presented in the payroll expenses in the various functions in which the employees are engaged. Actuarial gains and losses arising from differences between the actual and the expected return on the Swiss Plan assets are recognized in accumulated other comprehensive income (loss) and amortized over the requisite service period. The plan is part of a collective pension foundation run by an insurance company. The Company and the employees pay retirement contributions, which are defined as a percentage of the employees’ covered salaries. The foundation, in turn, has all its risks (disability, death, longevity) and future benefits managed and guaranteed by the insurance company. Interest is credited to the employees’ account at the minimum rate provided in the Swiss Plan, payment which is guaranteed by the insurance contract, which represents the Swiss Plan’s primary asset. The targeted allocation for these funds is as follows:
Asset Allocation by Category as of December 31, 2016: |
|
|
|
|
Asset Category: |
|
Asset allocation (%) |
|
|
Debt Securities |
|
|
28 |
|
Real Estate |
|
|
22 |
|
Equity Securities |
|
|
27 |
|
Others |
|
|
23 |
|
Total |
|
|
100 |
|
The following table sets forth the Swiss Plan’s funded status and amounts recognized in the consolidated financial statements for the year ended December 31, 2016 and 2015:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Change in Benefit Obligation |
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
6,223 |
|
|
$ |
- |
|
Interest cost |
|
|
64 |
|
|
|
47 |
|
Company service cost |
|
|
498 |
|
|
|
312 |
|
Employee contributions |
|
|
321 |
|
|
|
189 |
|
Prior service cost |
|
|
- |
|
|
|
158 |
|
Benefits paid |
|
|
422 |
|
|
|
4,023 |
|
Actuarial loss |
|
|
713 |
|
|
|
1,494 |
|
Projected benefit obligation at end of year |
|
$ |
8,241 |
|
|
$ |
6,223 |
|
Change in Plan Assets |
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
4,433 |
|
|
$ |
- |
|
Actual return on plan assets |
|
|
320 |
|
|
|
(63 |
) |
Employer contributions |
|
|
482 |
|
|
|
284 |
|
Employee contributions |
|
|
321 |
|
|
|
189 |
|
Benefits paid |
|
|
422 |
|
|
|
4,023 |
|
Fair value of plan assets at end of year |
|
$ |
5,978 |
|
|
$ |
4,433 |
|
|
|
|
|
|
|
|
|
|
Funded Status at End of year |
|
|
|
|
|
|
|
|
Excess of obligation over assets |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
|
|
|
|
|
|
|
|
|
Change in Accrued Benefit Liability |
|
|
|
|
|
|
|
|
Accrued benefit asset/(liability) at beginning of year |
|
$ |
(1,790 |
) |
|
$ |
- |
|
Company contributions made during year |
|
|
482 |
|
|
|
284 |
|
Net periodic benefit cost for year |
|
|
(529 |
) |
|
|
(404 |
) |
Net decrease in accumulated other comprehensive loss |
|
|
(426 |
) |
|
|
(1,670 |
) |
Accrued benefit liability at end of year |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Non - current plan assets |
|
$ |
5,979 |
|
|
$ |
4,433 |
|
Non - current liability |
|
|
8,242 |
|
|
|
6,223 |
|
Accrued benefit liability at end of year |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
Projected Benefit Payments |
|
|
|
|
|
|
|
|
Projected year 1 |
|
$ |
148 |
|
|
$ |
8 |
|
Projected year 2 |
|
|
150 |
|
|
|
13 |
|
Projected year 3 |
|
|
152 |
|
|
|
19 |
|
Projected year 4 |
|
|
155 |
|
|
|
25 |
|
Projected year 5 |
|
|
1,069 |
|
|
|
32 |
|
Projected year 6-10 |
|
$ |
928 |
|
|
$ |
264 |
|
The fair value of the plan assets is the estimated cash surrender value of the insurance contract at December 31, 2016. The level of inputs used to measure fair value was Level 2.
|
|
Year ended December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Net Periodic Benefit Cost |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
498 |
|
|
$ |
312 |
|
Interest cost (income) |
|
|
(21 |
) |
|
|
47 |
|
Expected return on plan assets |
|
|
(49 |
) |
|
|
(38 |
) |
Amortization of prior service costs |
|
|
87 |
|
|
|
14 |
|
Amortization of transition obligation |
|
|
14 |
|
|
|
69 |
|
Total net periodic benefit cost |
|
$ |
529 |
|
|
$ |
404 |
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions: |
|
|
|
|
|
|
|
|
Discount rate as of December 31 |
|
|
0.60% |
|
|
|
1.00% |
|
Expected long-term rate of return on assets |
|
|
0.60% |
|
|
|
1.00% |
|
Rate of compensation increase |
|
|
1.00% |
|
|
|
1.00% |
|
Mortality and disability assumptions (*) |
|
BVG 2015 GT |
|
|
BVG 2010 GT |
|
(*) |
Mortality data used for actuarial calculation. |
|
Note 10: Long-term loan, net of discount and issuance costs
In January 2015, the Company entered into a five-year term loan agreement (the “Term Loan Credit Facility”) with a lender to draw up to $100,000. In January 2015, the Company drew $25,000 from the lender. The Company had the option to draw the remaining $75,000 at any time through June 30, 2016. On June 30, 2016, the Company provided to the lender a drawdown notice for the remaining $75,000, and it received the funds in July 2016. As of December 31, 2016, there was $100,000 principal outstanding under the Term Loan Credit Facility.
Interest on the outstanding loan is 10% annually, payable quarterly in arrears. In addition, there is a 1.5% funding fee payable on the amount drawn on the funding date, a 0.75% pay-down fee on all principal amount repayments to be paid on the date such payments of principal are made and a pre-payment fee of 3.0%, 2.0% or 1.0% if the Company prepays outstanding loan amounts prior to the first, second or third year anniversaries, respectively, from the initial funding date. The entire outstanding principal loan is due in January 2020. The loan is secured by a first priority security interest in substantially all assets of the Company. The Term Loan Credit Facility sets forth certain affirmative and negative covenants with which the Company must comply on a quarterly basis commencing March 31, 2015 through the term of loan. As of December 31, 2016, the Company was in compliance with such covenants.
As of December 31, 2016 and 2015, the total discount of $1,699 and $491, respectively, and additional issuance costs of $2,070 and $1,739, respectively, are presented net of the loan and are amortized to interest expense over the five year term of the loan using the effective interest method.
|
Note 11: Other long-term liabilities
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred rent liability |
|
$ |
906 |
|
|
$ |
785 |
|
Leasehold improvements financing and other (see a and b below) |
|
|
193 |
|
|
|
254 |
|
Unrecognized tax benefits (Note 13e) |
|
|
2,400 |
|
|
|
1,565 |
|
Other |
|
|
534 |
|
|
|
131 |
|
|
|
$ |
4,033 |
|
|
$ |
2,735 |
|
a. In July 2013, the Company entered into a loan agreement with the landlord of its facility in Switzerland whereby the landlord will offer a loan of up to CHF 400 for the purpose of financing leasehold improvements in the facility. As of December 31, 2016 and 2015, the Company received CHF 220 ($232) of this financing. The principal and interest is due in monthly payments from January 1, 2014 through December 31, 2018 and bears an annual interest of 5%.
b. In May 2013, the Company entered into an agreement with the landlord of one of its facilities in the United States and in January 2014, the Company entered into an agreement with a leasing company for an aggregate of $226 for the purpose of financing leasehold improvements in the facility and a lease of machinery, respectively. The loan and interest is due in monthly payments from June 1, 2013 through May 1, 2023 and bears an annual interest of 7%.
The above principal leasehold improvement financing repayments as of December 31, 2016 are as follows:
2017 |
|
$ |
70 |
|
2018 |
|
|
77 |
|
2019 |
|
|
27 |
|
2020 |
|
|
24 |
|
2021 |
|
|
26 |
|
Thereafter |
|
|
39 |
|
|
|
|
263 |
|
Less: current portion of long-term loans |
|
|
(70 |
) |
Long-term loans, net of current portion |
|
$ |
193 |
|
|
Note 12: Commitments and contingent liabilities
The facilities of the Company are leased under various operating lease agreements for periods ending no later than 2024. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2019.
Future minimum lease payments under non-cancelable operating leases as of December 31, 2016, are as follows:
2017 |
$ |
3,276 |
|
2018 |
|
2,404 |
|
2019 |
|
2,186 |
|
2020 |
|
2,019 |
|
2021 |
|
1,594 |
|
Thereafter |
|
2,714 |
|
|
$ |
14,193 |
|
Lease and rental expense for the years ended December 31, 2016, 2015 and 2014 was $2,748, $2,194, and $1,794, respectively.
As of December 31, 2016 and 2015 the Company pledged bank deposits of $807 and $133, respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained guarantees by the bank for the fulfillment of the Company’s lease commitments of $955 and $283, respectively.
In January 2017, two putative class action lawsuits were filed against the Company, its directors and certain of its officers, as well as the underwriters in the Company’s October 2015 initial public offering. The complaints, which purport to be brought on behalf of a class of persons and/or entities who purchased or otherwise acquired ordinary shares of the Company pursuant and/or traceable to the registration statement and prospectus issued in connection with the Company’s initial public offering, allege material misstatements and/or omissions in the Company’s initial public offering materials in alleged violation of the federal securities laws and seek compensatory damages, among other remedies. The Company believes that the complaints are without merit and plans to defend the lawsuits vigorously. The Company has not accrued any amounts in respect of these lawsuits, as the amount of any liability is not probable or the amount cannot be reasonably estimated.
|
Note 13: Income taxes
a. The provision for income taxes from continuing operations is comprised of:
Loss before income taxes:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States (U.S.) |
|
$ |
(80,972 |
) |
|
$ |
(55,087 |
) |
|
$ |
(22,015 |
) |
Non-U.S. |
|
|
(40,492 |
) |
|
|
(52,060 |
) |
|
|
(58,285 |
) |
|
|
$ |
(121,464 |
) |
|
$ |
(107,147 |
) |
|
$ |
(80,300 |
) |
Income taxes expense:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
6,501 |
|
|
$ |
891 |
|
|
$ |
65 |
|
Non-U.S. |
|
|
3,863 |
|
|
|
3,678 |
|
|
|
324 |
|
Total current |
|
|
10,364 |
|
|
|
4,569 |
|
|
|
389 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
1 |
|
|
$ |
- |
|
|
$ |
- |
|
Non-U.S. |
|
|
16 |
|
|
|
(135 |
) |
|
|
(7 |
) |
Total deferred |
|
|
17 |
|
|
|
(135 |
) |
|
|
(7 |
) |
Total income taxes provision |
|
$ |
10,381 |
|
|
$ |
4,434 |
|
|
$ |
382 |
|
b. For purposes of comparability, the Company uses the notional U.S. federal income tax rate of 35% when presenting the Company's reconciliation of the income tax provision. The Company is a resident taxpayer in Jersey and as such is not generally subject to Jersey tax on remitted foreign earnings. A reconciliation of the provision for income taxes compared with the amounts at the notional federal statutory rate was:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
U.S Statutory Income Taxes Rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Non-deductible expenses |
|
|
(2.5 |
) |
|
|
(2.4 |
) |
|
|
(1.5 |
) |
Foreign taxes rate differential |
|
|
(14.2 |
) |
|
|
(19.2 |
) |
|
|
(26.5 |
) |
Change in valuation allowance |
|
|
(30.0 |
) |
|
|
(18.2 |
) |
|
|
(9.0 |
) |
State income taxes |
|
|
2.3 |
|
|
|
1.8 |
|
|
|
1.2 |
|
Change in excess taxes benefit |
|
|
1.2 |
|
|
|
- |
|
|
|
- |
|
Unrecognized taxes expense (benefit) |
|
|
(0.7 |
) |
|
|
(1.2 |
) |
|
|
0.3 |
|
Other |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
- |
|
Effective taxes rate |
|
|
(8.5 |
)% |
|
|
(4.1 |
)% |
|
|
(0.5 |
)% |
The Company's tax rate is affected by the tax rates in the jurisdictions outside the U.S. in which the Company operates. The jurisdictional location of earnings is a significant component of our effective tax rate as the tax rates outside of the U.S. are generally lower than the U.S. tax rate of 35% and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance.
c. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
18,770 |
|
|
$ |
11,504 |
|
Revenue recognition (timing differences) |
|
|
46,953 |
|
|
|
21,972 |
|
Net operating loss carryforwards |
|
|
577 |
|
|
347 |
|
|
Excess Tax Benefit |
|
|
3,510 |
|
|
|
- |
|
Deferred Revenue |
|
|
879 |
|
|
|
- |
|
Other temporary differences |
|
|
1,481 |
|
|
|
952 |
|
Total gross deferred taxes assets |
|
$ |
72,170 |
|
|
$ |
34,775 |
|
Less: valuation allowance |
|
|
(70,061 |
) |
|
|
(33,476 |
) |
Total deferred taxes assets |
|
$ |
2,109 |
|
|
$ |
1,299 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
1,789 |
|
|
|
1,008 |
|
Total gross deferred taxes liabilities |
|
$ |
1,789 |
|
|
$ |
1,008 |
|
|
|
|
|
|
|
|
|
|
Net deferred taxes assets |
|
$ |
320 |
|
|
$ |
291 |
|
d. Carryforward loss:
As of December 31, 2016, the Company's Luxembourg subsidiary has $1.9 million of net operating loss carry forwards (NOLs) available for utilization in future years.
e. A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:
|
|
December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Balance at beginning of the year |
|
$ |
1,565 |
|
|
$ |
308 |
|
|
$ |
549 |
|
Additions for taxes positions related current year |
|
|
1,088 |
|
|
|
848 |
|
|
|
79 |
|
Additions for taxes positions related to prior years |
|
|
58 |
|
|
|
409 |
|
|
|
- |
|
Reduction related to lapse of applicable statute of limitations |
|
|
(311 |
) |
|
|
- |
|
|
|
(320 |
) |
Balance at the end of the year |
|
$ |
2,400 |
|
|
$ |
1,565 |
|
|
$ |
308 |
|
The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2016, 2015 and 2014, the Company accrued $31, $26 and $2, respectively, for interest and penalties expenses related to uncertain tax positions.
The Company's Israeli subsidiary is currently under an income tax audit for the tax year 2013. There are no other ongoing income tax audits.
|
Note 15: Financial expenses, net
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Financial expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
(5,937 |
) |
|
$ |
(2,373 |
) |
|
$ |
(41 |
) |
Amortization of credit facility costs |
|
|
(667 |
) |
|
|
(329 |
) |
|
|
- |
|
Foreign currency transaction losses |
|
|
(396 |
) |
|
|
(356 |
) |
|
|
(104 |
) |
Others |
|
|
(318 |
) |
|
|
(177 |
) |
|
|
(142 |
) |
|
|
$ |
(7,318 |
) |
|
$ |
(3,235 |
) |
|
$ |
(287 |
) |
Financial income: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of treasury bills premium |
|
$ |
512 |
|
|
$ |
- |
|
|
$ |
- |
|
Interest income |
|
|
659 |
|
|
|
84 |
|
|
|
143 |
|
|
|
$ |
1,171 |
|
|
$ |
84 |
|
|
$ |
143 |
|
Total financial expenses, net |
|
$ |
(6,147 |
) |
|
$ |
(3,151 |
) |
|
$ |
(144 |
) |
|
Note 17: Subcontractor
The Company is currently dependent upon sole source suppliers for certain key components used in its delivery systems. The Company’s management believes that in most cases other suppliers could provide similar components at comparable terms. A change of suppliers which requires FDA or other regulatory approval, however, could cause a material delay in manufacturing and a possible loss of sales, which could adversely affect the Company’s operating results and financial position.
|
Note 18: Supplemental information
The following table presents long-lived assets by location:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
United States |
|
$ |
11,981 |
|
|
$ |
6,600 |
|
Switzerland |
|
|
4,346 |
|
|
|
4,204 |
|
Israel |
|
|
1,915 |
|
|
|
1,376 |
|
Others |
|
|
378 |
|
|
|
401 |
|
|
|
$ |
18,620 |
|
|
$ |
12,581 |
|
The Company’s net revenues by geographic region, based on the patient’s location are summarized as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
72,771 |
|
|
$ |
30,961 |
|
|
$ |
14,951 |
|
EMEA (*) |
|
|
10,028 |
|
|
|
2,070 |
|
|
|
539 |
|
Japan |
|
|
89 |
|
|
|
56 |
|
|
|
- |
|
|
|
$ |
82,888 |
|
|
$ |
33,087 |
|
|
$ |
15,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) including Germany |
|
$ |
9,799 |
|
|
$ |
1,803 |
|
|
$ |
408 |
|
|
Note 19: Selected quarterly financial information (Unaudited)
|
|
2016 |
|
|||||||||||||
|
|
Three months ended |
|
|||||||||||||
|
|
December 31 |
|
|
September 30 |
|
|
June 30 |
|
|
March 31 |
|
||||
Net revenues |
|
$ |
30,242 |
|
|
$ |
21,674 |
|
|
$ |
17,919 |
|
|
$ |
13,053 |
|
Gross profit |
|
$ |
19,268 |
|
|
$ |
10,556 |
|
|
$ |
1,710 |
|
|
$ |
5,071 |
|
Operating loss |
|
$ |
(17,877 |
) |
|
$ |
(28,265 |
) |
|
$ |
(37,237 |
) |
|
$ |
(31,938 |
) |
Net loss |
|
$ |
(22,168 |
) |
|
$ |
(33,628 |
) |
|
$ |
(40,612 |
) |
|
$ |
(35,437 |
) |
Basic and diluted net loss per ordinary share |
|
$ |
(0.26 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.42 |
) |
Weighted average number of ordinary shares used in computing basic and diluted net loss per share |
|
|
86,760,316 |
|
|
|
85,774,874 |
|
|
|
85,274,683 |
|
|
|
84,397,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|||||||||||||
|
|
Three months ended |
|
|||||||||||||
|
|
December 31 |
|
|
September 30 |
|
|
June 30 |
|
|
March 31 |
|
||||
Net revenues |
|
$ |
12,383 |
|
|
$ |
8,953 |
|
|
$ |
6,543 |
|
|
$ |
5,208 |
|
Gross profit |
|
$ |
6,079 |
|
|
$ |
3,294 |
|
|
$ |
1,793 |
|
|
$ |
1,311 |
|
Operating loss |
|
$ |
(30,606 |
) |
|
$ |
(24,238 |
) |
|
$ |
(27,206 |
) |
|
$ |
(21,946 |
) |
Net loss |
|
$ |
(32,928 |
) |
|
$ |
(26,023 |
) |
|
$ |
(29,357 |
) |
|
$ |
(23,273 |
) |
Basic and diluted net loss per ordinary share |
|
$ |
(0.39 |
) |
|
$ |
(2.09 |
) |
|
$ |
(2.36 |
) |
|
$ |
(1.77 |
) |
Weighted average number of ordinary shares used in computing basic and diluted net loss per share |
|
|
83,607,037 |
|
|
|
12,431,586 |
|
|
|
12,427,442 |
|
|
|
13,140,321 |
|
|
a. Use of estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, tax liabilities, useful-life of field equipment, revenue recognition and the estimations required in accrual base accounting, and share-based compensation costs. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.
b. Financial statements in U.S. dollars:
The accompanying financial statements have been prepared in U.S. dollars in thousands, except for share and per-share data.
The Company finances its operations in U.S. dollars and a substantial portion of its costs and revenues from its primary markets is incurred in U.S. dollars. As such, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment in which NovoCure Limited and certain subsidiaries operate. The Company’s reporting currency is U.S. dollars.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Accounting Standards Codification (ASC) No. 830-10, “Foreign Currency Matters.” All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the consolidated statements of operations as financial income or expenses, as appropriate.
For a subsidiary whose functional currency has been determined to be its local currency, assets and liabilities are translated at year-end exchange rates and statement of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.
c. Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances, including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.
d. Cash equivalents:
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with an original maturity of three months or less at the date acquired.
e. Short-term investments and restricted cash:
1. Short-term investments:
The Company accounts for investments in debt securities in accordance with ASC 320, “Investments-Debt and Equity Securities.” Management determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. For the years ended December 31, 2016 and 2015, all securities are classified as held-to-maturity since the Company has the intent and ability to hold the securities to maturity and, accordingly, debt securities are stated at amortized cost.
The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any other than temporary impairment losses. Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.
For the three years ended December 31, 2016, no impairment losses have been identified.
2. Restricted cash:
The Company has restricted cash used as security for the use of Company credit cards, presented in short-term assets. Additionally, the Company has pledged bank deposits to cover bank guarantees related to facility rental agreements, fleet lease agreements and customs payments presented in other long-term assets (see Note 12).
f. Trade Receivables:
Revenues from the use of Optune are recorded on an accrual basis for payers that meet the revenue recognition criteria for accrual basis where an agreement exists and collectability is reasonably assured. The Company considers receivables past due based on payment terms and reserve specific receivables if collectability is no longer reasonably assured. The Company evaluates such reserves on a regular basis and adjusts its reserves as needed. Once a receivable is deemed uncollectible, such balance is charged against the reserve. For the year ended December 31, 2016, the allowance for doubtful accounts is $0.
g. Inventories:
Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. The Company regularly evaluates the ability to realize the value of inventory. If actual demand for the Company’s delivery systems deteriorates, or market conditions are less favorable than those projected, inventory write-offs may be required.
Inventory write-offs of $774, $0 and $0, respectively, were identified for the years ended December 31, 2016, 2015 and 2014.
h. Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:
|
|
% |
Computers and laboratory equipment |
|
15 - 33 |
Office furniture |
|
6 - 33 |
Production equipment |
|
20 |
Leasehold improvements |
|
Over the shorter of the term of the lease or its useful life |
j. Impairment of long-lived assets:
The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. During the three years ended December 31, 2016, no impairment losses have been identified other than the impairment of field equipment described below in Note 7.
k. Other long-term assets:
Long term lease deposits in respect of office rent and vehicles under operating leases and restricted deposits are presented in other long-term assets.
l. Revenue recognition:
The TTFields delivery system for GBM, Optune, is comprised of two main components: (1) an Electric Field Generator (the “device”) and (2) Transducer Arrays and related accessories that are disposable supplies to the device (“disposables”). Title is retained by the Company for the device and the patient is provided replacement disposables and technical support for the device during the rental period. The device and disposables are always supplied and functioning together and are not sold on a standalone basis.
Revenues are recognized when persuasive evidence of an arrangement exists, delivery of Optune has occurred, the fee is fixed or determinable and collectability is reasonably assured. The evidence of an arrangement generally consists of a prescription, a patient service agreement and the verification of eligibility and insurance with the patient’s third-party insurance company (“payer”). The Company assesses whether the fee is fixed or determinable based on whether there is sufficient history with payers to reliably estimate their individual payment patterns or contractual arrangements exist and whether it can reliably estimate the amount that would be ultimately collected. Once the Company can reliably estimate the amounts that would be ultimately collected per payer and the above criteria are met, the Company recognizes revenues from the use of Optune on an accrual basis ratably over the lease term. During 2016, the Company began to recognize net revenues on an accrual basis for certain payers in the amount of $8,458 that met the criteria above. Revenues are recognized when cash is collected when the revenue criteria above are not met, such as when the price is not fixed or determinable or the collectability cannot be reasonably assured. Patients have out-of-pocket costs for the amount not covered by their payer and the Company bills the patient directly for the amounts of their co-pays and deductible, subject to the Company’s patient assistance programs. The Company currently recognizes revenue from patients at the time cash is collected.
Deferred revenues include amounts invoiced for days of therapy to be provided in future periods.
Revenues are presented net of indirect taxes, which include excise taxes of $105, $1,457, and $1,010 for the years ended December 31, 2016, 2015 and 2014, respectively, and other indirect taxes of $867, $818 and $266 for the years ended December 31, 2016, 2015 and 2014, respectively.
m. Charitable care:
The Company provides Optune to patients who meet certain criteria under its charitable care policy without charge. Because the Company does not pursue collection of amounts determined to qualify as charity, they are not reported as revenue. The Company's costs of care provided under charitable care were: $1,675, $1,376 and $836 for the years ended December 31, 2016, 2015 and 2014, respectively. These estimates were determined by applying a ratio of costs to gross charges multiplied by the Company's gross charitable care charges.
n. Shipping and handling costs:
The Company does not bill its customers for shipping and handling costs associated with shipping Optune to its customers. These direct shipping and handling costs of $3,389, $1,385 and $553 for the years ended December 31, 2016, 2015 and 2014, respectively are included in selling and marketing costs.
o. Accounting for share-based payments:
The Company accounts for share-based compensation in accordance with ASC 718, “Compensation—Stock Compensation.” ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.
The Company recognizes compensation costs net of a forfeiture rate only for the value of awards granted using the accelerated method over the requisite service period of the award, which is generally the option vesting term of four years. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company selected the Black-Scholes option-pricing model as the most appropriate fair value method for its option awards and Employee Share Purchase Plan. The option-pricing model requires a number of assumptions, of which the most significant are the share price expected, expected volatility and the expected option term.
Prior to NovoCure Limited’s initial public offering (“IPO”), the fair value of ordinary shares underlying the options was historically determined by management and the board of directors. Because there was no public market for the Company’s ordinary shares, the board of directors determined fair value of an ordinary share at the time of grant of the option by considering a number of objective and subjective factors including operating and financial performance, the lack of liquidity of share capital, general and industry specific economic outlook and valuations performed amongst other factors. For the period from January 1, 2015 through the IPO and for the year ended December 31, 2014, the Company’s board of directors determined the fair value of ordinary shares for the reported periods, among other factors, based on valuations performed using the hybrid method, which is the hybrid between the probability weighted expected return method (PWERM) and the option pricing method.
The computation of expected volatility is based on actual historical share price volatility of comparable companies. Expected term of options granted is calculated using the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.
p. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, short-term investments, restricted cash, receivables and prepaid expenses, trade receivables, trade payables and other accounts payable and accrued expenses approximate their fair value due to the short-term maturity of such instruments. Based upon the borrowing terms and conditions currently available to the Company, the carrying values of the long-term loans approximate fair value.
The Company accounts for certain assets and liabilities at fair value under ASC 820, “Fair Value Measurements and Disclosures.” Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data; and
Level 3 - Unobservable inputs which are supported by little or no market activity.
The availability of observable inputs can vary from instrument to instrument and is affected by a wide variety of factors, including, for example, the type of instrument, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the instrument are categorized as Level 3.
q. Basic and diluted net loss per share:
The Company applies the two class method as required by ASC 260-10, “Earnings per Share.” ASC 260-10 requires the income or loss per share for each class of shares (ordinary and preferred shares) to be calculated assuming 100% of the Company’s earnings are distributed as dividends to each class of shares based on their contractual rights. No dividends were declared or paid during the reported periods.
According to the provisions of ASC 260-10, the Company’s preferred shares are not participating securities in losses and, therefore, are not included in the computation of net loss per share.
Basic and diluted net loss per share is computed based on the weighted average number of ordinary shares outstanding during each year. Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus dilutive potential shares considered outstanding during the period, in accordance with ASC 260-10. Basic and diluted net loss per ordinary share was the same for each period presented as the inclusion of all potential ordinary shares (all options and warrants) outstanding was anti-dilutive.
r. Income taxes:
The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes.” ASC 740-10 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value, if needed.
The Company established reserves for uncertain tax positions based on the evaluation of whether or not the Company’s uncertain tax position is “more likely than not” to be sustained upon examination. The Company records interest and penalties pertaining to its uncertain tax positions in the financial statements as income tax expense.
s. Concentration of risks:
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash, short-term investments and trade receivables.
Cash and cash equivalents and restricted cash are invested in major banks or financial institutions in Jersey, the United States, Israel, Luxemburg, Switzerland, Japan and Germany. Such investments may be in excess of insured limits and are not insured in other jurisdictions. Generally, these investments may be redeemed upon demand and, therefore, bear minimal risk.
The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
In 2016, two payers represented $10,393,$7,010 or 13 %, 9 % of net revenues, respectively. In 2015, the same two payers represented $5,595 and $2,512 or 17% and 8% of net revenues, respectively. In 2014, the same two payers represented $2,372 and $2,014 or 15% and 12% of net revenues, respectively. Credit risk with respect to trade receivables is limited.
t. Retirement, pension and severance plans:
The Company has a 401(k) retirement savings plan for its U.S. employees. Each eligible employee may elect to contribute a portion of the employee’s compensation to the plan. The Company historically has not and currently does not make any matching contributions to this plan.
The Company has a defined benefit plan with a pension fund for its Swiss employees, whereby the employee and the Company contribute to the pension fund. The Company accounts for its obligation, in accordance with ASC 715, "Compensation – Retirement Benefits" (see note 9).
The pension expense for the years ended December 31, 2016, 2015 and, 2014 was $529, $404 and $205, respectively.
Israeli law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Company makes ongoing deposits into employee pension plans to fund its severance liabilities. According to Section 14 of Israel Severance Pay Law, the Company makes deposits on behalf of its employees with respect to the Company’s severance liability and therefore no obligation is provided for in the financial statements. Severance pay liabilities with respect to employees who are not subject to Section 14, are provided for in the financial statements based upon the number of years of service and the latest monthly salary and the related deposits are recorded as an asset based on the cash surrender value. Severance expense for the years ended December 31, 2016, 2015 and 2014 amounted to $430, $356 and $307, respectively.
u. Contingent liabilities:
The Company accounts for its contingent liabilities in accordance with ASC 450, “Contingencies.” A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated (see Note 14 c).
With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2016 and 2015, the Company was not a party to any ligation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
v. Other comprehensive loss:
The Company accounts for comprehensive loss in accordance with ASC 220, "Comprehensive Income". ASC 220 establishes standards for the reporting and display of comprehensive loss and its components. Comprehensive loss generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The accumulated other comprehensive loss, net of taxes, relates to a pension liability and foreign currency translation adjustments.
w. Going concern:
In 2016, the Company adopted ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), that provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. The adoption of ASU 2014-15 don’t have any impact on the consolidated financial statements or related disclosures.
x. Recently issued accounting pronouncements:
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The new revenue recognition standard will be effective in the first quarter of 2018, with the option to adopt it in the first quarter of 2017. The Company currently anticipates adopting the new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company currently anticipates adopting the standard using the modified retrospective method. While the Company is still in the process of completing its assessment on the impact this guidance will have on its consolidated financial statements and related disclosures, the Company expects that the most significant impact relates to the accounting for revenue transactions whereby there is variable consideration.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02-Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840. The standard is effective on January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 affect all entities that issue share-based payment awards to their employees and involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU 2016-10 covers two specific topics: performance obligations and licensing. This amendment includes guidance on immaterial promised goods or services, shipping or handling activities, separately identifiable performance obligations, functional or symbolic intellectual property licenses, sales-based and usage-based royalties, license restrictions (time, use, geographical) and licensing renewals. In addition, in May 2016, FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company is currently evaluating the impact of the adoption of both revenue standards on its consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13 also applies to employee benefit plan accounting, with an effective date of the first quarter of fiscal 2022. The amendments in this update are effective for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements, footnote disclosures and employee benefit plans’ accounting.
In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be prospectively as of the earliest date practicable. The standard is effective on January 1, 2019. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements and footnote disclosures.
In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This standard requires the presentation of the statement of cash flows to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. The standard is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the effects of the adoption of this ASU on the consolidated financial statements.
i. Field equipment under operating leases:
Field equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the field equipment which was determined to be 18 to 36 months. Field equipment consists of equipment being utilized under rental agreements accounted for in accordance with ASC 840 on a monthly basis as an operating lease, as well as “service pool” equipment. Service pool equipment is equipment owned and maintained by the Company that is swapped for equipment that needs repairs or maintenance by the Company while being rented by a patient. The Company records a provision for any excess, lost or damaged equipment when warranted based on an assessment of the equipment. Write-downs for equipment are included in cost of revenues. During the years ended December 31, 2016, 2015 and 2014, write downs for $6,436 (see Note 7), $36 and $12, respectively, were identified.
|
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:
|
|
% |
Computers and laboratory equipment |
|
15 - 33 |
Office furniture |
|
6 - 33 |
Production equipment |
|
20 |
Leasehold improvements |
|
Over the shorter of the term of the lease or its useful life |
|
|
a. |
Cash and cash equivalents: |
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cash |
|
$ |
29,915 |
|
|
$ |
75,421 |
|
Money market funds |
|
|
69,865 |
|
|
|
44,002 |
|
Total cash and cash equivalents |
|
$ |
99,780 |
|
|
$ |
119,423 |
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Advances and receivables from suppliers |
|
$ |
5,829 |
|
|
$ |
7,323 |
|
Government authorities |
|
|
1,867 |
|
|
|
1,955 |
|
Prepaid expenses |
|
|
2,238 |
|
|
|
1,290 |
|
Others |
|
|
150 |
|
|
|
231 |
|
|
|
$ |
10,084 |
|
|
$ |
10,799 |
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Raw materials |
|
$ |
5,243 |
|
|
$ |
3,518 |
|
Work in process |
|
|
8,292 |
|
|
|
4,618 |
|
Finished goods |
|
|
12,014 |
|
|
|
5,458 |
|
|
|
$ |
25,549 |
|
|
$ |
13,594 |
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cost: |
|
|
|
|
|
|
|
|
Computers and laboratory equipment |
|
$ |
10,121 |
|
|
$ |
6,734 |
|
Office furniture |
|
|
1,931 |
|
|
|
1,245 |
|
Production equipment |
|
|
1,179 |
|
|
|
857 |
|
Leasehold improvements |
|
|
2,885 |
|
|
|
1,653 |
|
Total cost |
|
$ |
16,116 |
|
|
$ |
10,489 |
|
Accumulated depreciation and amortization |
|
|
(6,304 |
) |
|
|
(3,937 |
) |
Depreciated cost |
|
$ |
9,812 |
|
|
$ |
6,552 |
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Field equipment |
|
$ |
11,167 |
|
|
$ |
9,226 |
|
Less: accumulated depreciation |
|
|
(2,359 |
) |
|
|
(3,197 |
) |
Field equipment, net |
|
$ |
8,808 |
|
|
$ |
6,029 |
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Employees and payroll accruals |
|
$ |
7,541 |
|
|
$ |
8,258 |
|
Taxes payable and others |
|
|
3,142 |
|
|
|
2,850 |
|
Provision for settlement (Note 14c) |
|
|
5,500 |
|
|
|
- |
|
Deferred revenues |
|
|
2,267 |
|
|
|
52 |
|
Other |
|
|
76 |
|
|
|
712 |
|
|
|
$ |
18,526 |
|
|
$ |
11,872 |
|
|
The targeted allocation for these funds is as follows:
Asset Allocation by Category as of December 31, 2016: |
|
|
|
|
Asset Category: |
|
Asset allocation (%) |
|
|
Debt Securities |
|
|
28 |
|
Real Estate |
|
|
22 |
|
Equity Securities |
|
|
27 |
|
Others |
|
|
23 |
|
Total |
|
|
100 |
|
The following table sets forth the Swiss Plan’s funded status and amounts recognized in the consolidated financial statements for the year ended December 31, 2016 and 2015:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Change in Benefit Obligation |
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
6,223 |
|
|
$ |
- |
|
Interest cost |
|
|
64 |
|
|
|
47 |
|
Company service cost |
|
|
498 |
|
|
|
312 |
|
Employee contributions |
|
|
321 |
|
|
|
189 |
|
Prior service cost |
|
|
- |
|
|
|
158 |
|
Benefits paid |
|
|
422 |
|
|
|
4,023 |
|
Actuarial loss |
|
|
713 |
|
|
|
1,494 |
|
Projected benefit obligation at end of year |
|
$ |
8,241 |
|
|
$ |
6,223 |
|
Change in Plan Assets |
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
4,433 |
|
|
$ |
- |
|
Actual return on plan assets |
|
|
320 |
|
|
|
(63 |
) |
Employer contributions |
|
|
482 |
|
|
|
284 |
|
Employee contributions |
|
|
321 |
|
|
|
189 |
|
Benefits paid |
|
|
422 |
|
|
|
4,023 |
|
Fair value of plan assets at end of year |
|
$ |
5,978 |
|
|
$ |
4,433 |
|
|
|
|
|
|
|
|
|
|
Funded Status at End of year |
|
|
|
|
|
|
|
|
Excess of obligation over assets |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
|
|
|
|
|
|
|
|
|
Change in Accrued Benefit Liability |
|
|
|
|
|
|
|
|
Accrued benefit asset/(liability) at beginning of year |
|
$ |
(1,790 |
) |
|
$ |
- |
|
Company contributions made during year |
|
|
482 |
|
|
|
284 |
|
Net periodic benefit cost for year |
|
|
(529 |
) |
|
|
(404 |
) |
Net decrease in accumulated other comprehensive loss |
|
|
(426 |
) |
|
|
(1,670 |
) |
Accrued benefit liability at end of year |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Non - current plan assets |
|
$ |
5,979 |
|
|
$ |
4,433 |
|
Non - current liability |
|
|
8,242 |
|
|
|
6,223 |
|
Accrued benefit liability at end of year |
|
$ |
(2,263 |
) |
|
$ |
(1,790 |
) |
Projected Benefit Payments |
|
|
|
|
|
|
|
|
Projected year 1 |
|
$ |
148 |
|
|
$ |
8 |
|
Projected year 2 |
|
|
150 |
|
|
|
13 |
|
Projected year 3 |
|
|
152 |
|
|
|
19 |
|
Projected year 4 |
|
|
155 |
|
|
|
25 |
|
Projected year 5 |
|
|
1,069 |
|
|
|
32 |
|
Projected year 6-10 |
|
$ |
928 |
|
|
$ |
264 |
|
The fair value of the plan assets is the estimated cash surrender value of the insurance contract at December 31, 2016. The level of inputs used to measure fair value was Level 2.
|
|
Year ended December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Net Periodic Benefit Cost |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
498 |
|
|
$ |
312 |
|
Interest cost (income) |
|
|
(21 |
) |
|
|
47 |
|
Expected return on plan assets |
|
|
(49 |
) |
|
|
(38 |
) |
Amortization of prior service costs |
|
|
87 |
|
|
|
14 |
|
Amortization of transition obligation |
|
|
14 |
|
|
|
69 |
|
Total net periodic benefit cost |
|
$ |
529 |
|
|
$ |
404 |
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions: |
|
|
|
|
|
|
|
|
Discount rate as of December 31 |
|
|
0.60% |
|
|
|
1.00% |
|
Expected long-term rate of return on assets |
|
|
0.60% |
|
|
|
1.00% |
|
Rate of compensation increase |
|
|
1.00% |
|
|
|
1.00% |
|
Mortality and disability assumptions (*) |
|
BVG 2015 GT |
|
|
BVG 2010 GT |
|
(*) |
Mortality data used for actuarial calculation. |
|
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred rent liability |
|
$ |
906 |
|
|
$ |
785 |
|
Leasehold improvements financing and other (see a and b below) |
|
|
193 |
|
|
|
254 |
|
Unrecognized tax benefits (Note 13e) |
|
|
2,400 |
|
|
|
1,565 |
|
Other |
|
|
534 |
|
|
|
131 |
|
|
|
$ |
4,033 |
|
|
$ |
2,735 |
|
The above principal leasehold improvement financing repayments as of December 31, 2016 are as follows:
2017 |
|
$ |
70 |
|
2018 |
|
|
77 |
|
2019 |
|
|
27 |
|
2020 |
|
|
24 |
|
2021 |
|
|
26 |
|
Thereafter |
|
|
39 |
|
|
|
|
263 |
|
Less: current portion of long-term loans |
|
|
(70 |
) |
Long-term loans, net of current portion |
|
$ |
193 |
|
|
Future minimum lease payments under non-cancelable operating leases as of December 31, 2016, are as follows:
2017 |
$ |
3,276 |
|
2018 |
|
2,404 |
|
2019 |
|
2,186 |
|
2020 |
|
2,019 |
|
2021 |
|
1,594 |
|
Thereafter |
|
2,714 |
|
|
$ |
14,193 |
|
|
a. The provision for income taxes from continuing operations is comprised of:
Loss before income taxes:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States (U.S.) |
|
$ |
(80,972 |
) |
|
$ |
(55,087 |
) |
|
$ |
(22,015 |
) |
Non-U.S. |
|
|
(40,492 |
) |
|
|
(52,060 |
) |
|
|
(58,285 |
) |
|
|
$ |
(121,464 |
) |
|
$ |
(107,147 |
) |
|
$ |
(80,300 |
) |
a. The provision for income taxes from continuing operations is comprised of:
Income taxes expense:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
6,501 |
|
|
$ |
891 |
|
|
$ |
65 |
|
Non-U.S. |
|
|
3,863 |
|
|
|
3,678 |
|
|
|
324 |
|
Total current |
|
|
10,364 |
|
|
|
4,569 |
|
|
|
389 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
1 |
|
|
$ |
- |
|
|
$ |
- |
|
Non-U.S. |
|
|
16 |
|
|
|
(135 |
) |
|
|
(7 |
) |
Total deferred |
|
|
17 |
|
|
|
(135 |
) |
|
|
(7 |
) |
Total income taxes provision |
|
$ |
10,381 |
|
|
$ |
4,434 |
|
|
$ |
382 |
|
A reconciliation of the provision for income taxes compared with the amounts at the notional federal statutory rate was:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
U.S Statutory Income Taxes Rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Non-deductible expenses |
|
|
(2.5 |
) |
|
|
(2.4 |
) |
|
|
(1.5 |
) |
Foreign taxes rate differential |
|
|
(14.2 |
) |
|
|
(19.2 |
) |
|
|
(26.5 |
) |
Change in valuation allowance |
|
|
(30.0 |
) |
|
|
(18.2 |
) |
|
|
(9.0 |
) |
State income taxes |
|
|
2.3 |
|
|
|
1.8 |
|
|
|
1.2 |
|
Change in excess taxes benefit |
|
|
1.2 |
|
|
|
- |
|
|
|
- |
|
Unrecognized taxes expense (benefit) |
|
|
(0.7 |
) |
|
|
(1.2 |
) |
|
|
0.3 |
|
Other |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
- |
|
Effective taxes rate |
|
|
(8.5 |
)% |
|
|
(4.1 |
)% |
|
|
(0.5 |
)% |
Significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
18,770 |
|
|
$ |
11,504 |
|
Revenue recognition (timing differences) |
|
|
46,953 |
|
|
|
21,972 |
|
Net operating loss carryforwards |
|
|
577 |
|
|
347 |
|
|
Excess Tax Benefit |
|
|
3,510 |
|
|
|
- |
|
Deferred Revenue |
|
|
879 |
|
|
|
- |
|
Other temporary differences |
|
|
1,481 |
|
|
|
952 |
|
Total gross deferred taxes assets |
|
$ |
72,170 |
|
|
$ |
34,775 |
|
Less: valuation allowance |
|
|
(70,061 |
) |
|
|
(33,476 |
) |
Total deferred taxes assets |
|
$ |
2,109 |
|
|
$ |
1,299 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
1,789 |
|
|
|
1,008 |
|
Total gross deferred taxes liabilities |
|
$ |
1,789 |
|
|
$ |
1,008 |
|
|
|
|
|
|
|
|
|
|
Net deferred taxes assets |
|
$ |
320 |
|
|
$ |
291 |
|
e. A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:
|
|
December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Balance at beginning of the year |
|
$ |
1,565 |
|
|
$ |
308 |
|
|
$ |
549 |
|
Additions for taxes positions related current year |
|
|
1,088 |
|
|
|
848 |
|
|
|
79 |
|
Additions for taxes positions related to prior years |
|
|
58 |
|
|
|
409 |
|
|
|
- |
|
Reduction related to lapse of applicable statute of limitations |
|
|
(311 |
) |
|
|
- |
|
|
|
(320 |
) |
Balance at the end of the year |
|
$ |
2,400 |
|
|
$ |
1,565 |
|
|
$ |
308 |
|
|
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
Financial expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
(5,937 |
) |
|
$ |
(2,373 |
) |
|
$ |
(41 |
) |
Amortization of credit facility costs |
|
|
(667 |
) |
|
|
(329 |
) |
|
|
- |
|
Foreign currency transaction losses |
|
|
(396 |
) |
|
|
(356 |
) |
|
|
(104 |
) |
Others |
|
|
(318 |
) |
|
|
(177 |
) |
|
|
(142 |
) |
|
|
$ |
(7,318 |
) |
|
$ |
(3,235 |
) |
|
$ |
(287 |
) |
Financial income: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of treasury bills premium |
|
$ |
512 |
|
|
$ |
- |
|
|
$ |
- |
|
Interest income |
|
|
659 |
|
|
|
84 |
|
|
|
143 |
|
|
|
$ |
1,171 |
|
|
$ |
84 |
|
|
$ |
143 |
|
Total financial expenses, net |
|
$ |
(6,147 |
) |
|
$ |
(3,151 |
) |
|
$ |
(144 |
) |
|
The following table presents long-lived assets by location:
|
|
December 31, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
United States |
|
$ |
11,981 |
|
|
$ |
6,600 |
|
Switzerland |
|
|
4,346 |
|
|
|
4,204 |
|
Israel |
|
|
1,915 |
|
|
|
1,376 |
|
Others |
|
|
378 |
|
|
|
401 |
|
|
|
$ |
18,620 |
|
|
$ |
12,581 |
|
The Company’s net revenues by geographic region, based on the patient’s location are summarized as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
United States |
|
$ |
72,771 |
|
|
$ |
30,961 |
|
|
$ |
14,951 |
|
EMEA (*) |
|
|
10,028 |
|
|
|
2,070 |
|
|
|
539 |
|
Japan |
|
|
89 |
|
|
|
56 |
|
|
|
- |
|
|
|
$ |
82,888 |
|
|
$ |
33,087 |
|
|
$ |
15,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) including Germany |
|
$ |
9,799 |
|
|
$ |
1,803 |
|
|
$ |
408 |
|
|
|
|
2016 |
|
|||||||||||||
|
|
Three months ended |
|
|||||||||||||
|
|
December 31 |
|
|
September 30 |
|
|
June 30 |
|
|
March 31 |
|
||||
Net revenues |
|
$ |
30,242 |
|
|
$ |
21,674 |
|
|
$ |
17,919 |
|
|
$ |
13,053 |
|
Gross profit |
|
$ |
19,268 |
|
|
$ |
10,556 |
|
|
$ |
1,710 |
|
|
$ |
5,071 |
|
Operating loss |
|
$ |
(17,877 |
) |
|
$ |
(28,265 |
) |
|
$ |
(37,237 |
) |
|
$ |
(31,938 |
) |
Net loss |
|
$ |
(22,168 |
) |
|
$ |
(33,628 |
) |
|
$ |
(40,612 |
) |
|
$ |
(35,437 |
) |
Basic and diluted net loss per ordinary share |
|
$ |
(0.26 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.42 |
) |
Weighted average number of ordinary shares used in computing basic and diluted net loss per share |
|
|
86,760,316 |
|
|
|
85,774,874 |
|
|
|
85,274,683 |
|
|
|
84,397,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|||||||||||||
|
|
Three months ended |
|
|||||||||||||
|
|
December 31 |
|
|
September 30 |
|
|
June 30 |
|
|
March 31 |
|
||||
Net revenues |
|
$ |
12,383 |
|
|
$ |
8,953 |
|
|
$ |
6,543 |
|
|
$ |
5,208 |
|
Gross profit |
|
$ |
6,079 |
|
|
$ |
3,294 |
|
|
$ |
1,793 |
|
|
$ |
1,311 |
|
Operating loss |
|
$ |
(30,606 |
) |
|
$ |
(24,238 |
) |
|
$ |
(27,206 |
) |
|
$ |
(21,946 |
) |
Net loss |
|
$ |
(32,928 |
) |
|
$ |
(26,023 |
) |
|
$ |
(29,357 |
) |
|
$ |
(23,273 |
) |
Basic and diluted net loss per ordinary share |
|
$ |
(0.39 |
) |
|
$ |
(2.09 |
) |
|
$ |
(2.36 |
) |
|
$ |
(1.77 |
) |
Weighted average number of ordinary shares used in computing basic and diluted net loss per share |
|
|
83,607,037 |
|
|
|
12,431,586 |
|
|
|
12,427,442 |
|
|
|
13,140,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|