Note 14: Share capital

Share capital is composed as follows:

	Issued and outstanding
	Number of shares
	December 31,
	2015		2014
Ordinary shares no par value		83,778,581		13,431,414
Series A Convertible Preferred shares no par value		-		4,177,235
Series B Convertible Preferred shares no par value		-		4,590,439
Series C Convertible Preferred shares no par value		-		2,261,666
Series D Convertible Preferred shares no par value		-		4,451,913
Series E Convertible Preferred shares no par value		-		7,790,861
Series F Convertible Preferred shares no par value		-		12,864,362
Series G Convertible Preferred shares no par value		-		5,106,269
Series H Convertible Preferred shares no par value		-		4,073,020
Series I Convertible Preferred shares no par value		-		13,360,252
Total		-		58,676,017

a. Investment rounds:

1) Series I Convertible Preferred shares:

In 2013, the Company sold to investors 13,360,252 Series I Convertible Preferred shares at a purchase price of $14.53 per share, for total consideration of $191,738, net of issuance expenses. Prior to conversion of the Series I Convertible Preferred shares into ordinary shares as a result of the IPO, Series I Convertible Preferred shares were senior to the other series of preferred shares on payment of the liquidation preference ($14.53 per share), but otherwise had similar participating preferred rights, dividend rights and voting rights to the other series of preferred shares.

2) Series J Preferred shares:

In June 2015, the Company sold to investors 4,068,500 Series J Convertible Preferred shares at a price per share of $23.33, for a total consideration of $94,599 (net of issuance expenses of $319). Prior to conversion of the Series J Convertible Preferred shares into ordinary shares as a result of the IPO, such shares

were senior to the other series of preferred shares on payment of the liquidation preference (equal to $23.33 per share), but otherwise had similar participating preferred rights, dividend rights and voting rights of the other series of preferred shares.

b. Rights, preferences and restrictions:

On October 7, 2015, the Company completed the IPO of its ordinary shares by issuing 7,876,195 ordinary shares (including exercise of overallotments) and raising net proceeds of $157,534, at which time the Series A through J Convertible Preferred shares converted into ordinary shares and ceased to exist. The rights, preferences and restrictions of the Series A through J Convertible Preferred shares were, and the rights, preferences and restrictions of ordinary shares are, as follows:

Conversion — Each Convertible Preferred share was convertible into ordinary shares (i) at any time at the holder’s option or (ii) automatically upon a qualified initial public offering, which is defined in the Company’s articles of association in effect prior to the IPO as an offering in which the aggregate gross proceeds received by the Company are (1) at least $50,000 if the equity securities of the Company that are sold in such offering are listed or traded on the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Automated Quotations (NASDAQ) or (2) at least $100,000 if the equity securities of the Company that are sold in such offering are listed or traded on any other public stock exchange. The IPO constituted a qualified initial public offering and, therefore, triggered conversion of the Series A through J Convertible Preferred shares.

Each of the Series A, B, C, D, E, F, G, H, I and J Convertible Preferred shares converted to ordinary shares on a 1-for-1 ratio, following adjustment for any recapitalizations, splits, ordinary share dividends and similar standard anti-dilution events.

Dividend rights — The holders of Series A through J Convertible Preferred shares were entitled to receive on a pari passu basis, prior and in preference to the declaration or payment of any dividend or distribution to the holders of ordinary shares on an as-converted basis when, as and if any dividend or distribution is declared by the Company’s board of directors in respect of ordinary shares, up to an amount equal to the applicable original issue price for such preferred shares.

Liquidation preference — The holders of Series A through J Convertible Preferred shares have a liquidation preference equal to $1.52, $1.09, $1.77, $1.80, $1.80, $2.23, $8.64, $13.5, $14.53, and $23.33 per share, respectively, plus any declared but unpaid dividends.

Preferred shareholders were entitled to their liquidation preferences based on their seniority. Series J Convertible Preferred shareholders would have been the first to receive their liquidation preferences and they would have been followed by the holders of Series I, H, G, F, E, D, C, B and A Convertible Preferred shares in turn.

Voting rights — Each holder of ordinary shares is and, prior to conversion into ordinary shares as a result of the IPO, each holder of Series A, B, C, D, E, F, G, H, I or J Convertible Preferred shares was, entitled to one vote.

c. Settlement agreement:

In February 2015, the Company entered into a settlement agreement (the “Settlement Agreement”) with a third party to resolve certain potential disputes regarding intellectual property developed by the Company’s founder and previously assigned to the Company. In exchange for a release of potential disputes from the third party, the Company paid $1,000 on execution of the Settlement Agreement and agreed to pay an additional $1,000 (the “Additional Payment”) at the earliest of (i) 18 months after signing of the Agreement, (ii) an IPO or (iii) the earlier of consummation of a merger/acquisition (“M&A”) or achievement of a Cumulative Net Sales milestone of $250,000 (as defined pursuant to the Agreement). The Company also agreed to pay an additional $5,500 on the earlier of (i) achievement of the Cumulative Net Sales milestone per above or (ii) consummation of a merger or acquisition transaction. In addition, the Company agreed to issue 1,005,210 ordinary shares (the “Settlement Shares”) to the third party and to grant to the third party options to purchase 1,005,210 ordinary shares (the “Settlement Options”) that are fully vested and at no cost. The Settlement Options terminate at the earlier of (i) 12 months subsequent to an IPO or (ii) immediately prior to a merger or acquisition transaction.

In February 2015, the Company contemporaneously entered into a Letter of Agreement (“Letter of Agreement”) with a Company founder and a related party of the founder (together, the “Founder”) pursuant to which the Founder indemnified the Company for compensation incurred to the third party by providing 2,010,420 ordinary shares which were redeemed and cancelled (the “Redeemed Shares”) in March 2015 to the Company at par value. The Founder also may be obligated to pay an additional $2,000 in cash to the Company upon its request out of the net proceeds from the sale of any ordinary shares by the Founder in a private transaction or following the consummation of a qualified initial public offering (as defined above in Note 14a—Conversion) in an open market transaction if the closing price of the ordinary shares is at least 80% of the price per share for which the ordinary shares were sold in the IPO (after deducting underwriting discounts and commissions and offering expenses). In March 2015, the Company provided the Settlement Shares and Settlement Options to the third party. On October 7, 2015, the Company completed the IPO of its ordinary shares and the Additional Payment was paid in October 2015.

Accordingly, for the year ended December 31, 2014, in accordance with ASC 450, the Company recorded a provision for a net settlement expense of $1,867 in general and administrative expense, reflecting the present value of the cash obligation of $2,000 and the fair value of the Settlement Shares issued and Settlement Options granted to the third party, net of the fair value of the Redeemed Shares provided by the Founder as consideration, which amounted to nil as presented in the statement of shareholder’s equity, in connection with the indemnification provided and the Letter of Agreement.

d. Warrants:

As part of the Series B, C, D and E Convertible Preferred share investment agreements, the investors received warrants to purchase ordinary shares. The Company accounted for these warrants as equity instruments based on the guidance of ASC 815, “Derivatives and Hedging”, ASC 480-10, “Distinguishing Liabilities from Equity”, its related FASB staff positions, ASC 815-40 “Contracts in Entity’s Own Stock” and the AICPA Technical Practice Aid for accounting for preferred shares and warrants, including the roadmap for accounting for freestanding financial instruments indexed to, and potentially settled in, a company’s own stock.

Significant terms of the warrants to purchase ordinary shares that were issued to purchasers of the Series B, C, D and E Convertible Preferred shares are as follows as of December 31, 2015 and 2014:

	Warrants for ordinary shares				Exercise price per share
Expiration date	2015		2014
October 11, 2015 (1)		-		565,411		3.54
May 8, 2016 (1)		1,108,050		1,112,983		3.59
July 31, 2017		556,678		556,678		3.59
January 22, 2018		556,678		556,678		3.59
July 21, 2018		834,355		834,355		3.59
		3,055,761		3,626,105

(1)	Warrants to purchase 570,344 ordinary shares were exercised in 2015, resulting in the issuance of 570,344 ordinary shares.

Pursuant to the Credit Agreement (see Note 10), the Company issued the Lenders 975,644 warrants to purchase Series H Convertible Preferred shares at an exercise price of $18.77 per share. The warrants were exercised on a cashless basis in January 2016.

e. Share option plans:

In 2003, the Company and its shareholders approved and adopted the 2003 Share Option Plan (the “2003 Plan”), which provided for the grant of options to the Company’s officers, directors, employees and advisors. The options granted generally have a four-year vesting period and expire ten years after the date of grant. Since March 2013, when the 2003 Plan expired, the Company has made grants pursuant to the 2013 Share Option Plan (as described below) and, following completion of the IPO in October 2015, all future equity grants will be made under the 2015 Omnibus Incentive Plan (as described below); however, any awards granted under the 2003 Plan that were outstanding as of the IPO continue to be subject to the terms and conditions of the 2003 Plan and the applicable option award agreement.

In 2013, the Company and its shareholders approved and adopted the 2013 Equity Incentive Share Option Plan (the “2013 Plan”), which provided for the grant of options to the Company’s officers, directors, advisors, management and other key employees. The options granted generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the 2013 Plan that are cancelled or forfeited before expiration become available for future grant.

In February and March 2015, the Company’s board of directors and its shareholders approved an increase in the number of ordinary shares reserved for grant of options pursuant to the 2013 Plan by 2,956,500 ordinary shares to 13,198,224 ordinary shares. Following completion of the IPO in October 2015, all future equity grants will be made under the 2015 Omnibus Incentive Plan (as described below); accordingly, as of December 31, 2015, there are no options available for future grants under the 2013 Plan. Any awards granted under the 2013 Plan that were outstanding as of the IPO continue to be subject to the terms and conditions of the 2013 Plan and the applicable option award agreement.

In August 2015, the Company’s board of directors adopted and established the 2015 Omnibus Incentive Plan (the “2015 Plan”). The Company’s shareholders approved the 2015 Plan in September 2015. Under the 2015 Plan, the Company can issue various types of equity compensation awards such as restricted shares, performance shares, restricted stock units, performance units, long-term cash award and other share-based awards. The options granted generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are cancelled or forfeited before expiration become available for future grant.

On December 31, 2015, in accordance with the terms of the 2015 Plan, the number of shares available for issuance under the 2015 Plan automatically increased by 4% of the Company’s outstanding ordinary shares as of December 30, 2015. As a result, the number of shares available for issuance under the 2015 Plan increased from 12,900,000 shares to 16,251,143 shares. As of December 31, 2015, 14,947,667 ordinary shares are available for grant under the 2015 Plan.

The fair value of share-based awards was estimated using the Black-Scholes option-pricing model for all grants, with the following underlying assumptions:

	Year ended December 31,
	2015	2014		2013
Expected term (years)	6.25		6.25		6.25
Expected volatility	59%-65.8%	73.1%-75.3%		70.4%-75.9%
Risk-free interest rate	1.74%-2.05%	1.9%-2.3%		1.4%-2.0%
Dividend yield	0%	0%		0%

A summary of the status of the Company’s options to purchase ordinary shares as of December 31, 2015 and changes during the year ended on that date is presented below:

	Year ended December 31, 2015
	Number of options			Weighted average exercise price		Aggregate intrinsic value
Outstanding at beginning of year		7,426,159			3.98
Granted		3,108,393			18.01
Exercised		(183,911	)		3.08
Forfeited and cancelled		(215,812	)		8.81
Outstanding at end of year		10,134,829			8.20		144,776
Exercisable options		5,521,406			3.04		106,684
Vested and expected to vest		10,007,130			8.11		143,835

The total equity-based compensation expense related to all of the Company’s equity-based awards recognized for the years ended December 31, 2015, 2014 and 2013, was comprised as follows:

	Year ended December 31,
	2015		2014		2013
Cost of revenues	$	174	$	32	$	52
Research, development and clinical trials		2,529		820		1,137
Sales and marketing		2,496		1,104		791
General and administrative		6,661		2,668		3,140
Total share-based compensation expense	$	11,860	$	4,624	$	5,120

As of December 31, 2015, there were unrecognized compensation costs of $25,008, which are expected to be recognized over a weighted average period of approximately 3.39 years.

The weighted average grant date fair values of the Company’s options granted during the years ended December 31, 2015, 2014 and 2013 were $10.64, $5.08 and $4.59 per share, respectively. The weighted average grant date fair values of the Company’s unvested options for the years ended December 31, 2015,2014 and 2013 were $8.66, $4.26 and $3.42 per share, respectively, and the unvested options for the years ended December 31, 2015,2014 and 2013 were 4,613,423, 2,934,974 and 3,125,543, respectively.

The weighted average grant date fair values of the Company’s vested options during the years ended December 31, 2015, 2014 and 2013 were $3.66, $2.89 and $2.26, respectively, and the vested options for the years ended December 31, 2015,2014 and 2013 were 1,235,880, 1,166,974 and 1,030,933, respectively. The weighted average grant date fair values of the Company’s options forfeited and cancelled during the years ended December 31, 2015, 2014 and 2013 were $ 5.73, $3.59 and $1.84, respectively.

The aggregate intrinsic values for the options exercised during the years ended December 31, 2015, 2014 and 2013 were $3,546, $3,339 and $3,431, respectively. The aggregate intrinsic value is calculated as the difference between the per share exercise price and the deemed fair value of the Company’s ordinary shares for each share subject to an option multiplied by the number of shares subject to options at the date of exercise. The Company deemed the fair value of the Company’s ordinary shares to be $22.36, $7.73 and $7.28 per share as of December 31, 2015, 2014, and 2013, respectively.

The options outstanding as of December 31, 2015 are as follows:

Exercise price		Number of options outstanding as of December 31, 2015		Weighted average remaining contractual term		Number of options exercisable as of December 31, 2015		Weighted average remaining contractual term
$				(years)				(years)
	0.17		1,402,757		0.71		1,402,757		0.71
	0.23		440,531		3.42		440,531		3.42
	0.38		488,331		4.78		488,331		4.78
	3.44		1,779,072		5.88		1,728,710		5.89
	6.72		850,401		6.67		642,321		6.66
	6.83		92,227		6.95		69,308		6.95
	7.03		613,174		7.14		307,309		7.14
	7.04		135,992		7.46		67,982		7.46
	7.28		167,921		7.65		83,946		7.65
	7.48		504,365		8.14		130,509		8.13
	7.52		110,560		8.24		29,925		8.23
	7.58		52,032		8.49		13,006		8.49
	7.73		431,053		8.77		107,755		8.77
	14.37		1,616,011		9.16		9,016		8.84
	15.60		146,926		9.32		-		-
	20.20		140,466		9.81		-		-
	22.00		913,210		9.76		-		-
	27.50		249,800		9.97		-		-
			10,134,829		6.56		5,521,406		4.63

In August, 2015, the Company’s board of directors adopted an employee share purchase plan (“ESPP”) subject to shareholder approval, which was obtained in September, 2015. The Company adopted the ESPP to encourage and enable eligible employees to acquire ownership of the Company’s ordinary shares purchased through accumulated payroll deductions on an after-tax basis. The ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Code and the provisions of the ESPP will be construed in a manner consistent with the requirements of such section. The Company intends to begin offerings under the ESPP at a future date determined by the compensation committee, in its sole discretion. As of December 31, 2015 no shares have been offered under the ESPP.

Under the ESPP, initially an aggregate of 830,000 ordinary shares could be purchased by eligible employees who become participants in the ESPP; which amount shall be automatically increased on December 31 of each year during the term of the ESPP to an amount equal to 1% of the total number of ordinary shares outstanding on December 30 of such year unless otherwise determined by the board of directors. On December 31, 2015, the number of shares available for issuance under the ESPP increased from 837,785 shares to 1,667,785 shares. As of December 31, 2015, 1,667,785 ordinary shares are available for grant under the ESPP.