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SIGNIFICANT ACCOUNTING POLICIES (Policies)
 12 Months Ended
Jun. 30, 2015
SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Use of estimates

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 financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions, including those related to warranty obligation, warrants to purchase convertible preferred stock, contingencies, share-based compensation cost, as well as in estimates used in applying the revenue recognition policy. 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 and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Financial statements in U.S. dollars

b.      Financial statements in U.S. dollars:

 

The functional currency of the Company and its Israeli subsidiary is the U.S. dollar, as the U.S. dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. The Company's and its Israeli subsidiary's operations are currently primarily conducted in Israel and a significant portion of its expenses are currently paid in U.S. dollars. Financing activities including loans and cash investments, are mainly made in U.S. dollars.

 

Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are translated into U.S. dollars in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 830 (“Foreign Currency Matters”). All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

 

The financial statements of the Company's German, Chinese, Australian, Canadian, Dutch, Japanese and French subsidiaries, whose functional currency is other than the U.S. dollar, have been translated into U.S dollars. Assets and liabilities have been translated using the exchange rates in effect on the balance sheet date. Statements of operations amounts have been translated using the average exchange rate for the relevant periods.

 

The resulting translation adjustments are reported as a component of stockholders' equity (deficiency) in accumulated other comprehensive income (loss).

 

Accumulated other comprehensive loss related to foreign currency translation adjustments, net amounted to $222, $61 and $26 as of June 30, 2015, 2014 and 2013, respectively.
Principles of consolidation

c.       Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances including profits from intercompany sales not yet realized outside the Company have been eliminated upon consolidation.

 

The Company's fiscal years 2015, 2014 and 2013 ended on June 30, 2015,  2014 and 2013, respectively. Unless otherwise stated, references to particular years and quarters, refer to the Company's fiscal years ended in June and the associated quarters of those fiscal years.
Basic and Diluted Net Earnings (Loss) Per Share

d.      Basic and Diluted Net Earnings (Loss) Per Share:

 

Basic net earnings (loss) per share is computed by dividing the net earnings (loss) by the weighted-average number of shares of common stock outstanding during the period.

 

Diluted net earnings (loss) per share is computed by giving effect to all potential shares of common stock, including stock options and convertible preferred stock, to the extent dilutive, all in accordance with FASB ASC No. 260, "Earnings Per Share."

 

The total weighted average number of shares related to the outstanding stock options, convertible preferred stock and warrants to purchase convertible preferred stock, excluded from the calculation of diluted net earnings (loss) per share due to their anti-dilutive effect was 20,565,747, 25,234,818 and 22,953,263, for the years ended June 30, 2015, 2014 and 2013, respectively.

 

Basic and diluted earnings (loss) per share is presented in conformity with the two-class method for participating securities for the periods prior to their conversion. Under this method the earnings per share for each class of shares are calculated assuming 100% of the Company's earnings are distributed as dividends to each class of shares based on their contractual rights. In addition, since all classes other than common stock do not participate in losses, for the twelve months period ended June 30, 2014 and 2013 these shares are not included in the computation of basic loss per share.

 

For the years ended June 30, 2014 and 2013 basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.

 

The following table presents the computation of basic and diluted net earnings (loss) per share for the periods presented (in thousands, except per share data):

 

 

 

Year ended June 30,

 

 

 

2015

 

 

2014

 

 2013

 

Net basic earnings (loss) per share of common stock:

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss)

 

21,121

 

 

(21,378)

 

(28,180)

 

Dividends accumulated for the period


(17,550)

 

 

 -  

 

-

 

Net income (loss) available to shareholders of common stock

 

3,571

 

 

(21,378)

 

(28,180)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 


 

Shares used in computing net earnings (loss) per share of common stock, basic

 

11,902,911

 

 

2,798,894

 

2,741,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net diluted earnings (loss) per share of common stock:

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss)

 

21,121

 

 

(21,378)

 

(28,180)

 

Dividends accumulated for the period

 

(16,971)

 

 

-

 

-

 

Net income (loss) available to shareholders of common stock

 

4,150

 

 

(21,378)

 

(28,180)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Shares used in computing net earnings (loss) per share of common stock, diluted

 

15,269,448

 

 

2,798,894

 

2,741,370

 
Cash and cash equivalents

e.       Cash and cash equivalents:

 

Cash equivalents are short-term, highly liquid investments that are readily convertible to cash, with original maturities of three months or less at the date acquired.
Restricted cash

f.       Restricted cash:

 

Restricted cash is primarily invested in short-term bank deposits, which are primarily used to guarantee a letter of credit which has been issued to one of the Company's major vendors and to the Company's landlords for its office leases.
Inventories

g.       Inventories:

 

Inventories are stated at the lower of cost or market value. Inventory reserves are provided to cover risks arising from slow-moving items or technological obsolescence.

 

The Company periodically evaluates the quantities on hand relative to historical, current and projected sales volume. Based on this evaluation, an impairment charge is recorded when required to write-down inventory to its market value. Cost of finished goods and raw materials is determined using the moving average cost method.
Property and equipment

h.      Property and equipment:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following rates:

 

 

 

%

 

 

 

Computers and peripheral equipment

 

14 – 33 (mainly 33)

Office furniture and equipment

 

7 – 15 (mainly 7)

Machinery & equipment

 

7 – 33 (mainly 20)

Laboratory equipment

 

15 – 33 (mainly 15)

Vehicles

 

15

Leasehold improvements

 

over the shorter of the lease term or useful economic life

Impairment of long-lived assets

i.       Impairment of long-lived assets:

 

The Company's long-lived assets are reviewed for impairment in accordance with ASC 360 (“Property, Plants and Equipment”), whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group).

 

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. For the years ended June 30, 2015, 2014 and 2013, no impairment losses have been identified.
Severance pay

j.       Severance pay:

 

Pursuant to Israel's Severance Pay Law, Israeli employees are entitled to severance pay equal to one month's salary for each year of employment, or a portion thereof. The employees of the Company's Israeli subsidiary have elected to be included under section 14 of the Severance Pay Law, 1963, under which these employees are entitled only to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary. These payments cause the Company to be released from any future obligation under the Israeli Severance Pay Law to make severance payments in respect of those employees; therefore, related assets and liabilities are not presented in the balance sheet.

 

For the years ended June 30, 2015, 2014 and 2013, the Company recorded $1,273, $1,109 and $974, severance expenses, respectively.
Revenue recognition

k.      Revenue recognition:

 

The Company and its subsidiaries generate their revenues mainly from the sale of power optimizers, inverters and cloud-based monitoring services, to distributors, installers and PV module manufacturers.

 

Revenues from product sales and related services are recognized in accordance with ASC 605 (“Revenue Recognition”), when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, collectability is reasonably assured and no significant obligations remain.  

 

Persuasive evidence of an arrangement exists. The Company's customers mainly consist of distributors and installers (the “Customers”).  The Company's sales arrangements with Customers are pursuant to written documentation, either a written contract or purchase order. The actual documentation used is dependent on the business practice with each Customer. Therefore, the Company determines that persuasive evidence of an arrangement exists with respect to a Customer when it has a written contract, or a binding purchase order from the Customer.

 

Delivery has occurred. Each item of written documentation relating to a sale arrangement that is agreed upon with the Customer specifically sets forth when risk  of loss and title are being transferred (based on the agreed International Commercial terms, or “INCOTERMS”). Unless a different written arrangement with the Customer exists, the Company determines that risk of loss and title are transferred to the Customer when the applicable INCOTERMS are satisfied and thus delivery of its products has occurred.

 

The fee is fixed or determinable. The Company does not provide any price protection, stock rotation and/or right of return and thus the Company considers all the Customers as end-users and the fee is considered fixed and determinable upon execution of the written documentation with the Customers. Additionally, payments that are due within the normal course of the Company's credit terms, which are currently no more than three months from the delivery date, are deemed to be fixed and determinable. Fees and arrangements with payment terms extending beyond customary payment terms are considered not to be fixed or determinable, in which case revenues are deferred and recognized when payments become due, provided that all other revenue recognition criteria have been met.  

 

Collectability is reasonably assured. The Company determines whether collectability is reasonably assured on a Customer-by-Customer basis pursuant to its credit review policy. The Company typically sells to Customers with whom it has a long-term business relationship and a history of successful collection. For a new Customer, or when an existing Customer substantially expands its commitments, the Company evaluates the Customer's financial position, the number of years the Customer has been in business, the history of collection with the Customer and the Customer's ability to pay and typically assigns a credit limit based on that review.

 

Provisions for rebates, sales incentives, and discounts to customers are accounted for as reductions in revenue in the same period the related sales are recorded.

 

The Company increases a credit limit only after it has established a successful collection history with the Customer. If the Company determines at any time that collectability is not reasonably assured under a particular arrangement based upon its credit review process, the Customer's payment history or information that comes to light about a Customer's financial position, it recognizes revenue under that arrangement as Customer payments are actually received.

 

Revenues related to cloud-based monitoring services are recognized ratably on a straight-line basis over the estimated service period of 25 years.

 

For multiple-element arrangements, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“ESP”).

 

VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. ESPs reflect the Company's best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. The Company has allocated revenue between its deliverables based on their relative selling prices. Because the Company has neither VSOE nor TPE for its deliverables, the allocation of revenue has been based on the Company's ESPs. Amounts allocated to the delivered elements are recognized at the time of sale provided the other conditions for revenue recognition have been met.

 

The Company's process for determining its ESP considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable. Key factors considered by the Company in developing the ESPs for its products include prices charged by the Company for similar offerings, the Company's historical pricing practices and product-specific business objectives.

 

Deferred revenues consist of deferred web-based monitoring services, advance payments received from Customers for the Company's products and warranty extensions, and are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized.
Cost of revenues

l.       Cost of revenues:

 

Cost of revenues sold includes the following: product costs consisting of purchases from contract manufacturers and other suppliers, indirect manufacturing, support, warranty, provision for loss related to slow moving and dead inventory, personnel and logistics costs.
Shipping and handling costs

m.     Shipping and handling costs:

 

Shipping and handling costs, which amounted to $26,931, $14,066 and $5,140 for the years ended June 30, 2015, 2014 and 2013, respectively, are included in cost of revenues in the consolidated statements of operations. Shipping and handling costs include all costs associated with the distribution of finished products from the Company's point of selling directly to its Customers.
Warranty obligations

n.         Warranty obligations:

 

The Company's products include a minimum 12-year limited warranty for inverters and a 25-year limited warranty for power optimizers. In certain cases, the Company provides extended warranties for inverters that bring the warranty period up to 25 years. The Company maintains reserves to cover the expected costs that could result from these warranties. The potential liability is generally in the form of product replacement. Warranty reserves are based on the Company's best estimate of such costs and are included in cost of revenues. The reserve for the related warranty expenses is based on various factors including assumptions about the frequency of warranty claims on product failures, derived from results of accelerated lab testing, field monitoring, analysis of the history of product failures and the Company's reliability estimates.

 

The Company has established a reliability measurement system based on the units' estimated mean time between failure, or MTBF, a metric that equates to a steady-state failure rate per year for current generation products. The MTBF represents the predicted mean elapsed time to each product unit failure during system operation. The Company performs accelerated life cycle testing, which simulates the service life of the product in a short period of time.

 

The accelerated life cycle tests incorporate test methodologies derived from standard tests used by solar module vendors to evaluate the period over which solar modules wear out. Corresponding replacement costs are updated periodically to reflect changes in the Company's actual and estimated production costs for its products.

 

In addition, through the collection of actual failure statistics, the Company has identified several additional failure causes that are not included in the MTBF calculations. Such causes, which mostly consist of workmanship errors caused during the manufacturing process and replacement of non-faulty units by installers, are in addition to the replacement costs projected under the MTBF model. The Company identified each of those causes, its failure pattern and the relative ratio compared to the pattern of malfunctions identified under the MTBF and accrued additional provisions for the occurrence of such malfunctioning. The Company evaluates the continuation of these occurrences and the appearance of potential additional malfunctioning cases beyond the MTBF pattern and accrues additional expenses accordingly.

 

Warranty obligations are classified as short-term and long-term warranty obligations based on the period in which the warranty is expected to be claimed.
Royalty-bearing grants from the Binational Industrial Research and Development Foundation

o.      Royalty-bearing grants from the Binational Industrial Research and Development Foundation:

 

Royalty-bearing grants from the Binational Industrial Research and Development Foundation (“BIRD-F”) for funding of approved research and development projects are recognized, as a deduction from research and development expenses,  at the time the Company is entitled to such grants (see Note 10c).

 

The Company recorded grants from BIRD-F in the amount of $248 for the year ended June 30, 2013, which was deducted from research and development expenses. No grants were recorded in the years ended June 30, 2015 and 2014.
Government grants

p.      Government grants:

        

Government grants received by the Company's Israeli subsidiary relating to categories of operating expenditures are credited to the consolidated statements of operations during the period in which the expenditure to which they relate is charged. Royalty bearing grants from the Israeli Office of the Chief Scientist (“OCS”) for funding certain approved research and development projects are recognized at the time when the Company's Israeli subsidiary is entitled to such grants, on the basis of the related costs incurred, and are included as a deduction from research and development expenses.

 

The Company recorded grants in the amount of $763 and $275 for the year ended June 30, 2015 and 2014, respectively, which was deducted from research and development expenses. No grants were recorded in the year ended June 30, 2013.
Research and development costs

q.      Research and development costs:

 

Research and development costs, net of grants received, are charged to the consolidated statement of operations as incurred.
Concentrations of credit risks

r.       Concentrations of credit risks:

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, trade receivables and other accounts receivable.

 

Cash and cash equivalents are mainly invested in major banks in the U.S., Israel and in Germany. Management believes that the financial institutions that hold the Company's investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.

 

The trade receivables of the Company are derived from sales to Customers located primarily in North America and Europe.

 

The Company generally does not require collateral, except for a partial advance payment; however, in certain circumstances, the Company may require letters of credit, other collateral or additional guarantees.

 

 An allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection. As of June 30, 2015 the Company accrued $13 as allowance for doubtful accounts. As of June 30, 2014 and 2013 the Company did not accrue any allowance for doubtful accounts.

 

As of June 30, 2015 and 2014, the Company had a major Customer which accounted for approximately 30% and 31%, respectively, of the Company's consolidated trade receivables.

 

The Company and its subsidiaries have no off-balance sheet concentration of credit risk except for certain derivative instruments as mentioned below.
Fair value of financial instruments

s.       Fair value of financial instruments:

 

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

 

The carrying value of cash and cash equivalents, restricted cash, trade receivables, prepaid expenses and other accounts receivable, short term bank loan, trade payables, employees and payroll accruals and accrued expenses and other accounts payable approximate their fair values due to the short-term maturities of such instruments.

 

Assets measured at fair value on a recurring basis as of June 30, 2015 are comprised of foreign currency forward contracts.

 

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 and 2013 are comprised of foreign currency forward contracts and warrants to purchase convertible preferred stock liability related to term loan (see Note 8).      

 

The Company applies ASC 820 (“Fair Value Measurements and Disclosures”), with respect to fair value measurements of all financial assets and liabilities.

 

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.

 

A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

 


 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.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

In accordance with ASC 820, the Company measures its foreign currency derivative contracts, at fair value using the market approach valuation technique. Foreign currency derivative contracts as detailed in Note 2w are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments. Warrants to purchase convertible preferred stock as detailed in Note 8 are classified within the Level 3 value hierarchy.
Warrants to Purchase Convertible Preferred Stock

t.       Warrants to Purchase Convertible Preferred Stock:

 

The Company accounts for freestanding warrants to purchase shares of its convertible preferred stock as a liability on the balance sheets at fair value. The warrants to purchase convertible preferred stock are recorded as a liability because of a provision calling for minimum proceeds upon or after an “Exit Event”, as described in Note 8.

 

The fair value of warrants to purchase convertible preferred stock on the issuance date and on subsequent reporting dates was determined using a hybrid method utilizing the assumptions noted below. The fair value of the underlying preferred stock price was determined by the board of directors considering, among others, third party valuations. The valuation of the Company was performed using the hybrid method, a hybrid between the probability-weighted estimated return method (“PWERM”) and Option Pricing Method (“OPM”) estimating the probability-weighted value across multiple scenarios but using the OPM to estimate the allocation of value within one or more of those scenarios. The OPM was used to allocate the Company's equity value between the preferred stock, common stock and warrants in a scenario of other liquidation events.

 

The expected terms of the warrants were based on the remaining contractual expiration period. The expected share price volatility for the shares was determined by examining the historical volatilities of a group of the Company's industry peers as there was insufficient trading history of the Company's shares. The risk-free interest rate was calculated using the average of the published interest rates for U.S. Treasury zero-coupon issues with maturities that approximate the expected term.

 

The dividend yield assumption was zero as there is no history of dividend payments and since the Company does not expect to pay any didivends in the foreseeable future.

 

The following assumptions were used to estimate the value of the warrants to purchase  convertible preferred stock:

 

June 30,

 

 

2014

 

2013

 

 

 

 

 

Expected volatility

 

45.0%

 

55.8%

Risk-free rate

 

0.09%

 

0.3%

Dividend yield

 

0%

 

0%

Expected term (in years)

 

1.21

 

1.50

 

The warrants to purchase convertible preferred stock were subject to re-measurement to fair value at each balance sheet date and any change in fair value was recognized as a component of financial expenses, net, on the statements of operations.

 

The change in the fair value of warrants to purchase convertible preferred stock is summarized below:

 

 

 

 

Balance at
beginning of period

 

 Issuance of

warrants to
purchase preferred
stock

 

 Exercise of

warrants to
purchase common
stock(*)

 

 

Change in fair value

 

 

Balance at
end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

$

765

 

$

              -

 

$

(6,115)

 

$

      5,350

 

$

           -

June 30, 2014

 

$

818

 

$

              -

 

$

-

 

$

(53)

 

$

      765

June 30, 2013

 

$

-

 

$

         778

 

$

-

 

$

           40

 

$

      818

 

(*)
Upon the closing of the IPO, all outstanding warrants to purchase convertible preferred stock automatically converted into warrants to purchase 187,671 shares of common stock (See Note 1b).

 

On June 18, 2015 the warrants were cashless exercised into 154,768 common shares. Immidiately before the cashless exercise the warrants were remessured to fair value based on their intrinsic value which amounted to $6,115 (see Note 8).
Accounting for stock-based compensation

u.      Accounting for stock-based compensation:

 

The Company accounts for stock-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 (“OPM”). 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 expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. 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. Estimated forfeitures are based on actual historical pre-vesting forfeitures.

 

The Company selected the Black-Scholes-Merton option pricing model as the most appropriate fair value method for its stock-option awards. The option-pricing model requires a number of assumptions, of which the most significant are the fair market value of the underlying common stock, expected stock price volatility and the expected option term. Expected volatility was calculated based upon certain peer companies that the Company considered to be comparable. The expected option term represents the period of time that options granted are expected to be outstanding. The expected option term is determined based on the simplified method in accordance with SAB No. 110, as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has not declared or paid any dividends on its common stock and does not expect to pay any dividends in the foreseeable future.

 

The fair value of the shares of common stock underlying the stock options has historically been determined by the Company's management and approved by the board of directors. Because there has been no public market for the Company's common stock, the Company's management has determined fair value of the common stock by using, among other factors, third party valuations at the time of grant of the option by considering a number of objective and subjective factors, including data from other comparable companies, issuance of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook. The fair value of the underlying common stock was determined by the management until such time as the Company's common stock is listed on an established stock exchange or national market system. The Company's management determined the value of the shares of common stock based on valuations performed using the OPM for the years ended June 30, 2014 and 2013 and for the period from July 1, 2014 and up to March 31, 2015. From March 31, 2015 the common stock is publicly traded.

 

Since the distributions and participation rights to security holders until March 31, 2015 are different in a sale/liquidation scenario versus an IPO, the valuation of the Company's equity was performed using a discounted cash flow (DCF) model or a new investment round by external investors. The allocation of the Company's equity value between the convertible preferred stock, common stock and warrants was performed using a hybrid method between the PWERM and OPM estimating the probability-weighted value across multiple scenarios for liquidation events other than an IPO. Before the per share value was determined, a discount for lack of marketability and a voting right differential was applied, as applicable, to the common stock.

 

The fair value for options granted to employees and executive directors in the year ended June 30, 2015, 2014 and 2013 is estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following assumptions:

 

 

 

Year ended June 30,

 

 

2015

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest

 

1.39% - 2.06%

 

1.62% - 1.94%

 

0.74% - 1.00%

Dividend yields

 

0%

 

0%

 

0%

Volatility

 

46.5%-55.1%

 

46.3%-55.8%

 

55.8%-62.7%

Expected option term

 

5.50-6.27 years

 

6.02-6.27 years

 

6.08-6.27 years

Estimated forfeiture rate

 

12.5%-18.7%

 

14.0%

 

14.5%-20.9%

 

The following table set forth the parameters used in computation of the options compensation to non-employee consultants in the year ended June 30, 2015, 2014 and 2013, using a Black-Scholes-Merton option pricing model with the following assumptions:

 

 

 

Year ended June 30,

 

 

2015

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest

 

1.49%-2.58%

 

1.95%-2.45%

 

0.98%-1.96%

Dividend yields

 

0%

 

0%

 

0%

Volatility

 

45.5%-56.2%

 

45.0%-55.8%

 

55.8%-62.7%

Contractual life

 

7.2-10.0 years

 

6.0-10.0 years

 

7.0-10.0 years

Income taxes

v.      Income taxes:

 

The Company and its subsidiaries account for income taxes in accordance with ASC 740, “Income Taxes.” ASC 740 prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.

 

The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

 

The Company accounts for uncertain tax positions in accordance with ASC 740. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits under taxes on income.

 
Derivative financial instruments

w.      Derivative financial instruments:

 

The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”). ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.

 

The Company entered into derivative instrument arrangements to hedge the Company's exposure to currencies other than the U.S. dollar. These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses were recorded immediately in the statement of operations, as financial expenses, net.

 

As of June 30, 2015, 2014 and 2013, the Company recorded the fair value of derivative instruments in the amount of $859, $213 and $258, respectively in prepaid expenses and other accounts receivable.
Comprehensive income (loss)

x.      Comprehensive income (loss):

 

The Company reports comprehensive income (loss) in accordance with ASC 220 (“Comprehensive Income”). ASC 220 establishes standards for the reporting and presentation of comprehensive income and its components in a full set of general purpose financial statements.

 

Total comprehensive income (loss) and the components of accumulated other comprehensive income (loss) are presented in the consolidated statements of stockholders' equity (deficiency). Accumulated other comprehensive income (loss) consists of foreign currency translation effects.
Impact of recently issued accounting standards

y.      The impact of recently issued accounting standards still not effective for the Company as of June 30, 2015 is as follows:

 

In May 2014, the FASB issued an accounting standard update on revenue from contracts with customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

 

The new guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. On July 9, 2015, the FASB agreed to delay the effective date by one year. In accordance with the agreed upon delay, the new standard is effective for the Company beginning January 1st, 2018. Early adoption is permitted, but not before the original effective date of the standard. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
Reclassification

z.       Certain 2014 and 2013 figures have been reclassified to conform to the 2015 presentation. The reclassification had no effect on previously reported net loss or stockholders' equity (deficiency).