☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-5338862 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
1 HaMada Street Herziliya Pituach 4673335, Israel (Address of principal executive offices, zip code) | ||
972 (9) 957-6620 | ||
( |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller Reporting Company | ☐ |
Emerging growth company | ☐ |
3 | ||
3 | ||
F-2 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-8 | ||
4 | ||
14 | ||
14 | ||
15 | ||
15 | ||
15 | ||
16 | ||
16 | ||
16 | ||
16 | ||
17 | ||
17 |
Page | |
F-2 - F-3 | |
F-4 | |
F-5 | |
F-6 - F-7 | |
F-8 - F-25 |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Unaudited | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 149,448 | $ | 104,683 | ||||
Restricted cash | 1,400 | 897 | ||||||
Marketable Securities | 81,488 | 74,465 | ||||||
Trade receivables, net | 91,694 | 71,041 | ||||||
Prepaid expenses and other accounts receivable | 38,201 | 21,347 | ||||||
Inventories | 62,356 | 67,363 | ||||||
Total current assets | 424,587 | 339,796 | ||||||
LONG-TERM ASSETS: | ||||||||
Marketable securities | 72,351 | 44,262 | ||||||
Property, equipment and intangible assets, net | 45,714 | 37,381 | ||||||
Prepaid expenses and lease deposits | 732 | 489 | ||||||
Deferred tax assets, net | 5,822 | 2,815 | ||||||
Total long term assets | 124,619 | 84,947 | ||||||
Total assets | $ | 549,206 | $ | 424,743 |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Unaudited | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade payables, net | $ | 42,700 | $ | 34,001 | ||||
Employees and payroll accruals | 17,640 | 13,018 | ||||||
Warranty obligations | 12,942 | 13,616 | ||||||
Deferred revenues | 2,743 | 1,202 | ||||||
Accrued expenses and other accounts payable | 16,407 | 8,648 | ||||||
Total current liabilities | 92,432 | 70,485 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Warranty obligations | 58,625 | 44,759 | ||||||
Deferred revenues | 26,858 | 18,660 | ||||||
Lease incentive obligation | 1,838 | 2,061 | ||||||
Total long-term liabilities | 87,321 | 65,480 | ||||||
COMMITMENTS AND CONTINGENT LIABILITIES | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock of $0.0001 par value - Authorized: 125,000,000 shares as of September 30, 2017 (unaudited) and December 31, 2016; issued and outstanding: 42,862,712 and 41,259,391 shares as of September 30, 2017 (unaudited) and December 31, 2016, respectively | 4 | 4 | ||||||
Additional paid-in capital | 323,076 | 307,098 | ||||||
Accumulated other comprehensive loss | (297 | ) | (324 | ) | ||||
Retained earnings (accumulated deficit) | 46,670 | (18,000 | ) | |||||
Total stockholders' equity | 369,453 | 288,778 | ||||||
Total liabilities and stockholders' equity | $ | 549,206 | $ | 424,743 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Revenues | $ | 166,552 | $ | 128,484 | $ | 417,705 | $ | 378,441 | ||||||||
Cost of revenues | 108,498 | 86,609 | 273,909 | 256,719 | ||||||||||||
Gross profit | 58,054 | 41,875 | 143,796 | 121,722 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development, net | 14,363 | 9,935 | 38,546 | 27,876 | ||||||||||||
Sales and marketing | 13,217 | 10,036 | 35,953 | 27,792 | ||||||||||||
General and administrative | 5,078 | 3,664 | 12,782 | 10,191 | ||||||||||||
Total operating expenses | 32,658 | 23,635 | 87,281 | 65,859 | ||||||||||||
Operating income | 25,396 | 18,240 | 56,515 | 55,863 | ||||||||||||
Financial income, net | 2,666 | 390 | 7,671 | 1,892 | ||||||||||||
Income before taxes on income | 28,062 | 18,630 | 64,186 | 57,755 | ||||||||||||
Taxes on income (tax benefit) | 91 | 3,014 | (484 | ) | 4,067 | |||||||||||
Net income | $ | 27,971 | $ | 15,616 | $ | 64,670 | $ | 53,688 | ||||||||
Net basic earnings per share of common stock | $ | 0.66 | $ | 0.38 | $ | 1.55 | $ | 1.32 | ||||||||
Net diluted earnings per share of common stock | $ | 0.61 | $ | 0.35 | $ | 1.44 | $ | 1.21 | ||||||||
Weighted average number of shares used in computing net basic earnings per share of common stock | 42,433,648 | 40,926,887 | 41,831,400 | 40,691,402 | ||||||||||||
Weighted average number of shares used in computing net diluted earnings per share of common stock | 46,131,556 | 43,995,227 | 44,937,527 | 44,348,461 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Net income | $ | 27,971 | $ | 15,616 | $ | 64,670 | $ | 53,688 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Available-for-sale securities: | ||||||||||||||||
Changes in unrealized gains (losses), net of tax benefit | 54 | (92 | ) | 87 | 45 | |||||||||||
Reclassification adjustments for gains, net of tax expence included in net income | - | - | - | 1 | ||||||||||||
Net change | 54 | (92 | ) | 87 | 46 | |||||||||||
Cash flow hedges: | ||||||||||||||||
Changes in unrealized gains, net of tax expense | - | 320 | 975 | 655 | ||||||||||||
Reclassification adjustments for loses, net of tax expense included in net income | - | (254 | ) | (994 | ) | (421 | ) | |||||||||
Net change | - | 66 | (19 | ) | 234 | |||||||||||
Foreign currency translation adjustments, net | 16 | (125 | ) | (41 | ) | 133 | ||||||||||
Other comprehensive income (loss) | 70 | (151 | ) | 27 | 413 | |||||||||||
Comprehensive income | $ | 28,041 | $ | 15,465 | $ | 64,697 | $ | 54,101 |
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Unaudited | ||||||||
Cash flows provided by operating activities: | ||||||||
Net income | $ | 64,670 | $ | 53,688 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of property, equipment and intangible assets | 4,932 | 3,468 | ||||||
Amortization of premiums on available-for-sale marketable securities | 1,310 | 829 | ||||||
Stock-based compensation | 12,183 | 8,132 | ||||||
Deferred tax assets, net | (3,063 | ) | 2,327 | |||||
Realized losses on Cash Flow Hedges | - | 2 | ||||||
Changes in assets and liabilities: | ||||||||
Inventories | 5,005 | 19,216 | ||||||
Prepaid expenses and other accounts receivable | (17,360 | ) | 8,214 | |||||
Trade receivables, net | (20,168 | ) | (38,105 | ) | ||||
Trade payables, net | 8,667 | (21,699 | ) | |||||
Employees and payroll accruals | 4,509 | (916 | ) | |||||
Warranty obligations | 13,192 | 15,514 | ||||||
Deferred revenues | 9,699 | 5,069 | ||||||
Accrued expenses and other accounts payable | 7,537 | 2,192 | ||||||
Lease incentive obligation | (223 | ) | (185 | ) | ||||
Net cash provided by operating activities | 90,890 | 57,746 | ||||||
Cash flows used in investing activities: | ||||||||
Purchase of property and equipment | (13,203 | ) | (13,869 | ) | ||||
Decrease (increase) in restricted cash | (503 | ) | 2,471 | |||||
Decrease (increase) in short and long-term lease deposits | (60 | ) | 37 | |||||
Investment in available-for-sale marketable securities | (82,469 | ) | (85,579 | ) | ||||
Maturities of available-for-sale marketable securities | 46,513 | 21,654 | ||||||
Net cash used in investing activities | $ | (49,722 | ) | $ | (75,286 | ) |
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Unaudited | ||||||||
Cash flows from financing activities: | ||||||||
Issuance costs related to initial public offering | $ | - | $ | (194 | ) | |||
Proceeds from issuance of shares upon exercise of options | 3,795 | 1,774 | ||||||
Net cash provided by financing activities | 3,795 | 1,580 | ||||||
Increase (decrease) in cash and cash equivalents | 44,963 | (15,960 | ) | |||||
Cash and cash equivalents at the beginning of the period | 104,683 | 106,150 | ||||||
Effect of exchange rate differences on cash and cash equivalents | (198 | ) | (176 | ) | ||||
Cash and cash equivalents at the end of the period | $ | 149,448 | $ | 90,014 |
NOTE 1:- | GENERAL |
a. | SolarEdge Technologies, Inc. (the "Company") and its subsidiaries design, develop, and sell an intelligent inverter solution designed to maximize power generation at the individual photovoltaic ("PV") module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features. The Company's products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC) and (iii) a related cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters of a solar PV system to enable customers and system owners as applicable, to monitor and manage the solar PV systems. (iv) storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third-party manufacturers, to store and supply power as needed (the "StorEdge solution"). The StorEdge solution is designed to provide smart energy functions such as maximizing self-consumption, Time-of-Use programming for desired hours of the day, and home energy backup solutions. In addition, the Company offers several communication and smart energy management solutions. |
b. | Recent accounting pronouncements: |
NOTE 1:- | GENERAL (Cont.) |
c. | The significant accounting policies applied in the Company's audited 2016 consolidated financial statements and notes thereto included in the Company's Transition Report on Form 10-KT for transition period from July 1, 2016 to December 31, 2016 (the "2016 Form 10-KT") are applied consistently in these financial statements. |
d. | Basis of Presentation: |
e. | The Company depends on two contract manufacturers and several limited or single source component suppliers. Currently, the Company has entered into an agreement with a third manufacturer and is in the process of transitioning manufacturing from one manufacturer to another. During this transition period the Company mainly relies on one contract manufacturer. Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields and costs. |
NOTE 1:- | GENERAL (Cont.) |
f. | Derivative financial instruments: |
Balance as of September 30, | Balance as of December 31, | |||||||
2017 | 2016 | |||||||
(unaudited) | ||||||||
Derivative assets: | ||||||||
Derivatives not designated as cash flow hedging instruments: | ||||||||
Foreign exchange option contracts | $ | 1 | $ | - | ||||
Derivatives designated as cash flow hedging instruments: | ||||||||
Foreign exchange forward contracts | - | 19 | ||||||
Derivative liabilities: | ||||||||
Derivatives not designated as cash flow hedging instruments: | ||||||||
Foreign exchange option contracts | (301 | ) | - | |||||
Foreign exchange forward contracts | (107 | ) | - | |||||
Total | $ | (407 | ) | $ | 19 |
NOTE 1:- | GENERAL (Cont.) |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Derivatives designated as cash flow hedging instruments: | ||||||||||||||||
Foreign exchange forward contracts | $ | - | $ | 320 | $ | 975 | $ | 655 |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Derivatives designated as cash flow hedging instruments: | ||||||||||||||||
Foreign exchange forward contracts | $ | - | $ | 254 | $ | 994 | $ | 421 |
g. | Accumulated other comprehensive income: |
Unrealized gains (losses) on available-for-sale marketable securities | Unrealized gains (losses) on cash flow hedges | Unrealized gains (losses) on foreign currency translation | Total | |||||||||||||
Beginning balance | $ | (103 | ) | $ | - | $ | (264 | ) | $ | (367 | ) | |||||
Other comprehensive income (loss) before reclassifications | 54 | - | 16 | 70 | ||||||||||||
Ending balance | $ | (49 | ) | $ | - | $ | (248 | ) | $ | (297 | ) |
NOTE 1:- | GENERAL (Cont.) |
Unrealized gains (losses) on available-for-sale marketable securities | Unrealized gains (losses) on cash flow hedges | Unrealized gains (losses) on foreign currency translation | Total | |||||||||||||
Beginning balance | $ | (136 | ) | $ | 19 | $ | (207 | ) | $ | (324 | ) | |||||
Other comprehensive income (loss) before reclassifications | 87 | 975 | (41 | ) | 1,021 | |||||||||||
Losses (gains) reclassified from accumulated other comprehensive income (loss) | - | (994 | ) | - | (994 | ) | ||||||||||
Net current period other comprehensive income (loss) | 87 | (19 | ) | (41 | ) | 27 | ||||||||||
Ending balance | $ | (49 | ) | $ | - | $ | (248 | ) | $ | (297 | ) |
Unrealized gains (losses) on available-for-sale marketable securities | Unrealized gains (losses) on cash flow hedges | Unrealized gains (losses) on foreign currency translation | Total | |||||||||||||
Beginning balance | $ | 57 | $ | 243 | $ | (29 | ) | $ | 271 | |||||||
Other comprehensive income (loss) before reclassifications | (92 | ) | 320 | (125 | ) | 103 | ||||||||||
Losses (gains) reclassified from accumulated other comprehensive income (loss) | - | (254 | ) | - | (254 | ) | ||||||||||
Net current period other comprehensive income (loss) | (92 | ) | 66 | (125 | ) | (151 | ) | |||||||||
Ending balance | $ | (35 | ) | $ | 309 | $ | (154 | ) | $ | 120 |
NOTE 1:- | GENERAL (Cont.) |
Unrealized gains (losses) on available-for-sale marketable securities | Unrealized gains (losses) on cash flow hedges | Unrealized gains (losses) on foreign currency translation | Total | |||||||||||||
Beginning balance | $ | (81 | ) | $ | 75 | $ | (287 | ) | $ | (293 | ) | |||||
Other comprehensive income (loss) before reclassifications | 45 | 655 | 133 | 833 | ||||||||||||
Losses (gains) reclassified from accumulated other comprehensive income (loss) | 1 | (421 | ) | - | (420 | ) | ||||||||||
Net current period other comprehensive income (loss) | 46 | 234 | 133 | 413 | ||||||||||||
Ending balance | $ | (35 | ) | $ | 309 | $ | (154 | ) | $ | 120 |
Details about Accumulated Other Comprehensive Income (Loss) Components | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Statements of Income | |||||||
Three months ended September 30, | |||||||||
2017 | 2016 | ||||||||
(unaudited) | |||||||||
Unrealized gains on cash flow hedges, net | $ | - | $ | 32 | Cost of revenues | ||||
- | 152 | Research and development, net | |||||||
- | 39 | Sales and marketing | |||||||
- | 31 | General and administrative | |||||||
- | 254 | Total, before income taxes | |||||||
- | - | Taxes on income (benefit) | |||||||
$ | - | $ | 254 | Total, net of income taxes |
NOTE 1:- | GENERAL (Cont.) |
Details about Accumulated Other Comprehensive Income (Loss) Components | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Statements of Income | |||||||
Nine months ended September 30, | |||||||||
2017 | 2016 | ||||||||
(unaudited) | |||||||||
Unrealized gains on cash flow hedges, net | $ | - | $ | (1 | ) | Financial income | |||
166 | 62 | Cost of revenues | |||||||
570 | 267 | Research and development, net | |||||||
151 | 72 | Sales and marketing | |||||||
153 | 53 | General and administrative | |||||||
1,040 | 453 | Total, before income taxes | |||||||
(46 | ) | (33 | ) | Taxes on income (benefit) | |||||
$ | 994 | $ | 420 | Total, net of income taxes |
NOTE 2:- | INVENTORIES |
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Raw materials | $ | 18,476 | $ | 10,053 | ||||
Finished goods | 43,880 | 57,310 | ||||||
$ | 62,356 | $ | 67,363 |
NOTE 3:- | WARRANTY OBLIGATIONS |
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
(unaudited) | ||||||||
Balance, at beginning of period | $ | 58,375 | $ | 40,894 | ||||
Additions and adjustments to cost of revenues | 23,758 | 24,441 | ||||||
Usage and current warranty expenses | (10,566 | ) | (8,927 | ) | ||||
Balance, at end of period | 71,567 | 56,408 | ||||||
Less current portion | (12,942 | ) | (15,103 | ) | ||||
Long term portion | $ | 58,625 | $ | 41,305 |
NOTE 4:- | FAIR VALUE MEASUREMENTS |
Level 1- | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Level 2- | Include other inputs that are directly or indirectly observable in the marketplace. |
Level 3- | Unobservable inputs which are supported by little or no market activity. |
NOTE 4:- | FAIR VALUE MEASUREMENTS (Cont.) |
Balance as of | Fair value measurements | |||||||||||||||
Description | September 30, 2017 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market mutual funds | $ | 11,669 | $ | 11,669 | - | - | ||||||||||
Foreign exchange option contracts not designated as hedging instruments | $ | 1 | - | $ | 1 | - | ||||||||||
Short-term marketable securities: | ||||||||||||||||
Corporate bonds | $ | 74,743 | - | $ | 74,743 | - | ||||||||||
Governmental bonds | $ | 6,745 | - | $ | 6,745 | - | ||||||||||
Long-term marketable securities: | ||||||||||||||||
Corporate bonds | $ | 66,256 | - | $ | 66,256 | - | ||||||||||
Governmental bonds | $ | 6,095 | - | $ | 6,095 | - | ||||||||||
Liabilities: | ||||||||||||||||
Foreign exchange option contracts not designated as hedging instruments | $ | (301 | ) | - | $ | (301 | ) | - | ||||||||
Foreign exchange forward contracts not designated as hedging instruments | $ | (107 | ) | - | $ | (107 | ) | - |
NOTE 4:- | FAIR VALUE MEASUREMENTS (Cont.) |
Balance as of | Fair value measurements | |||||||||||||||
Description | December 31, 2016 | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market mutual funds | $ | 6,510 | $ | 6,510 | - | - | ||||||||||
Derivative instruments asset | $ | 19 | - | $ | 19 | - | ||||||||||
Short-term marketable securities: | ||||||||||||||||
Corporate bonds | $ | 71,719 | - | $ | 71,719 | - | ||||||||||
Governmental bonds | $ | 2,746 | - | $ | 2,746 | - | ||||||||||
Long-term marketable securities: | ||||||||||||||||
Corporate bonds | $ | 39,279 | - | $ | 39,279 | - | ||||||||||
Governmental bonds | $ | 4,983 | - | $ | 4,983 | - |
NOTE 5:- | COMMITMENTS AND CONTINGENT LIABILITIES |
a. | Guarantees: |
b. | Royalty and Governmental commitments: |
NOTE 5:- | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) |
c. | Contractual purchase obligations: |
d. | Legal claims: |
NOTE 6:- | STOCK CAPITAL |
a. | Common Stock: |
Authorized | Issued and outstanding | |||||||||||||||
Number of shares | ||||||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Stock of $0.0001 par value: | ||||||||||||||||
Common stock | 125,000,000 | 125,000,000 | 42,862,712 | 41,259,391 |
NOTE 6:- | STOCK CAPITAL (Cont.) |
b. | Stock Incentive plans: |
NOTE 6:- | STOCK CAPITAL (Cont.) |
c. | Options granted to employees and members of the board of directors: |
Weighted | ||||||||||||||||
average | ||||||||||||||||
Weighted | remaining | |||||||||||||||
Number | average | contractual | Aggregate | |||||||||||||
of | exercise | term | intrinsic | |||||||||||||
Options | price | in years | Value | |||||||||||||
Outstanding as of December 31, 2016 | 4,864,469 | 5.05 | 6.24 | $ | 39,585 | |||||||||||
Granted | 445,680 | 14.64 | ||||||||||||||
Exercised | (1,077,256 | ) | 2.48 | |||||||||||||
Forfeited or expired | (8,919 | ) | 5.18 | |||||||||||||
Outstanding as of September 30, 2017 | 4,223,974 | 6.72 | 6.33 | $ | 92,201 | |||||||||||
Vested and expected to vest as of September 30, 2017 | 4,123,214 | 6.63 | 6.30 | $ | 90,365 | |||||||||||
Exercisable as of September 30, 2017 | 2,889,086 | 4.79 | 5.54 | $ | 68,653 |
d. | A summary of the activity in the RSUs granted to employees and members of the board of directors for the nine months ended September 30, 2017 (unaudited) is as follows: |
No. of RSUs | Weighted average grant date fair value | |||||||
Unvested as of December 31, 2016 | 1,515,018 | $ | 19.74 | |||||
Granted | 628,210 | 16.39 | ||||||
Vested | (403,668 | ) | 20.59 | |||||
Forfeited | (91,779 | ) | 17.86 | |||||
Unvested as of September 30, 2017 | 1,647,781 | $ | 18.27 |
NOTE 6:- | STOCK CAPITAL (Cont.) |
Outstanding | Exercisable | ||||||||||||
as of | as of | ||||||||||||
Issuance | September 30, | Exercise | September 30, | Exercisable | |||||||||
Date | 2017 | price | 2017 | Through | |||||||||
July 31, 2008 | 33,333 | $ | 0.87 | 33,333 | July 31, 2018 | ||||||||
October 24, 2012 | 2,000 | 2.46 | 2,000 | October 24, 2022 | |||||||||
January 23, 2013 | 3,333 | 3.03 | 3,333 | January 23, 2023 | |||||||||
January 27, 2014 | 1,228 | 3.51 | 506 | January 27, 2024 | |||||||||
May 1, 2014 | 2,000 | 3.51 | 1,750 | May 1, 2024 | |||||||||
September 17, 2014 | 6,498 | 3.96 | 5,040 | September 17, 2024 | |||||||||
October 29, 2014 | 3,335 | 5.01 | 557 | October 29, 2024 | |||||||||
August 19, 2015 | 12,167 | 0.00 | - | ||||||||||
November 8, 2015 | 1,709 | 0.00 | - | ||||||||||
April 18, 2016 | 1,459 | 0.00 | - | ||||||||||
July 11, 2016 | 1,667 | 0.00 | - | ||||||||||
September 21, 2016 | 4,000 | 15.34 | 1,000 | September 21, 2026 | |||||||||
September 21, 2016 | 5,250 | 0.00 | - | ||||||||||
March 15, 2017 | 7,500 | 0.00 | - | ||||||||||
March 15, 2017 | 8,000 | 13.70 | 500 | March 15, 2027 | |||||||||
March 27, 2017 | 4,000 | $ | 0.00 | - | |||||||||
97,479 | 48,019 |
f. | Employee Stock Purchase Plan ("ESPP"): |
The Company adopted an Employee Stock Purchase Plan (the "ESPP") effective upon the consummation of the IPO. As of September 30, 2017 (unaudited), a total of 1,301,154 shares were reserved for issuance under this plan. The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding calendar year or 487,643 shares. However, the Company's board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero. |
NOTE 6:- | STOCK CAPITAL (Cont.) |
The ESPP is implemented through an offering every six months. According to the ESPP, eligible employees may use up to 10% of their salaries to purchase common stock shares up to an aggregate limit of $10 per participant for every six months plan. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date. |
As of September 30, 2017 (unaudited), 185,173 common stock shares had been purchased under the ESPP. |
As of September 30, 2017 (unaudited), 1,115,981 common stock shares were available for future issuance under the ESPP. |
In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation cost. |
g. | Stock-based compensation expense for employees and consultants: |
The Company recognized stock-based compensation expenses related to stock options and RSUs granted to employees and non-employees and ESPP in the condensed consolidated statement of operations for the three and nine months ended on September 30, 2017 (unaudited) and 2016 (unaudited), as follows: |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Cost of revenues | $ | 538 | $ | 384 | $ | 1,548 | $ | 940 | ||||||||
Research and development | 1,423 | 927 | 3,908 | 2,398 | ||||||||||||
Selling and marketing | 1,439 | 850 | 3,673 | 2,422 | ||||||||||||
General and administrative | 1,137 | 939 | 3,054 | 2,372 | ||||||||||||
Total stock-based compensation expense | $ | 4,537 | $ | 3,100 | $ | 12,183 | $ | 8,132 |
NOTE 7:- | BASIC AND DILUTED NET EARNINGS PER SHARE |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Numerator: | ||||||||||||||||
Net income | 27,971 | 15,616 | 64,670 | 53,688 | ||||||||||||
Denominator: | ||||||||||||||||
Shares used in computing net earnings per share of common stock, basic | 42,433,648 | 40,926,887 | 41,831,400 | 40,691,402 | ||||||||||||
Effect of stock-based awards | 3,697,908 | 3,068,340 | 3,106,127 | 3,657,059 | ||||||||||||
Shares used in computing net earnings per share of common stock, diluted | 46,131,556 | 43,995,227 | 44,937,527 | 44,348,461 | ||||||||||||
Basic net income per share | $ | 0.66 | $ | 0.38 | $ | 1.55 | $ | 1.32 | ||||||||
Diluted net income per share | $ | 0.61 | $ | 0.35 | $ | 1.44 | $ | 1.21 |
a. | Corporate tax in Israel: |
b. | Taxes on income (tax benefit) are comprised as follows: |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Current year taxes | $ | 878 | $ | 835 | $ | 2,906 | $ | 1,741 | ||||||||
Deferred tax income and others | (787 | ) | 2,179 | (3,390 | ) | 2,326 | ||||||||||
Taxes on income (tax benefit) | $ | 91 | $ | 3,014 | $ | (484 | ) | $ | 4,067 |
c. | Deferred income taxes: |
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
Assets in respect of: | ||||||||
Research and Development carryforward expenses- temporary differences | $ | 2,934 | $ | 908 | ||||
Stock based compensation | 1,528 | 1,039 | ||||||
Other reserves | 1,360 | 868 | ||||||
Net deferred tax assets | $ | 5,822 | $ | 2,815 |
d. | Uncertain tax positions: |
NOTE 9:- | CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS |
a. | For the three month period ended September 30, 2017 (unaudited), the Company had two major customers that accounted for 21.60% of its consolidated revenues. For the three month period ended September 30, 2016 (unaudited) the Company had one major customer that accounted for 12.38% of its consolidated revenues. |
b. | As of September 30, 2017, (unaudited) two customers accounted for approximately 31.19% and as of December 31, 2016, one customer accounted for approximately 20.15%, of the Company's net accounts receivable, respectively. |
forward-looking statements. Given these uncertainties, you should not place undue reliance on forward looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this filing. Important factors that could cause actual results to differ materially from our expectations include:
Except as required by law, we assume no obligation to update these forward looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future. 5 Overview We have invented an intelligent inverter solution that has changed the way power is harvested and managed in a solar photovoltaic (“PV”) system. Our direct current (“DC”) optimized inverter system is designed to maximize power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features. Supporting increased PV proliferation, our system consists of power optimizers, inverters, communication and smart energy management solutions, and a cloud-based monitoring platform. Our solutions address a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations. We believe that these benefits, along with our comprehensive and advanced safety features, are highly valued by our customers. Our revenues for the three months ended September 30, 2017 and 2016 were $166.6 million and $128.5 million, respectively. Gross margin was 34.9% and 32.6% for the three months ended September 30, 2017 and 2016, respectively. Net income was $28.0 million and $15.6 million for the three months ended September 30, 2017 and 2016, respectively. Our revenues for the nine months ended September 30, 2017 and 2016 were $417.7 million and $378.4 million, respectively. Gross margin was 34.4% and 32.2% for the nine months ended September 30, 2017 and 2016, respectively. Net income was $64.7 million and $53.7 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we have shipped approximately 20.6 million power optimizers and 856,000 inverters. Approximately 492,000 installations, many of which may include multiple inverters, are currently connected to, and monitored through, our cloud‑based monitoring platform. As of September 30, 2017, we have shipped approximately 5.9 GW of our DC optimized inverter systems. Our products are sold in approximately 47 countries, and are installed in solar PV systems in more than 120 countries. Key Operating Metrics In managing our business and assessing financial performance, we supplement the information provided by the financial statements with other operating metrics. These operating metrics are utilized by our management to evaluate our business, measure our performance, identify trends affecting our business and formulate projections. We use metrics relating to shipments (inverters shipped, power optimizers shipped and megawatts shipped) to evaluate our sales performance and to track market acceptance of our products. We use metrics relating to monitoring (systems monitored) to evaluate market acceptance of our products and usage of our solution. We provide the “megawatts shipped” metric, which is calculated based on nameplate capacity shipped, to show adoption of our system on a nameplate capacity basis. Nameplate capacity shipped is the maximum rated power output capacity of an inverter and corresponds to our financial results in that higher total capacities shipped are generally associated with higher total revenues. However, revenues increase with each additional unit, not necessarily each additional MW of capacity, sold. Accordingly, we also provide the “inverters shipped” and “power optimizers shipped” operating metrics.
6 Results of Operations The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report. The following table sets forth selected consolidated statements of operations data for each of the periods indicated.
Comparison of the Three Months Ended September 30, 2017 and 2016 Revenues
Revenues increased by $38.1 million, or 29.6%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, due to an increase in the number of units sold outside of the U.S. Specifically, non-U.S. revenues comprised 51% of our revenues in the three months ended September 30, 2017 as compared to 33% in the three months ended September 30, 2016, with significant growth in revenues coming from Germany and the Netherlands as well as from non-U.S. markets outside of Europe The number of power optimizers sold increased by approximately 0.4 million units, or 24.8%, from approximately 1.6 million units in the three months ended September 30, 2016 to approximately 2.0 million units in the three months ended September 30, 2017. The number of inverters sold increased by approximately 23,800 units, or 37.2%, from approximately 64,000 units in the three months ended September 30, 2016 to approximately 87,800 units in the three months ended September 30, 2017. Our blended average selling price per watt for units shipped decreased by $0.02, or 7.3%, in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, primarily due to: (i) an increase in sales of commercial products that are characterized by lower average selling prices per watt; (ii) price erosion in the overall inverter market; and (iii) a change in our customer mix, which includes a higher portion of sales to large customers to whom we provide volume discounts. 7 Cost of Revenues and Gross Profit
Cost of revenues increased by $21.9 million, or 25.3%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to: (i) an increase in the volume of products sold; (ii) increased warranty expenses and warranty accruals of $1.9 million associated with the rapid increase in our install base; (iii) increased shipment and logistical costs of $3.9 million attributed, in part to the growth in volumes shipped, and to an increase in air shipments caused by industry wide component shortages; (iv) increased personnel-related costs of $2.2 million connected to the expansion of our operations and increased support headcount which is growing in parallel with our growing install base worldwide. Gross profit as a percentage of revenue increased from 32.6%, in the three months ended September 30, 2016, to 34.9%, in the three months ended September 30, 2017, primarily due to reductions in per unit production costs that exceeded price erosion of our products, increased efficiency in our supply chain and general economies of scale in our personnel-related costs and other costs associated with our support and operations departments. Operating Expenses: Research and Development, Net
Research and development, net increased by $4.4 million, or 44.6%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase in personnel-related costs of $3.0 million resulting from an increase in our research and development headcount and salary adjustments. The increase in headcount reflects our continued investment in enhancing our existing products as well as activities associated with bringing new products to market. The increase is also attributed to: the use of external consultants; overhead costs; deprecation expenses; and materials consumption, which increased by $0.5 million, $0.4 million, $0.3 million and $0.2 million, respectively, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Sales and Marketing
Sales and marketing expenses increased by $3.2 million, or 31.7%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase in personnel-related costs of $2.4 million related to an increase in headcount associated with supporting our sales in the U.S., Europe and Asia, as well as salary increases. In addition, expenses related to trade shows and marketing activities; other overhead costs and travel expenses; and expenses related to external consultants and sub-contractors, increased by $0.4 million, $0.3 million and $0.1 million, respectively, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. 8 General and Administrative
General and administrative expenses increased by $1.4 million, or 38.6%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase in personnel-related costs of $0.8 million related to: (i) higher headcount in the legal, finance, human resources, and information system department functions required for a fast-growing public company; and (ii) increased expenses related to equity-based compensation. In addition, legal expenses increased by $0.8 million mainly due to legal proceedings initiated by us during the third quarter. This increase was offset by a decrease in costs related to the accrual of doubtful debts in the amount of $0.2 million in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Financial income (expenses), net
Financial income increased by $2.3 million, or 583.6%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase of $2.3 million in foreign exchange fluctuations between the Euro and the New Israeli Shekel against the US Dollar in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. In addition, financial income increased by $0.3 million due to an increase in interest income, net of accretion (amortization) of discount (premium) on marketable securities in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. These increases in financial income were offset by an increase of $0.3 million in costs related to hedging transactions in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Taxes on Income
Taxes on income decreased by $2.9 million in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase of $3.1 million in deferred tax assets in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This was offset by an increase of $0.2 million in current tax expenses in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. 9 Net Income
As a result of the factors discussed above, net income increased by $12.4 million, or 79.1%, in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Comparison of the Nine Months Ended September 30, 2017 and 2016 Revenues
Revenues increased by $39.3 million, or 10.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to an increase in the number of units sold primarily outside of the U.S. Specifically, revenues generated from outside the United States comprised 45.3% of our revenues for the nine months ended September 30, 2017, as compared to 34.2% for the nine months ended September 30, 2016. The number of power optimizers sold increased by approximately 0.6 million units, or 13.9%, from approximately 4.6 million units in the nine months ended September 30, 2016, to approximately 5.2 million units in the nine months ended September 30, 2017. The number of inverters sold increased by approximately 40,900 units, or 23.2%, from approximately 176,400 units in the nine months ended September 30, 2016 to approximately 217,300 units in the nine months ended September 30, 2017. Our blended average selling price per watt for units shipped decreased by $0.03, or 10.5%, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to: (i) increased volumes of commercial products that are characterized by lower average selling prices per watt; (ii) decreased prices in the overall inverter market; and (iii) a change in our customer mix, which included a higher portion of sales to large customers to whom we provide volume discounts. Cost of Revenues and Gross Profit
Cost of revenues increased by $17.2 million, or 6.7%, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to (i) an increase in the volume of products sold ; (ii) an increase in shipment and logistical costs of $4.1 million attributed, in part to the growth in volumes shipped, and to an increase in the portion of air shipments used as a result of an industry wide component shortage; and (iii) an increase in personnel-related costs of $6.1 million due to the expansion of our operations and increased support headcount which is growing in parallel with our growing install base worldwide. Gross profit as a percentage of revenue increased from 32.2% in the nine months ended September 30, 2016, to 34.4% in the nine months ended September 30, 2017, primarily due to: (i) cost reductions in per unit product costs which exceeded price erosions of our products; (ii) increased efficiency in our supply chain due to our increased volumes; (iii) lower costs associated with our warranty and warranty provisions; and (iv) general economies of scale in our personnel-related costs and other costs associated with our support and operations departments. 10 Operating Expenses: Research and Development, Net
Research and development, net increased by $10.7 million, or 38.3%, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to an increase in personnel-related costs of $7.5 million triggered by increased headcount. The increase in headcount reflects our continued investment in enhancing our existing products as well as development associated with bringing new products to market. In addition, use of contractors and subcontractors; depreciation of lab equipment; other directly related overhead and travels costs; and material consumption, increased by $1.2 million, $0.8 million, $0.7 million and $0.5 million, respectively, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Sales and Marketing
Sales and marketing expenses increased by $8.2 million, or 29.4%, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to an increase in personnel-related costs of $6.2 million resulting from an increase in headcount supporting our growth in the U.S., Europe and Asia. In addition, expenses related to the use of contractors and subcontractors; trade shows and marketing activities; expenses associated with our worldwide sales offices; other directly related overhead and travel expenses; and depreciation, increased by $0.7 million, $0.6 million, $0.4 million $0.2 million and $0.1 million, respectively, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. General and Administrative
General and administrative expenses increased by $2.6 million, or 25.4%, in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily due to an increase in personnel-related costs of $1.5 million related to (i) higher headcount in the legal, finance, human resources, and information technology department functions required for a fast-growing public company and (ii) increased expenses related to equity-based compensation, changes in management compensation and growth in vacation accruals, which resulted from changes in compensation packages of employees. In addition, costs related to use of contractors and subcontractors increased by $0.6 million due to a legal proceeding initiated by us and accrual for a doubtful account increased by $0.5 million, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. 11 Financial Income (Expenses), Net
Financial income increased by $5.8 million, or 305.4%, in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to an increase of $5.9 million in foreign exchange fluctuations between the Euro and the New Israeli Shekel against the U.S. Dollar in the nine months ended September 30, 2017, as compared to the three months ended September 30, 2016. In addition, financial income increased by $0.8 due to an increase in interest income, net of accretion (amortization) of discount (premium) on marketable securities in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. These increases in financial income were offset by an increase of $0.9 million in costs related to hedging transactions in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Taxes on Income (Tax Benefit)
Tax benefits amounted to $0.5 million in the nine months ended September 30, 2017, as compared to taxes on income of $4.1 million in the nine months ended September 30, 2016, primarily due to an increase of $5.4 million in deferred tax assets in the nine months ended September 30, 2017 and a $0.3 million of tax credit related to previous years’ activity. This was offset by an increase of $1.1 million in taxes on income during the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Net Income
As a result of the factors discussed above, net income increased by $11.0 million, or 20.5% in the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. 12 Liquidity and Capital Resources The following table shows our cash flow from operating activities, investing activities and financing activities for the stated periods:
As of September 30, 2017, our cash and cash equivalents were $149.4 million. This amount does not include $153.8 million invested in available-for-sale marketable securities and $1.4 million of restricted cash (primarily held to secure bank guarantees securing certain office lease obligations). We believe that cash provided by operating activities as well as our cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months. Operating Activities For the nine months ended September 30, 2017, cash provided by operating activities was $90.9 million, derived mainly from a net income of $64.7 million, $15.4 million of non-cash expenses, an increase of $16.0 million in trade payables and other accounts payable, $13.2 million in warranty obligations, $9.7 million of deferred revenues, $4.5 million in accruals for employees and a decrease of $5.0 million in inventories. The cash from operating activities was offset by an increase of $20.2 million in trade receivables, net and $17.4 million in prepaid expenses and other receivables. For the nine months ended September 30, 2016, cash used in operating activities was $57.7 million derived mainly from a net income of $53.7 million, $14.8 million of non-cash expenses, a decrease of $19.2 million in inventories, $8.2 million in prepaid expenses and other receivables, and an increase of $15.5 million in warranty obligations and $5.1 million in deferred revenues. The cash from operating activities was offset by an increase of $38.1 million in trade receivables and a deacrese of $19.7 million in trade payables and other accounts payable and $1.0 million in accruals for employees. Investing Activities During the nine months ended September 30, 2017, net cash used in investing activities was $49.7 million, of which $82.5 million was invested in available-for-sale marketable securities, $13.2 million related to capital investments in laboratory equipment, end of line testing equipment, automated assembly lines, manufacturing tools and leasehold improvements and $0.5 million was related to an increase in restricted cash and a short and long-term lease deposit. This was offset by $46.5 million from the maturities of available-for-sale marketable securities. During the nine months ended September 30, 2016, net cash used in investing activities was $75.3 million, of which $85.6 million was invested in available-for-sale marketable securities and $13.9 million related to capital investments in laboratory equipment, end of line testing equipment, manufacturing tools and leasehold improvements. This was offset by $21.7 million from the maturities of available-for-sale marketable securities and a decrease of $2.5 million in restricted cash. Financing Activities For the nine months ended September 30, 2017, net cash provided by financing activities was $3.8 million, all attributed to cash received from the exercise of employee and non-employee stock options. For the nine months ended September 30, 2016, net cash provided by financing activities was $1.6 million, of which $1.8 million was related to cash received from the exercise of employee and non-employee stock options, offset by $0.2 million attributed to issuance costs related to our initial public offering. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. 13 We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, customer concentrations and interest rates. We do not hold or issue financial instruments for trading purposes. Foreign Currency Exchange Risk Approximately 40.3% and 26.1% of our revenues for the nine months ended September 30, 2017 and 2016, respectively, were earned in non‑U.S. Dollar denominated currencies, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. Dollar and New Israeli Shekel, and to a lesser extent the Euro. Our New Israeli Shekel‑denominated expenses consist primarily of personnel and overhead costs. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. A hypothetical 10% change in foreign currency exchange rates during the nine months ended September 30, 2017, between the Euro and the U.S. Dollar would increase or decrease our net income by $14.0 million for the nine months ended September 30, 2017. A hypothetical 10% change in foreign currency exchange rates during the nine months ended September 30, 2017, between the New Israeli Shekel and the U.S. Dollar would increase or decrease our net income by $5.1 million for the nine months ended September 30, 2017. For purposes of our consolidated financial statements, local currency assets and liabilities are translated at the rate of exchange to the U.S. Dollar on the balance sheet date and local currency revenues and expenses are translated at the exchange rate as of the date of the transaction or at the average exchange rate to the U.S. Dollar during the reporting period. To date, we have used derivative financial instruments, specifically foreign currency forward contracts, to manage exposure to foreign currency risks by hedging a portion of our account receivable balances denominated in Euros expected to be paid within three months. Our foreign currency forward contracts are expected to mitigate exchange rate changes related to the hedged assets. We do not use derivative financial instruments for speculative or trading purposes. We had cash and cash equivalents of $149.5 million and available-for-sale marketable securities with an estimated fair value of $153.8 million on September 30, 2017, which securities were held for working capital purposes. We do not enter into investments for trading or speculative purposes. Since most of our cash and cash equivalents are held in U.S. Dollar‑denominated money market funds, we believe that our cash and cash equivalents do not have any material exposure to changes in exchange rates. Concentrations of Major Customers Our trade accounts receivables potentially expose us to a concentration of credit risk with our major customers. As of September 30, 2017, two major customers accounted for approximately 31.2% of our consolidated trade receivables balance. We currently do not foresee a credit risk associated with these receivables. ITEM 4 CONTROLS AND PROCEDURES Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2017. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. 14 Changes in Internal Control over Financial Reporting Based on an evaluation by our chief executive officer and chief financial officer, such officers concluded that there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 1 LEGAL PROCEEDINGS In the normal course of business, we may from time to time be named as a party to various legal claims, actions and complaints (including as a result of initiating such legal claims, action or complaints on behalf of the Company). It is impossible to predict with certainty whether any resulting liability from any such legal claims, actions or complaints would have a material adverse effect on our financial position, results of operations or cash flows. ITEM 1A RISK FACTORS There have been no material changes to the risk factors as described in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-KT for the year ended December 31, 2016 other than the supplemental risk factors set forth below: We rely on a limited number of contract manufacturers and, for a period of time, will rely on one contract manufacturer for some manufacturing. We depend on two contract manufacturers and several limited or single source component suppliers; we have recently entered into an agreement with a new contract manufacturer and are in the process of ramping up manufacturing with this new manufacturer. During this ramp up period we will be relying on one contract manufacturer. Any change in our relationship with our contract manufacturers or changes to contractual terms of our agreements with the contract manufacturers could adversely affect our financial condition and results of operations. Changes in the U.S. trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows. On October 31, 2017, the U.S. International Trade Commission (“ITC”) announced its intended recommendations with respect to regulation of the U.S. solar industry, including the imposition of import tariffs of up to 35% on solar cells and modules imported into the U.S. from certain countries. Once a formal recommendation has been delivered to President Trump, he will have up to 60 days to determine what action to take with respect to such recommendations. He may adopt the recommendations or do nothing at all. In addition, certain solar companies have filed a petititon with the ITC under Section 201 of the U.S. Trade Act of 1974, which petititon seeks various remedies including the imposition of import tariffs on solar cells and modules that are substantially higher than the tariffs recommended by the ITC, as well as certain restrictions on the import of solar cells and modules. Significant uncertainty currently exists with respect to these matters, including uncertainty about the nature and timing of any changes and what countries may be affected. An adverse determination by the ITC or the imposition of remedies with respect to the Section 201 action could result in a wide range of impacts to the U.S. solar industry and the global manufacturing market. Tariffs or similar taxes or duties, or other remedies that may be imposed, could materially increase the price of solar systems in the U.S. or harm the industry generally, thereby making the use of solar less economically feasible and decreasing demand for our products. These outcomes could adversely affect the amount or timing of our revenues, results of operations or cash flows, and continuing uncertainty could cause sales volatility, price fluctuations or supply shortages or cause our customers to advance or delay their purchase of our products. 15 None. ITEM 3 DEFAULTS UPON SENIOR SECURITIES None. ITEM 4 MINE SAFETY DISCLOSURES Not applicable. ITEM 5 OTHER INFORMATION None. 16
17 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
18 |