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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
(State or other jurisdiction of
incorporation or organization)
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20-4645388
(I.R.S. Employer
Identification No.)
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1420 N. McDowell Blvd.
Petaluma, California
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94954
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1.
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Financial Statements (Unaudited)
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June 30,
2015 |
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December 31,
2014 |
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ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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31,887
|
|
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$
|
42,032
|
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Accounts receivable, net of allowances of $587 and $569 at June 30, 2015 and December 31, 2014, respectively
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67,315
|
|
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45,119
|
|
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Inventory
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34,054
|
|
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21,590
|
|
||
Prepaid expenses and other assets
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8,076
|
|
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6,155
|
|
||
Total current assets
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141,332
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|
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114,896
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|
||
Property and equipment, net
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31,633
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|
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30,824
|
|
||
Goodwill
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3,745
|
|
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3,745
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||
Intangibles, net
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1,596
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|
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1,811
|
|
||
Other assets
|
2,992
|
|
|
916
|
|
||
Total assets
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$
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181,298
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|
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$
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152,192
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
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$
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34,467
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|
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$
|
22,316
|
|
Accrued liabilities
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21,027
|
|
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26,036
|
|
||
Deferred revenues, current
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3,943
|
|
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2,747
|
|
||
Warranty obligations, current (includes $1,971 and $1,125 measured at fair value at June 30, 2015 and December 31, 2014, respectively)
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7,251
|
|
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7,607
|
|
||
Borrowings under revolving credit facility
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17,000
|
|
|
—
|
|
||
Total current liabilities
|
83,688
|
|
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58,706
|
|
||
Long-term liabilities:
|
|
|
|
||||
Deferred revenues, noncurrent
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20,465
|
|
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16,612
|
|
||
Warranty obligations, noncurrent (includes $3,832 and $2,437 measured at fair value at
June 30, 2015 and December 31, 2014, respectively)
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26,512
|
|
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26,333
|
|
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Other liabilities
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1,885
|
|
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3,589
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|
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Total liabilities
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132,550
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105,240
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Commitments and contingencies
|
|
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|
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Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.00001 par value, 10,000 shares authorized; none issued and outstanding
|
—
|
|
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—
|
|
||
Common stock, $0.00001 par value, 100,000 shares authorized; 44,427 and 43,756 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
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—
|
|
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—
|
|
||
Additional paid-in capital
|
217,062
|
|
|
208,022
|
|
||
Accumulated deficit
|
(167,914
|
)
|
|
(160,991
|
)
|
||
Accumulated other comprehensive loss
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(400
|
)
|
|
(79
|
)
|
||
Total stockholders’ equity
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48,748
|
|
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46,952
|
|
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Total liabilities and stockholders’ equity
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$
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181,298
|
|
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$
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152,192
|
|
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
||||||||||||
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2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net revenues
|
$
|
102,093
|
|
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$
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82,004
|
|
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$
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188,746
|
|
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$
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139,584
|
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Cost of revenues
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69,066
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55,172
|
|
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127,695
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|
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94,097
|
|
||||
Gross profit
|
33,027
|
|
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26,832
|
|
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61,051
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|
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45,487
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
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||||||||
Research and development
|
12,786
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|
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11,148
|
|
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26,216
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|
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20,234
|
|
||||
Sales and marketing
|
12,508
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|
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10,493
|
|
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24,445
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|
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19,321
|
|
||||
General and administrative
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8,102
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|
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7,679
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|
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16,307
|
|
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14,205
|
|
||||
Total operating expenses
|
33,396
|
|
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29,320
|
|
|
66,968
|
|
|
53,760
|
|
||||
Loss from operations
|
(369
|
)
|
|
(2,488
|
)
|
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(5,917
|
)
|
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(8,273
|
)
|
||||
Other income (expense), net:
|
|
|
|
|
|
|
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||||||||
Interest expense
|
(87
|
)
|
|
(486
|
)
|
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(165
|
)
|
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(935
|
)
|
||||
Other income (expense)
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79
|
|
|
58
|
|
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(448
|
)
|
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165
|
|
||||
Total other expense, net
|
(8
|
)
|
|
(428
|
)
|
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(613
|
)
|
|
(770
|
)
|
||||
Loss before income taxes
|
(377
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)
|
|
(2,916
|
)
|
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(6,530
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)
|
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(9,043
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)
|
||||
Provision for income taxes
|
(226
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)
|
|
(115
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)
|
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(393
|
)
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(224
|
)
|
||||
Net loss
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$
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(603
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)
|
|
$
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(3,031
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)
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$
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(6,923
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)
|
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$
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(9,267
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)
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Net loss per share, basic and diluted
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$
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(0.01
|
)
|
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$
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(0.07
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)
|
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$
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(0.16
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)
|
|
$
|
(0.22
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)
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Shares used in computing net loss per share, basic and diluted
|
44,319
|
|
|
42,648
|
|
|
44,136
|
|
|
42,428
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net loss
|
$
|
(603
|
)
|
|
$
|
(3,031
|
)
|
|
$
|
(6,923
|
)
|
|
$
|
(9,267
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
1
|
|
|
6
|
|
|
(321
|
)
|
|
7
|
|
||||
Comprehensive loss
|
$
|
(602
|
)
|
|
$
|
(3,025
|
)
|
|
$
|
(7,244
|
)
|
|
$
|
(9,260
|
)
|
|
Six Months Ended
June 30,
|
||||||
|
2015
|
|
2014
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(6,923
|
)
|
|
$
|
(9,267
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
5,054
|
|
|
3,902
|
|
||
Provision for doubtful accounts
|
99
|
|
|
711
|
|
||
Net loss on disposal of assets
|
275
|
|
|
28
|
|
||
Non-cash interest expense
|
80
|
|
|
191
|
|
||
Stock-based compensation
|
6,296
|
|
|
4,507
|
|
||
Revaluation of contingent consideration liability
|
(900
|
)
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(22,295
|
)
|
|
(15,164
|
)
|
||
Inventory
|
(12,464
|
)
|
|
856
|
|
||
Prepaid expenses and other assets
|
(4,077
|
)
|
|
(2,272
|
)
|
||
Accounts payable, accrued and other liabilities
|
6,712
|
|
|
16,582
|
|
||
Warranty obligations
|
(177
|
)
|
|
2,537
|
|
||
Deferred revenues
|
5,049
|
|
|
1,523
|
|
||
Net cash (used in) provided by operating activities
|
(23,271
|
)
|
|
4,134
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(6,260
|
)
|
|
(4,333
|
)
|
||
Net cash used in investing activities
|
(6,260
|
)
|
|
(4,333
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings under revolving credit facility
|
17,000
|
|
|
—
|
|
||
Repayments of term loans
|
—
|
|
|
(2,177
|
)
|
||
Proceeds from issuance of common stock under employee stock plans
|
2,744
|
|
|
1,701
|
|
||
Net cash provided by (used in) financing activities
|
19,744
|
|
|
(476
|
)
|
||
Effect of exchange rate changes on cash
|
(358
|
)
|
|
106
|
|
||
Net decrease in cash and cash equivalents
|
(10,145
|
)
|
|
(569
|
)
|
||
Cash and cash equivalents—Beginning of period
|
42,032
|
|
|
38,190
|
|
||
Cash and cash equivalents—End of period
|
$
|
31,887
|
|
|
$
|
37,621
|
|
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
||||
Purchases of property and equipment included in accounts payable
|
$
|
1,611
|
|
|
$
|
675
|
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
Raw materials
|
$
|
2,651
|
|
|
$
|
3,429
|
|
Finished goods
|
31,403
|
|
|
18,161
|
|
||
Total inventory
|
$
|
34,054
|
|
|
$
|
21,590
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Warranty obligations, beginning of period
|
$
|
34,163
|
|
|
$
|
30,728
|
|
|
$
|
33,940
|
|
|
$
|
30,432
|
|
Accruals for warranties issued during period
|
1,202
|
|
|
1,138
|
|
|
2,307
|
|
|
1,751
|
|
||||
Changes in estimates
|
180
|
|
|
2,960
|
|
|
238
|
|
|
4,360
|
|
||||
Settlements
|
(1,715
|
)
|
|
(1,893
|
)
|
|
(2,865
|
)
|
|
(3,625
|
)
|
||||
Increase due to accretion expense
|
210
|
|
|
20
|
|
|
371
|
|
|
40
|
|
||||
Other
|
(277
|
)
|
|
16
|
|
|
(228
|
)
|
|
11
|
|
||||
Warranty obligations, end of period
|
$
|
33,763
|
|
|
$
|
32,969
|
|
|
$
|
33,763
|
|
|
$
|
32,969
|
|
Less current portion
|
|
|
|
|
|
|
$
|
(7,251
|
)
|
|
$
|
(8,477
|
)
|
||
Noncurrent
|
|
|
|
|
|
|
$
|
26,512
|
|
|
$
|
24,492
|
|
•
|
Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of such assets or liabilities do not entail a significant degree of judgment.
|
•
|
Level 2—Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
•
|
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
|
Fair Value
Hierarchy |
|
June 30,
2015 |
|
December 31,
2014 |
||||
Assets:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Level 2
|
|
$
|
—
|
|
|
$
|
76
|
|
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
Level 2
|
|
$
|
52
|
|
|
$
|
—
|
|
Warranty obligations
|
Level 3
|
|
5,803
|
|
|
3,562
|
|
||
Contingent consideration
|
Level 3
|
|
1,400
|
|
|
2,300
|
|
|
Six Months Ended
June 30, |
||||||
|
2015
|
|
2014
|
||||
Balance at beginning of period
|
$
|
3,562
|
|
|
$
|
—
|
|
Accruals for warranties issued during period
|
2,183
|
|
|
1,638
|
|
||
Changes in estimates
|
—
|
|
|
117
|
|
||
Settlements
|
(85
|
)
|
|
—
|
|
||
Increase due to accretion expense
|
371
|
|
|
40
|
|
||
Other
|
(228
|
)
|
|
11
|
|
||
Balance at end of period
|
$
|
5,803
|
|
|
$
|
1,806
|
|
Balance—December 31, 2014
|
$
|
2,300
|
|
Revaluations
|
(900
|
)
|
|
Balance—June 30, 2015
|
$
|
1,400
|
|
Item Measured at Fair Value
|
|
Valuation Technique
|
|
Description of Significant Unobservable Input
|
|
Percent Used
(Weighted-Average)
|
Warranty obligations for microinverters sold since January 1, 2014
|
|
Discounted cash flows
|
|
Profit element and risk premium
|
|
17%
|
|
|
Credit-adjusted risk-free rate
|
|
19%
|
||
|
|
|
|
|
|
|
Contingent consideration liability
|
|
Probability-weighted discounted cash flows
|
|
Risk-adjusted discount rate
|
|
18%
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Goodwill
|
$
|
3,745
|
|
|
$
|
—
|
|
|
$
|
3,745
|
|
|
$
|
3,745
|
|
|
$
|
—
|
|
|
$
|
3,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other indefinite-lived intangibles
|
$
|
286
|
|
|
$
|
—
|
|
|
$
|
286
|
|
|
$
|
286
|
|
|
$
|
—
|
|
|
$
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intangibles assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
900
|
|
|
(90
|
)
|
|
810
|
|
|
900
|
|
|
—
|
|
|
900
|
|
||||||
Patents
|
750
|
|
|
(250
|
)
|
|
500
|
|
|
750
|
|
|
(125
|
)
|
|
625
|
|
||||||
Total
|
$
|
1,650
|
|
|
$
|
(340
|
)
|
|
$
|
1,310
|
|
|
$
|
1,650
|
|
|
$
|
(125
|
)
|
|
$
|
1,525
|
|
Year
|
|
(In thousands)
|
||
2015 (remaining 6 months)
|
|
$
|
215
|
|
2016
|
|
430
|
|
|
2017
|
|
305
|
|
|
2018
|
|
180
|
|
|
2019
|
|
180
|
|
|
Total
|
|
$
|
1,310
|
|
|
Number of
Shares
Outstanding
|
|
Weighted-
Average
Exercise Price
per Share
|
|||
Outstanding at December 31, 2014
|
8,632
|
|
|
$
|
4.75
|
|
Granted
|
737
|
|
|
11.22
|
|
|
Exercised
|
(288
|
)
|
|
4.34
|
|
|
Canceled
|
(194
|
)
|
|
10.19
|
|
|
Outstanding at June 30, 2015
|
8,887
|
|
|
5.18
|
|
|
RSUs
|
|
Weighted Average
Fair Value per Share at Grant Date |
|||
Outstanding at December 31, 2014
|
1,345
|
|
|
$
|
8.25
|
|
Granted
|
613
|
|
|
12.25
|
|
|
Vested
|
(212
|
)
|
|
7.79
|
|
|
Canceled
|
(43
|
)
|
|
13.13
|
|
|
Outstanding at June 30, 2015
|
1,703
|
|
|
9.62
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Cost of revenues
|
$
|
318
|
|
|
$
|
194
|
|
|
$
|
582
|
|
|
$
|
343
|
|
Research and development
|
1,158
|
|
|
778
|
|
|
2,238
|
|
|
1,391
|
|
||||
Sales and marketing
|
942
|
|
|
649
|
|
|
1,707
|
|
|
1,181
|
|
||||
General and administrative
|
889
|
|
|
873
|
|
|
1,769
|
|
|
1,592
|
|
||||
Total
|
$
|
3,307
|
|
|
$
|
2,494
|
|
|
$
|
6,296
|
|
|
$
|
4,507
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Stock options and restricted stock units
|
$
|
2,874
|
|
|
$
|
2,309
|
|
|
$
|
5,400
|
|
|
$
|
4,148
|
|
Employee stock purchase plan
|
433
|
|
|
185
|
|
|
896
|
|
|
359
|
|
||||
Total
|
$
|
3,307
|
|
|
$
|
2,494
|
|
|
$
|
6,296
|
|
|
$
|
4,507
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Weighted average grant date fair value
|
$
|
6.90
|
|
|
$
|
4.24
|
|
|
$
|
6.38
|
|
|
$
|
4.13
|
|
Expected term (in years)
|
4.4
|
|
|
4.3
|
|
|
4.5
|
|
|
4.4
|
|
||||
Expected volatility
|
72.7
|
%
|
|
69.5
|
%
|
|
72.0
|
%
|
|
66.4
|
%
|
||||
Annual risk-free rate of return
|
1.3
|
%
|
|
1.4
|
%
|
|
1.3
|
%
|
|
1.4
|
%
|
||||
Dividend yield
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(603
|
)
|
|
$
|
(3,031
|
)
|
|
$
|
(6,923
|
)
|
|
$
|
(9,267
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding
|
44,319
|
|
|
42,648
|
|
|
44,136
|
|
|
42,428
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share, basic and diluted
|
$
|
(0.01
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.22
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Employee stock options
|
8,738
|
|
|
8,443
|
|
|
8,683
|
|
|
8,466
|
|
Restricted stock units
|
1,640
|
|
|
1,520
|
|
|
1,537
|
|
|
1,128
|
|
Warrants to purchase common stock
|
111
|
|
|
261
|
|
|
111
|
|
|
277
|
|
Total
|
10,489
|
|
|
10,224
|
|
|
10,331
|
|
|
9,871
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
June 30, |
|
Change in
|
|
Six Months Ended
June 30, |
|
Change in
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
(dollars in thousands)
|
|
(dollars in thousands)
|
||||||||||||||||||||||||||
Cost of revenues
|
$
|
69,066
|
|
|
$
|
55,172
|
|
|
$
|
13,894
|
|
|
25
|
%
|
|
$
|
127,695
|
|
|
$
|
94,097
|
|
|
$
|
33,598
|
|
|
36
|
%
|
Gross profit
|
33,027
|
|
|
26,832
|
|
|
6,195
|
|
|
23
|
%
|
|
61,051
|
|
|
45,487
|
|
|
15,564
|
|
|
34
|
%
|
||||||
Gross margin
|
32.3
|
%
|
|
32.7
|
%
|
|
|
|
|
|
32.3
|
%
|
|
32.6
|
%
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change in
|
|
Six Months Ended
June 30, |
|
Change in
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
(dollars in thousands)
|
|
(dollars in thousands)
|
||||||||||||||||||||||||||
Research and development
|
$
|
12,786
|
|
|
$
|
11,148
|
|
|
$
|
1,638
|
|
|
15
|
%
|
|
$
|
26,216
|
|
|
$
|
20,234
|
|
|
$
|
5,982
|
|
|
30
|
%
|
Percentage of net revenues
|
13
|
%
|
|
14
|
%
|
|
|
|
|
|
14
|
%
|
|
14
|
%
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change in
|
|
Six Months Ended
June 30, |
|
Change in
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
(dollars in thousands)
|
|
(dollars in thousands)
|
||||||||||||||||||||||||||
Sales and marketing
|
$
|
12,508
|
|
|
$
|
10,493
|
|
|
$
|
2,015
|
|
|
19
|
%
|
|
$
|
24,445
|
|
|
$
|
19,321
|
|
|
$
|
5,124
|
|
|
27
|
%
|
Percentage of net revenues
|
12
|
%
|
|
13
|
%
|
|
|
|
|
|
13
|
%
|
|
14
|
%
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change in
|
|
Six Months Ended
June 30, |
|
Change in
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
(dollars in thousands)
|
|
(dollars in thousands)
|
||||||||||||||||||||||||||
General and administrative
|
$
|
8,102
|
|
|
$
|
7,679
|
|
|
$
|
423
|
|
|
6
|
%
|
|
$
|
16,307
|
|
|
$
|
14,205
|
|
|
$
|
2,102
|
|
|
15
|
%
|
Percentage of net revenues
|
8
|
%
|
|
9
|
%
|
|
|
|
|
|
9
|
%
|
|
10
|
%
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Change in
|
|
Six Months Ended
June 30, |
|
Change in
|
||||||||||||||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|
2015
|
|
2014
|
|
$
|
|
%
|
||||||||||||||
|
(dollars in thousands)
|
|
(dollars in thousands)
|
||||||||||||||||||||||||||
Other expense, net
|
$
|
(8
|
)
|
|
$
|
(428
|
)
|
|
$
|
420
|
|
|
(98
|
)%
|
|
$
|
(613
|
)
|
|
$
|
(770
|
)
|
|
$
|
157
|
|
|
(20
|
)%
|
|
Six Months Ended
June 30, |
||||||
|
2015
|
|
2014
|
||||
|
(In thousands)
|
||||||
Net cash (used in) provided by operating activities
|
$
|
(23,271
|
)
|
|
$
|
4,134
|
|
Net cash used in investing activities
|
(6,260
|
)
|
|
(4,333
|
)
|
||
Net cash provided by (used in) financing activities
|
19,744
|
|
|
(476
|
)
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
•
|
market acceptance of solar PV systems based on our product platform;
|
•
|
cost competitiveness, reliability and performance of solar PV systems compared to conventional and non-solar renewable energy sources and products;
|
•
|
availability and amount of government subsidies and incentives to support the development and deployment of solar energy solutions;
|
•
|
the extent to which the electric power industry and broader energy industries are deregulated to permit broader adoption of solar electricity generation;
|
•
|
the cost and availability of key raw materials and components used in the production of solar PV systems;
|
•
|
prices of traditional utility-provided energy sources;
|
•
|
levels of investment by end-users of solar energy products, which tend to decrease when economic growth slows; and
|
•
|
the emergence, continuance or success of, or increased government support for, other alternative energy generation technologies and products.
|
•
|
changes in customer, geographic or product mix;
|
•
|
increased price competition, including the impact of customer discounts and rebates;
|
•
|
ability to reduce and control product costs;
|
•
|
warranty costs and reserves, including changes resulting from changes in estimates related to the long-term performance of our products, product replacement costs and warranty claim rates;
|
•
|
loss of cost savings due to changes in component or raw material pricing or charges incurred due to inventory holding periods if product demand is not correctly anticipated;
|
•
|
introduction of new products;
|
•
|
ordering patterns from our distributors;
|
•
|
price reductions on older products to sell remaining inventory;
|
•
|
our ability to reduce production costs, such as through technology innovations, in order to offset price declines in older products over time;
|
•
|
changes in shipment volume;
|
•
|
changes in distribution channels;
|
•
|
excess and obsolete inventory and inventory holding charges;
|
•
|
expediting costs incurred to meet customer delivery requirements; and
|
•
|
fluctuations in foreign currency exchange rates.
|
•
|
our ability to timely introduce and complete new designs and timely qualify and certify our products;
|
•
|
whether installers, system owners and solar financing providers will continue to adopt our microinverter systems, which is a relatively new technology with a limited history with respect to reliability and performance;
|
•
|
whether installers, system owners and solar financing providers will be willing to purchase microinverter systems from us given our limited operating history;
|
•
|
the ability of prospective system owners to obtain long-term financing for solar PV installations based on our product platform on acceptable terms or at all;
|
•
|
our ability to produce microinverter systems that compete favorably against other solutions on the basis of price, quality, reliability and performance;
|
•
|
our ability to develop products that comply with local standards and regulatory requirements, as well as potential in-country manufacturing requirements; and
|
•
|
our ability to develop and maintain successful relationships with our customers and suppliers.
|
•
|
manage a larger organization;
|
•
|
expand third-party manufacturing, testing and distribution capacity;
|
•
|
build additional custom manufacturing test equipment;
|
•
|
manage an increasing number of relationships with customers, suppliers and other third parties;
|
•
|
increase our sales and marketing efforts;
|
•
|
train and manage a growing employee base;
|
•
|
broaden our customer support capabilities;
|
•
|
implement new and upgrade existing operational and financial systems; and
|
•
|
enhance our financial disclosure controls and procedures.
|
•
|
acceptance of microinverters in markets in which they have not traditionally been used;
|
•
|
our ability to compete in new product markets to which we are not accustomed;
|
•
|
our ability to manage an increasing manufacturing capacity and production;
|
•
|
willingness of our potential customers to incur a higher upfront capital investment than may be required for competing solutions;
|
•
|
our ability to develop solutions to address the requirements of the larger commercial and utility-scale markets;
|
•
|
timely qualification and certification of new products for larger commercial and utility-scale installations;
|
•
|
our ability to reduce production costs in order to price our products competitively over time;
|
•
|
availability of government subsidies and economic incentives for solar energy solutions;
|
•
|
accurate forecasting and effective management of inventory levels in line with anticipated product demand; and
|
•
|
our customer service capabilities and responsiveness.
|
•
|
differing regulatory requirements, including tax laws, trade laws, labor, safety, local content, recycling and consumer protection regulations, tariffs, export quotas, customs duties or other trade restrictions;
|
•
|
limited or unfavorable intellectual property protection;
|
•
|
risk of change in international political or economic conditions;
|
•
|
restrictions on the repatriation of earnings;
|
•
|
fluctuations in the value of foreign currencies and interest rates;
|
•
|
difficulties and increased expenses in complying with a variety of U.S. and foreign laws, regulations and trade standards, including the Foreign Corrupt Practices Act;
|
•
|
potentially longer sales cycles;
|
•
|
higher volume requirements;
|
•
|
increased customer concentrations;
|
•
|
warranty expectations and product return policies; and
|
•
|
cost, performance and compatibility requirements.
|
•
|
obtain from a third party claiming infringement a license to sell or use the relevant technology, which may not be available on reasonable terms, or at all;
|
•
|
stop manufacturing, selling, incorporating or using our products that embody the asserted intellectual property;
|
•
|
pay substantial monetary damages;
|
•
|
indemnify our customers pursuant to indemnification obligations under some of our customer contracts; or
|
•
|
expend significant resources to redesign the products that use the infringing technology and to develop or acquire non-infringing technology.
|
•
|
invest in our research and development efforts by hiring additional technical and other personnel;
|
•
|
expand our operations into new product markets and new geographies;
|
•
|
acquire complementary businesses, products, services or technologies; or
|
•
|
otherwise pursue our strategic plans and respond to competitive pressures.
|
•
|
fluctuations in demand for our products;
|
•
|
the timing, volume and product mix of sales of our products, which may have different average selling prices or profit margins;
|
•
|
changes in our pricing and sales policies or the pricing and sales policies of our competitors;
|
•
|
our ability to design, manufacture and deliver products to our customers in a timely and cost-effective manner and that meet customer requirements;
|
•
|
our ability to manage our relationships with our contract manufacturers, customers and suppliers;
|
•
|
quality control or yield problems in our manufacturing operations;
|
•
|
the anticipation, announcement or introductions of new or enhanced products by our competitors and ourselves;
|
•
|
reductions in the retail price of electricity;
|
•
|
changes in laws, regulations and policies applicable to our business and products, particularly those relating to government incentives for solar energy applications;
|
•
|
unanticipated increases in costs or expenses;
|
•
|
the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our business operations;
|
•
|
the impact of government-sponsored programs on our customers;
|
•
|
our exposure to the credit risks of our customers, particularly in light of the fact that some of our customers are relatively new entrants to the solar market without long operating or credit histories;
|
•
|
our ability to estimate future warranty obligations due to product failure rates, claim rates or replacement costs;
|
•
|
our ability to forecast our customer demand and manufacturing requirements, and manage our inventory;
|
•
|
fluctuations in our gross profit;
|
•
|
our ability to predict our revenue and plan our expenses appropriately; and
|
•
|
fluctuations in foreign currency exchange rates.
|
•
|
providing for a classified board of directors with staggered, three-year terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
|
•
|
not providing for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
|
•
|
authorizing our board of directors to issue, without stockholder approval, preferred stock rights senior to those of common stock, which could be used to significantly dilute the ownership of a hostile acquiror;
|
•
|
prohibiting stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
|
•
|
requiring the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, to amend provisions of our certificate of incorporation relating to the management of our business, our board of directors, stockholder action by written consent, advance notification of stockholder nominations and proposals, forum selection and the liability of our directors, or to amend our bylaws, which may inhibit the ability of stockholders or an acquiror to effect such amendments to facilitate changes in management or an unsolicited takeover attempt;
|
•
|
requiring special meetings of stockholders may only be called by our chairman of the board, if any, our chief executive officer, our president or a majority of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
|
•
|
requiring advance notification of stockholder nominations and proposals, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
|
ENPHASE ENERGY, INC.
|
||
|
|
|
|
|
By:
|
|
/s/ Kris Sennesael
|
|
|
|
Kris Sennesael
|
|
|
|
Vice President and Chief Financial Officer
|
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Enphase Energy, Inc.
(1)
|
|
|
|
3.2
|
|
Amended and Restated Bylaws of Enphase Energy, Inc.
(2)
|
|
|
|
4.1
|
|
Specimen Common Stock Certificate of Enphase Energy, Inc.
(3)
|
|
|
|
4.2
|
|
2010 Amended and Restated Investors’ Rights Agreement by and between Enphase Energy, Inc. and the investors listed on Exhibit A thereto, dated March 15, 2010, as amended.
(3)
|
|
|
|
4.3
|
|
Form of June 2011 Warrant to Purchase Common Stock of Enphase Energy, Inc., pursuant to that certain Amended and Restated Subordinated Convertible Loan Facility and Security Agreement.
(3)
|
|
|
|
4.4
|
|
Form of November 2011 Warrant to Purchase Common Stock of Enphase Energy, Inc., pursuant to that certain Amended and Restated Subordinated Convertible Loan Facility and Security Agreement.
(3)
|
|
|
|
10.1
|
|
Summary of 2015 Performance Bonus Program.
(4)
|
|
|
|
10.2***
|
|
Supply Agreement by and between the Company and Dow Corning Corporation, dated April 22, 2014.
|
|
|
|
10.3
|
|
Amendment No. 1 to Supply Agreement by and between the Company and Dow Corning Corporation, dated August 1, 2014.
|
|
|
|
10.4***
|
|
Amendment No. 2 to Supply Agreement by and between the Company and Dow Corning Corporation, dated June 30, 2015.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Document.
|
(1)
|
Previously filed as Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-35480), filed with the Securities and Exchange Commission on April 6, 2012, and incorporated by reference herein.
|
(2)
|
Previously filed as Exhibit 3.5 to Amendment No. 7 to the Registration Statement on Form S-1/A (File No. 333-174925), filed with the Securities and Exchange Commission on March 12, 2012, and incorporated by reference herein.
|
(3)
|
Previously filed as the like-numbered exhibit to the Registration Statement on Form S-1/A (File No. 333-174925), and incorporated herein by reference.
|
(4)
|
Previously filed as the like-numbered exhibit to the Current Report on Form 8-K (File No. 001-35480), filed with the Securities and Exchange Commission on June 19, 2015, and incorporated by reference herein.
|
*
|
The certifications attached as Exhibit 32.1 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by Enphase Energy, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
|
***
|
Material in the exhibit marked with three asterisks [***] has been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Securities and Exchange Commission.
|
1.
|
TERM
|
1.1
|
This Agreement will be in effect from April 22, 2014 (the “
Effective Date
”) until December 31, 2015 (the “
Initial Term
”), and may be extended upon the mutual written agreement of the Parties for additional calendar year periods (each such calendar year, a “
Renewal Term
” and collectively the Initial Term and each Renewal Term will be defined as the “
Term
”).
|
2.
|
PRODUCT(S)
|
2.1
|
The Product(s) subject to this Agreement are listed in
Exhibit A
(the “
Product(s)
”) and will be sold in the packages and at the prices set forth in
Exhibit A
. During the Term, Dow Corning may offer and make available to Buyer any alternative, new or subsequent generation of Product(s) sold or supplied by Dow Corning (“
New Product(s)
”) and such New Product(s) may be purchased by Buyer under the terms of this Agreement. The Product Specifications (as defined below) of any New Product(s) will be as mutually agreed to by the Parties and will be subject to the quality requirements set forth in Section 3 herein.
|
2.2
|
Each of Dow Corning and Buyer desire to collaborate in evaluating future application and development opportunities to continue to meet evolving performance and cost standards during the Term, and may either amend this Agreement to include such opportunities, or enter into other agreements for such Product(s). The preceding sentence notwithstanding, each of Dow Corning and Buyer reserve the right to accept or reject any future opportunities to collaborate, and will make independent business judgments regarding each such opportunity.
|
3.
|
QUALITY AND PRODUCT SPECIFICATIONS
|
3.1
|
The Product(s) will meet the Dow Corning Product Specifications (the “
Product Specifications
”) set forth in
Exhibit B
. No changes to the Product Specifications will be implemented without agreement by both Parties. The “
Minimum Shelf-Life
” for the Product(s) will be (a) from the Effective Date through [***], at least nine (9) months from the date of shipment of the Product(s) to Buyer, and (b) from [***] through the remainder of this Agreement, at least twelve (12) months from the date of shipment of the Product(s) to Buyer.
|
3.2
|
Dow Corning’s production facility has ISO9001 registration and has implemented change management procedures in compliance with ISO9001 requirements.
|
3.3
|
During Dow Corning’s internal quality control and testing, Dow Corning will ensure compliance with: (i) the Product Specifications; (ii) only to the extent applicable, relevant and reasonable to Supplier’s status as a liquid materials supplier and not a parts supplier, the Buyer’s Advanced
|
4.
|
PRODUCT TESTING AND QUALIFICATION
|
4.1
|
The Product(s) will be deemed as “
Qualified
” once: (i) Buyer’s Product Validation group successfully completes its internal testing results of the Product(s) and signs-off on its results in Buyer’s Arena system; (ii) the Product(s) comply with the Product Specifications; (iii) the APQP Process is successfully completed; and (iv) Parts Submission Warrant is formally signed-off by Buyer’s Supplier Quality Engineer and is formally released in Buyer’s Arena System.
|
4.2
|
In the event that the Product(s) cannot be Qualified, the Parties agree to work together to resolve any issues related to the Qualification of the Product(s); provided however, that Buyer may, if Buyer and Dow Corning mutually agree that use of the Product(s) is commercially unreasonable due to delay, cost, performance or any other reason, and Dow Corning is unable to remedy such determination within thirty (30) days, terminate this Agreement upon ten (10) days’ notice.
|
5.
|
PRICE AND QUANTITY
|
5.1
|
The “
Purchase Price
” for the Product(s) or New Product(s) will be as specified in
Exhibit A
.
|
5.2
|
Buyer’s minimum purchase obligation in calendar year 2014 is [***]kg of Products between July 1, 2014 and December 31, 2014, and in calendar year 2015 is [***]kg of Products (the “Minimum Volume Commitment”). Dow Corning’s maximum supply obligation is [***]kg of Products in calendar year 2014 and [***]kg of Products in calendar year 2015. Unless otherwise agreed, Dow Corning’s monthly supply obligation will not exceed 200% of Buyer’s average monthly purchase obligation (calculated as the Minimum Volume Commitment divided by the number of months in the relevant calendar year).
In the event that Buyer purchases at least the Minimum Volume Commitment in [***], then Dow Corning agrees that for calendar year [***], the Purchase Price for the Product(s) will be [***] percent less than the amount set forth on
Exhibit A
.
|
5.3
|
If, during the period of time between the Effective Date and June 30, 2015 (the “
Price Protection Period
”), Dow Corning sells to any other party any quantity of the same grade and quality of the Product(s) or New Product(s) for like use, and at a price lower than the Purchase Price or Purchase Price less the discounts provided for in Section 5.2, then Dow Corning will apply such lower price to all Product(s) purchased by Buyer during the Price Protection Period. In the event the application of this Section creates a rebate for the benefit of Buyer, Dow Corning will issue a credit to Buyer’s account for such amount within thirty (30) days of the determination thereof.
|
5.4
|
In the event that Buyer desires, at a later date, to have a designated agent that is approved in writing by Dow Corning purchase the Products directly from Dow Corning, Dow Corning will count such purchases towards Buyer’s Minimum Volume Commitment.
|
6.
|
FREIGHT AND SHIPPING DESTINATION(S); TITLE AND RISK OF LOSS
|
6.1
|
Freight terms are INCOTERMS 2010 [***] to Flextronics Electronics Technology(Shenzhen) Co., LTD # 89 Yong Fu Road, Tong Fu Yu Industrial Park, Fu Yong Town, Bao An District, Shenzhen, 518103 P.R. China or any other location agreed to by Buyer and Dow Corning. Title and risk of loss with respect to all Products shall pass to Buyer upon delivery pursuant to [***] terms. Except as set forth in Section 6.4, Dow Corning will deliver the Product(s) in full container loads (84 drums/42 kits, double stacked) from Dow Corning’s bonded warehouse in Hong Kong. Upon notification from Dow Corning for shipment release against a purchase order placed by Buyer to Dow Corning, Buyer or its designated agent must complete Import Customs Clearance and provide confirmation thereof to Dow Corning prior to completion of the shipment.to Flextronics warehouse in Shenzhen, China.
|
6.2
|
For rush orders (with requested shipping date less than fifteen (15) business days prior to order, per Section 7 below), freight terms are INCOTERMS 2010 FCA Dow Corning’s bonded warehouse in Hong Kong.
|
6.3
|
Dow Corning will select the carrier and the routing.
|
6.4
|
In the event Buyer requests shipments in increments smaller than full container loads, freight terms will be INCOTERMS 2010 FCA Dow Corning’s bonded warehouse in Hong Kong.
|
7.
|
ORDERS
|
8.
|
FORECAST
|
9.
|
PAYMENT
|
9.1
|
Provided that Product(s) has been delivered and Accepted, payment for such Product(s) must be delivered to Dow Corning within [***] calendar days from the date that an undisputed invoice (“
Undisputed Invoice
”) has been received by Buyer’s accounts payable group (“
AP
”). Buyer will be entitled to a [***] percent discount off of the amounts in an Undisputed
|
9.2
|
In the event that Buyer, in good faith, is not in material agreement with the amount owed in a particular invoice (a “
Disputed Invoice
”), then Buyer will notify Dow Corning in writing (email communication will be considered sufficient written notice for this Section 9.2) within five (5) business days of receipt of the Disputed Invoice (“
Notice Date
”). The parties agree to attempt to resolve the Disputed Invoice within thirty (30) calendar days from the Notice Date (the “Negotiation Period”). Upon resolution of a Disputed Invoice (agreement as to appropriate amount), Buyer shall pay such Invoice within ten (10) calendar days of such resolution (or the original due date of such Invoice, whichever is later). Early payment discounts will not be available or applied for invoices paid after they have been Disputed Invoices. In the event that the parties are unable to resolve the Disputed Invoice within the Negotiation Period, then the parties agree to resolve such Disputed Invoice pursuant to the terms of Section 20.
|
9.3
|
Other than as required by law, Buyer will not make deductions, counterclaims or set-offs to justify withholding payment of any invoice amount in whole or in part. Failure to pay Undisputed Invoices when due, failure to pay finance charges when assessed or making deductions, counterclaims or set-offs from invoices will result in delayed or cancelled shipments until such Undisputed Invoices have been paid, or termination of this Agreement by Dow Corning. Buyer agrees to pay Dow Corning’s collection costs, including reasonable attorney fees.
|
10.
|
BUYER’S KNOWLEDGE AND EXPERIENCE WITH THE PRODUCT
|
10.1
|
Buyer acknowledges and understands that it is familiar with and understands the nature of the Product(s) and that it may be dangerous when handled, used, sold, stored, transported or disposed. Buyer will follow safe handling, use, selling, storage, transportation, and disposal practices for the Product(s), will instruct its employees, contractors, agents, and customers in these practices, and take appropriate action with respect to the Product(s) to avoid releases or other dangers to persons, property, or the environment. Buyer acknowledges and agrees that it has the requisite expertise, experience and equipment for the conduct of all the aforementioned activities with the Product(s), and Buyer assumes all risks of doing so.
|
10.2
|
Buyer shall indemnify, defend and hold harmless Dow Corning, its affiliates and the employees, agents, officers, directors and shareholders of Dow Corning and/or its affiliates for all claims, damages, and related costs, including reasonable attorney fees, arising out of Buyer’s noncompliance with any of its commitments under this Section.
|
10.3
|
Dow Corning will make available to Buyer all relevant Material Safety Data Sheets and Product Data Sheets relating to the Product(s). Buyer will only use the Product(s) in accordance with such Material Safety Data Sheets and Product Data Sheets.
|
10.4
|
In the event that Dow Corning discovers that Buyer has failed to comply with the terms of this Section 10, then Dow Corning agrees to give Buyer written notice of such non-compliance. Buyer will then have fifteen (15) business days to cure such non-compliance and to notify Dow Corning of the steps taken to remedy the non-compliance. If Buyer fails to remedy the non-compliance and notify Dow Corning, then Dow Corning may terminate this Agreement immediately upon written notice.
|
11.
|
END USE
|
12.
|
LIMITED WARRANTY
|
13.
|
BUYER’S REMEDIES
|
13.1
|
If the Product(s) provided by Dow Corning are deemed, by both Dow Corning and Buyer, to be nonconforming upon Buyer’s receipt, Dow Corning will either (a) replace the Product(s) in question with Product(s) that meet the quality requirements of this Agreement, or (b) credit Buyer the Purchase Price of the Product(s) shown to be other than as warranted (if Buyer agrees to such credit in lieu of replacement Product(s)). For Product(s) that are deemed defective pursuant to this Section:
|
13.1.1
|
A Return Authorization Number (RMA) will be assigned by Dow Corning;
|
13.1.2
|
Dow Corning will be responsible for selecting the carrier and routing all returns and replacement Product shipments;
|
13.1.3
|
Dow Corning will be responsible for all reasonable costs associated with the return and replacement of such Product(s);
|
13.1.4
|
If replacement Product(s) are deemed necessary, Dow Corning will use its best commercial efforts to ensure that such replacement Product(s) are delivered to the location specified in this Agreement within Buyer’s requested timeline; and
|
13.1.5
|
Dow Corning will provide Buyer with a failure analysis report (8D report) within forty-five (45) days following receipt of returned Product(s), subject to the complexity of the failure.
|
13.2
|
Any remedy to be received by Buyer pursuant to Section 13.1 is conditional upon Buyer giving Dow Corning notice of any claim within thirty (30) calendar days from the expiration of Minimum Shelf Life of the Product(s) or two (2) years from the date the claim arose, whichever occurs later. Failure by Buyer to give notice of a claim within this period will constitute a waiver by Buyer of any such claim. If requested by Dow Corning, all unconsumed Product(s) alleged by Buyer to be other than as warranted will be returned to Dow Corning freight collect.
|
14.
|
LIMITATION OF LIABILITY
|
15.
|
TAXES
|
15.1
|
Any tax, duty or other governmental charge now or in the future levied upon the production, sale, use or shipment of the Product(s) may, at Dow Corning’s option, be added to the purchase price.
|
15.2
|
Income taxes imposed upon Dow Corning are excluded from this definition of taxes.
|
16.
|
FORCE MAJEURE
|
16.1
|
Dow Corning will incur no liability due to delay in performance, non-performance or other failure to meet any obligation to the Buyer caused by circumstances beyond its control (a “
Force Majeure Event
”) including but not limited to war, fire, flood, strike, labor troubles, breakage of equipment, accident, riot, act of governmental authority, Acts of nature or the inability to obtain, on terms judged reasonable by Dow Corning, raw materials (including energy source) used in connection with the Product(s). Dow Corning may, during any shortage due to a Force Majeure Event, allocate its raw materials and finished Product(s) in any manner that, in the opinion of Dow Corning, is fair and reasonable. Buyer will incur no liability due to inability of Buyer to have Product delivered due to a Force Majeure Event.
|
17.
|
TERMINATION
|
17.1
|
A party may terminate this Agreement for cause if the other party fails to remedy any default in its compliance with any representation or warranty or in its performance of any covenant or obligation under this Agreement within thirty (30) calendar days after written notice thereof. Where the default is incapable of remedy the party suffering the default may terminate this Agreement immediately upon notice to the other party.
|
17.2
|
Either party may unilaterally terminate this Agreement at any time upon five (5) business days written notice in the event of the institution by or against either party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of that party’s debts, upon either party making an assignment for the benefit of creditors, or upon either party’s dissolution or ceasing to do business.
|
17.3
|
If Dow Corning discontinues the sale of any Product(s) for the application(s), market(s) or industries served by Buyer, then Dow Corning may, upon at least 270 days prior written notice, remove the discontinued Product(s) from this Agreement without any further obligation to Buyer (such date after 270 days, the “
EOL Date
”). Buyer reserves the right to order the Product(s) until the EOL Date, and Dow Corning will be obligated to accept commercially reasonable orders that it is capable of meeting until the EOL Date. For purchases during such 270 day period, Buyer must accept delivery of all Product(s) ordered during such 270 day period within ninety (90) days of such order.
|
17.4
|
Termination of this Agreement due to default by Dow Corning will not relieve Dow Corning of any obligation or liability arising prior to such termination (including the notice period in Section 17.3).
|
17.5
|
Survival. Sections titled “Buyer’s Knowledge and Experience with the Product,” “End Use,” “Limited Warranty,” “Buyer’s Remedy,” “Limitation of Liability,” and “Audit Rights” will survive termination of this Agreement.
|
18.
|
AUDIT RIGHTS
|
19.
|
NON-ASSIGNMENT
|
20.
|
DISPUTES
|
21.
|
COMPLIANCE WITH APPLICABLE LAW AND FCPA
|
21.1
|
With respect to the matters covered by this Agreement, Dow Corning represents, warrants, and covenants to Buyer, that neither Dow Corning nor any owners, directors, officers, employees, agents, affiliates or other contractors and subcontractors (collectively, “
Relevant Persons
”) of Dow Corning has or will, with respect to the Products being sold hereunder, (i) violate or cause Buyer or its Relevant Persons to be in violation of the U.S. Foreign Corrupt Practices Act of 1977 as amended (15 U.S.C. §§78dd-1, et seq.) (the “
FCPA
”), the U.S. Travel Act, or any other applicable anti-corruption law or regulation (collectively “
Anti-Corruption Laws
”); (ii) with a corrupt, improper, or illegal intent directly or indirectly (through third parties) pay, provide, promise, offer, or authorize the payment or provision of any money or thing of value to (a) an official, employee, or agent of any government, military, political party, public international organization, state-owned or affiliated entity, or instrumentality thereof (collectively “
Government Officials
”), (b) a political party or candidate for public office, (c) any person while “knowing” (as that term is interpreted by the U.S. government in relation to the FCPA) that all or a portion of that money or thing of value will be offered, promised, paid, or provided to the foregoing persons, or (d) any other individual, entity, or organization, in order to obtain, retain, or direct approvals, licenses, permits, business, sales, tax or duty assessments, import or export clearances, or other advantages; (iii) offer, promise, authorize, provide, or incur any bribe, kickback, or other corrupt or unlawful payment, expense, contribution, gift, entertainment, travel or other
|
21.2
|
Dow Corning shall keep full, true, and accurate records and accounts, in accordance with generally-accepted accounting principles, of Dow Corning’s performance under this Agreement for a period of five (5) years from the termination or expiration date of this Agreement. The Company may upon twenty-one (21) days prior written notice audit these records (solely for the purpose of, and solely with access to the information completely necessary for determining, compliance with this Section 21) at its discretion and suspend its performance under this Agreement for the duration of such audit if Buyer reasonably suspects that Dow Corning or its Relevant Persons have violated or caused Buyer or its Relevant Persons to violate Anti-Corruption Laws. Dow Corning shall reasonably cooperate with Buyer with such audit. These audit rights shall last for up to five (5) years from the date of the expiration or termination of this Agreement.
|
21.3
|
Dow Corning understands and acknowledges that its material violation of the foregoing representations, warranties, covenants, terms, or conditions contained in this Section 21 shall constitute a material breach of this Agreement, and Buyer may, at its sole option, terminate this Agreement for cause and without further liability or obligation on the part of Buyer. Any such material breach shall entitle Buyer to injunctive and other equitable relief, in addition to any other remedies which may be available, including indemnification rights under this Agreement.
|
22.
|
FEDERAL ACQUISITION REGULATIONS
|
23.
|
EXPORT LAWS AND REGULATIONS
|
23.1
|
Buyer agrees to be responsible for being knowledgeable as to all laws, regulations, and requirements regarding the export, re-export, resale, shipment, or diversion of Dow Corning Product(s) or any other Dow Corning items (whether tangible or intangible, including without limitation commodities, software, technology, and technical data). Buyer acknowledges that the Product(s) referenced in
Exhibit A
may be subject to export control laws and regulations and may require an export license or permit prior to resale, transfer, export or re-export,
|
23.2
|
Buyer agrees it will not in any form export, re-export, resell, ship or divert or cause to be exported, re-exported, resold, shipped or diverted, directly or indirectly, any Product or technical data furnished hereunder to any country, end-use, or end-user that requires an export license or other approval without first obtaining such license or approval. The end-users and end-uses that may require an export license or other approval include, without limitation, (i) any person, entity, organization or other party identified on an applicable government restricted party list, including for example the U.S. Department of Commerce’s Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons List or the Department of State’s Debarred Parties List, and (ii) any end-use involving nuclear applications, chemical/biological weapons or missile, rocket systems or unmanned air vehicle applications.
|
23.3
|
Additionally, Buyer agrees to abide by the regulations of U.S. Department of Treasury, Office of Foreign Assets Control, which administers U.S. trade sanctions and embargoes. As of the date of this Agreement, OFAC regulations currently include, without limitation, Iran, Cuba, Syria and Sudan. As of the date of this Agreement, similar restrictions apply to North Korea under the U.S. Export Administration Regulations. OFAC sanctioned and embargoed countries and related regulations are currently listed at http://www.treas.gov/offices/enforcement/ofac/programs/index.shtml.
|
23.4
|
Buyer agrees to indemnify, defend and hold Dow Corning harmless from any and all costs (including attorneys’ fees) expenses, judgments, penalties, or other liabilities due to Buyer’s failure to comply with this section.
|
24.
|
WAIVER
|
25.
|
SEVERABILITY
|
26.
|
NOTICE
|
To Dow Corning:
|
To Buyer
|
Dow Corning Corporation
|
Enphase Energy, Inc.
|
Attn: Shane Ladwein, Director, Engineered Materials Product Line
cc: General Counsel
|
Attn: Cristina Nguyen, Strategic Sourcing Manager
cc: Legal Counsel
|
2200 W. Salzburg Rd
|
1420 N. McDowell Blvd.
|
Auburn, MI 48611
|
Petaluma, CA 94954
|
27.
|
HEADINGS
|
28.
|
ENTIRE AGREEMENT
|
29.
|
RIGHTS OF THIRD PARTIES
|
|
DOW CORNING CORPORATION
|
|
ENPHASE ENERGY, INC.
|
|
|
|
|
By:
|
/s/ Thomas H. Cook
|
By:
|
/s/ Paul Nahi
|
Name:
|
Thomas H. Cook
|
Name:
|
Paul Nahi
|
Title:
|
Senior VP, Sales &
|
Title:
|
President and CEO
|
|
Customer Experience
|
|
|
Date:
|
April 22, 2014
|
Date:
|
April 22, 2014
|
Product
|
Container
|
Price/ LB or KG
|
Dow Corning© EE-[***] Encapsulant
Enphase Item Numbers:
751-00127-01
751-00128-01
|
Product is sold in two parts (Part A and Part B), each of which will be packed in 225kg drums.
|
US$[***]/ KG
|
Product
|
Container
|
Price/ LB or KG
|
Dow Corning© EE-[***] Encapsulant
Enphase Item Numbers:
751-00127-01
751-00128-01
|
Product is sold in two parts (Part A and Part B), each of which will be packed in 225kg drums.
|
US$[***]/ KG
|
Revision
|
Date
|
Author
|
Description of Change
|
1.0
|
02
-
28
-
14
|
Tom Krizner
,
Sr
.
Staff
Engineer
,
Mechanical
|
Initial release in Arena
|
|
|
|
|
NameTitleDepartment
|
||
Arvind Krishna
|
Director
,
Mechanical Engineering
|
Engineering
|
Peter Tarver
|
Compliance and Homologation Technical Lead
|
Quality and Reliability
|
Thad Pearson
|
Director
,
Manufacturing Engineering
|
Manufacturing
|
Rob Howard
|
Director
,
Global Manufacturing and Supplier Quality
|
Manufacturing
|
Jeff Rosen
|
Director
,
Supply Chain
|
Manufacturing
|
Property
|
Test standard
|
Acceptance
|
Vertical burn
|
UL 94
|
[***] (at [***] to [***])
|
Hot wire ignition (HWI)
|
UL 746/ ASTM D3874
|
PLC ≤ [***]
|
High current arc ignition (HAI)
|
UL 746/ ASTM D3874
|
PLC ≤ [***]
|
Relative temperature index (electrical)
|
UL 746
|
≥ [***] deg C
|
Relative temperature index (impact)
|
UL 746
|
≥ [***] deg C
|
Relative temperature index (strength)
|
UL 746
|
≥ [***] deg C
|
Comparative tracking index (CTI)
|
UL 746
|
PLC ≤ [***]
|
Dielectric strength (kV/mm)
|
UL 746
|
≥ [***]
|
Volumetric resistivity
,
dry (ohm
-
cm)
|
UL 746
|
≥ [***] x [***]
|
Volumetric resistivity
,
wet (ohm
-
cm)
|
UL 746
|
≥ [***]
6
|
1.
|
The full container load description has been amended. Section 6.1 will be replaced by the following:
|
DOW CORNING CORPORATION
|
|
ENPHASE ENERGY, INC.
|
||
|
|
|
|
|
By:
|
/s/ John E. Church
|
|
By:
|
/s/ Paul Nahi
|
Name:
|
John E. Church
|
|
Name:
|
Paul Nahi
|
Title:
|
Sales Director
|
|
Title:
|
President & CEO
|
Date:
|
July 30, 2014
|
|
Date:
|
July 23, 2014
|
1.
|
Pursuant to Section 1.1 of the Agreement, the Agreement is hereby extended for a three-year Renewal Term, from January 1, 2016 through December 31, 2018.
|
2.
|
Exhibit A to the Agreement is hereby deleted in its entirety and replaced by Exhibit A to this Second Amendment.
|
3.
|
Section 3.1 is hereby deleted in its entirety and replaced by the following:
|
3.1
|
The Product(s) will meet the Dow Corning Product Specifications (the “
Product Specifications
”) set forth in
Exhibit B
. No changes to the Product Specifications will be implemented without agreement by both Parties. The “
Minimum Shelf-Life
” for the Product(s) will be at least twelve (12) months from the date of shipment of the Product(s) to Buyer.” In the case that shipping delays, changes in forecast, or other actions result in Dow Corning having stock of material that does not meet the Minimum Shelf-Life, Dow Corning will submit a waiver to Enphase for all shipments that do not meet the Minimum Shelf-Life, and Buyer and Dow Corning will work together in good faith to facilitate Buyer’s acceptance of the Product.
|
4.
|
Section 5.2 is hereby deleted in its entirety and replaced by the following:
|
5.2
|
This Agreement is a take or pay agreement. Buyer is absolutely and irrevocably required to purchase, cumulatively, [***] kg of Product (the “Minimum Volume Commitment”) between January 1, 2015 and December 31, 2018. If Buyer fails to purchase the Minimum Volume Commitment before December 31, 2018, then Dow Corning will issue an invoice to Buyer in an amount equal to $[***]/kg for each kilogram of Product that Buyer has failed to purchase (the price per kilogram of
|
5.
|
Section 5.5 is hereby added to the Agreement:
|
5.5
|
In addition to the other volume commitments specified herein, Buyer shall purchase all of its requirements for silicon potting materials used to fill or encapsulate microinverter products exclusively from Dow Corning through December 31, 2018.
|
1.
|
Section 6 is hereby deleted in its entirety and replaced by the following:
|
•
|
Flextronics Electronics Technology (Shenzhen) Co., Ltd.
# 89 Yong Fu Road, Tong Fu Yu Industrial Park, Fu Yong Town, Bao An District, Shenzhen, 518103 P.R. China |
•
|
Flextronics International
260 South Milpitas Blvd, Bldg 15, Doc 12, Milpitas CA 95035 |
•
|
Flextronics Technologies Mexico S de RL de CV
Prol. Av. López Mateos Sur 2915 m. 6.5 |
•
|
or any other location agreed to by Buyer and Dow Corning.
|
6.2
|
For rush orders (with requested shipping date less than fifteen (15) business days prior to order, per Section 7 below), freight terms are INCOTERMS 2010 FCA Dow Corning’s warehouse in either Hong Kong, Mexico City or Carrolton, KY (at Dow Corning’s discretion and based upon stock and availability at such time).
|
6.3
|
Dow Corning will select the carrier and the routing.
|
6.4
|
In the event Buyer requests shipments in increments smaller than full container loads, freight terms are INCOTERMS 2010 FCA Dow Corning’s warehouse in either Hong Kong, Mexico City or Carrolton, KY (at Dow Corning’s discretion and based upon stock and availability at such time).
|
2.
|
Section 8 of the Agreement is hereby deleted in its entirety and replaced with the following:
|
8.1
|
On the first (1
st
) business day of each month, Buyer will provide Dow Corning a six-month rolling forecast of purchases for each Product for each shipping destination. Only the first month of each six-month forecast will be considered a binding commitment on the part of Buyer to purchase and of Dow Corning to supply the corresponding volume of Product(s) subject to the Quantity provisions set forth in this Agreement; the balance of such six-month forecast is for planning purposes only.
|
8.2
|
If Buyer desires to purchase more than (a) [***] kg of Product in any calendar month of the Term, or (b) [***] kg of Product in any calendar year of the Term, Buyer shall provide notice to Dow Corning at least 180 days prior to its volume requirements exceeding such amount.
|
DOW CORNING CORPORATION
|
|
ENPHASE ENERGY, INC.
|
||
|
|
|
|
|
By:
|
/s/ John E. Church
|
|
By:
|
/s/ Paul Nahi
|
Name:
|
John E. Church
|
|
Name:
|
Paul Nahi
|
Title:
|
North America - Sales Director
|
|
Title:
|
President & CEO
|
Date:
|
April 28, 2015
|
|
Date:
|
April 23, 2015
|
Product
|
Container
|
Period
|
Price/ KG
|
Dow Corning® EE-[***] Encapsulant
Enphase Item Numbers:
751-00127-01
751-00128-01
|
Product is sold in two parts (Part A and Part B), each of which will be packed in 225kg drums.
|
July 1, 2015 – December 31, 2015
|
US $[***] / KG
|
Jan 1, 2016 – December 31, 2016
|
US $[***] / KG
|
||
January 1, 2017 – December 31, 2017
|
US $[***] / KG
|
||
January 1, 2018 – December 31, 2018
|
US $[***] / KG
|
1.
|
I have reviewed this Form 10-Q of Enphase Energy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Paul B. Nahi
|
|
Paul B. Nahi
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Form 10-Q of Enphase Energy, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Kris Sennesael
|
|
Kris Sennesael
|
|
Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|
/s/ Paul B. Nahi
|
|
/s/ Kris Sennesael
|
Paul B. Nahi
President and Chief Executive Officer
|
|
Kris Sennesael
Vice President and Chief Financial Officer
|