What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-25 · 197 added, 203 removed, 865 unchanged (32% of the section changed)

2 unchanged sentences

Index to consolidated financial statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 1281 )

Consolidated Balance Sheets as of December 31, 2021 and 2020

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We have audited the accompanying consolidated balance sheets of NovoCure Limited and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021 and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairl y , in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the T readway Commission (2013 framework) and our report dated February 25, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

W e believe that our audits provide a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter s communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters belo w , providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition – Measuring variable consideration

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The implicit discount adjustments to the transaction price are due to concessions, not collectability concerns driven by payer credit risk.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating e f fectiveness of internal controls over the Company's process to calculate variable consideration, including the underlying assumptions about estimates of expected price concessions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process to calculate variable consideration, including the underlying assumptions about estimates of expected price concessions.

Our audit procedures included, among others, evaluating the methodology used, analyzing the significant assumptions discussed above, and testing the accuracy and completeness of the underlying data used in management's calculation.

This included testing inputs of the calculation by reconciliation of the data between the various information systems performing independent recalculation of the Company's estimate and evaluating the historical accuracy of management's estimates by comparing such estimates to subsequent actual results.

Accounting for the Issuance of Convertible Senior Notes

Description of the Matter As explained in Note 10 to the consolidated financial statements, in November 2020, the Company issued $575 million of 0% coupon rate convertible senior notes due November 2025 (the "Notes").

In accounting for the issuance of the Notes, management allocated the total proceeds into liability and equity components.

The carrying amount of the liability component was calculated by estimating the fair value of the Notes if there were no associated convertible features.

The carrying amount of the equity component, representing the conversion option was determined by deducting the fair value of the liability component from the principal amount of the Notes.

The valuation model used in determining the fair value of the liability component for the Notes includes assumptions subject to management's judgement, including the synthetic credit rating.

Auditing management’s evaluation of the transaction was complex and required a high degree of auditor judgement and audit effort due to the inherent complexity in assessing the accounting for the Notes.

This required an assessment of the valuation of the fair value of the liability component of the Notes, which included evaluation of assumptions subject to management's judgement in determining the borrowing rate.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls in respect of the Company’s Notes transaction, including controls over the initial recognition and measurement of the Notes and recording of the associated liability and equity components.

To test the initial accounting for the Notes transaction, our procedures included, among others, inspection of the underlying agreements and testing management’s evaluation and application of the relevant accounting guidance.

We also involved our valuation specialists to evaluate the Company’s determination of the fair value of the liability component of the Notes.

We tested the appropriateness of the methodology, evaluated the reasonableness of the underlying assumptions used to determine the borrowing rate, such as the Company’s synthetic credit rating, and performed an independent calculation of the carrying amounts attributable to the liability and equity components.

Additionally, we tested the source information underlying the valuation assumptions and inputs used to determine the fair value and the mathematical accuracy of the calculation.

We also evaluated the Company’s disclosures regarding the issuance of the Notes transaction included in Note 10.

KOST FORER GABBAY & KASIERER

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Opinion on Internal Control over Financial Reporting

We have audited NovoCure Limited and subsidiaries internal control over financial reporting as of December 31, 2020,based on criteria established in Internal Control– Integrated Framework issued by the Committee of Sponsoring Organizations of the T readway Commission (2013 framework) (the COSO Criteria).

In our opinion, NovoCure Limited and subsidiaries (the Company) maintained, in all material respects, e f fective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We have audited NovoCure Limited and subsidiaries internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO Criteria).

In our opinion, NovoCure Limited and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss) changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021 and the related notes, and our report dated February 24, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company ’ s management is responsible for maintaining e f fective internal control over financial reporting and for its assessment of the e f fectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

W e are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether e f fective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating e f fectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

W e believe that our audit provides a reasonable basis for our opinion.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

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(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company ’ s assets that could have a material e f fect on the financial statements.

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of e f fectiveness to future periods are subject to the risk that controls may

become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

KOST FORER GABBAY & KASIERER

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Trade payables $ 72,600 $ 53,647

Other payables and accrued expenses 59,965 49,386

Other payables, lease liabilities and accrued expenses 70,002 59,965

Total current liabilities 142,602 113,612

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Additional paid-in capital 1,099,589 1,111,435

Accumulated other comprehensive loss ( 3,832 ) ( 2,767 )

Accumulated deficit ( 631,077 ) ( 650,885 )

Accumulated other comprehensive income (loss) ( 3,169 ) ( 3,832 )

Retained earnings (accumulated deficit) ( 685,926 ) ( 631,077 )

Total shareholders’ equity 410,494 476,526

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Operating costs and expenses:

Research, development and clinical trials 132,010 79,003 50,574

Research, development and clinical studies 201,303 132,010 79,003

Sales and marketing 137,057 118,017 96,675

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Balance as of December 31, 2018 93,254,185 $ 757,314 $ ( 1,400 ) $ ( 643,655 ) $ 112,259

Share-based compensation to employees — 39,846 — — 39,846

Exercise of options and warrants 3,688,781 18,468 — — 18,468

Share-based compensation — 52,416 — — 52,416

Exercise of options 6,206,884 59,245 — — 59,245

Issuance of shares in connection with employee stock purchase plan 67,366 2,467 — — 2,467

Cumulative effect adjustment resulting from ASU 2016-09 adoption — — — 2,162 2,162

Other comprehensive income (loss) net of tax benefit of $( 145 )

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Issuance of shares in connection with employee stock purchase plan 66,691 3,370 — — 3,370

Conversion feature of convertible note, net — 132,474 — 132,474

Other comprehensive income (loss) net of tax expense of $ 0

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Balance as of December 31, 2020 102,334,276 1,111,435 ( 3,832 ) ( 631,077 ) 476,526

Share-based compensation to employees — 75,721 — — 75,721

Share-based compensation — 94,900 — — 94,900

Exercise of options 1,585,617 21,182 — — 21,182

Issuance of shares in connection with employee stock purchase plan 51,370 4,546 — — 4,546

Conversion feature of convertible note, net — 132,474 — — 132,474

Cumulative effect adjustment resulting from ASU 2020-06 early adoption (see Note 2(z)) — ( 132,474 ) — 3,502 ( 128,972 )

Other comprehensive loss, net of tax expense of $ 0

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Depreciation and amortization 10,251 9,150 8,460

Accrued interest ( 94 ) — —

Asset write-downs and impairment of field equipment 649 429 398

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Proceeds from issuance of shares, net $ 4,546 $ 3,370 $ 2,467

Proceeds from long-term debt, net 558,439 — 149,150

Proceeds from convertible note, net — 558,439 —

Repayment of long-term debt ( 26 ) ( 150,028 ) ( 31 )

Exercise of options and warrants 28,428 59,245 18,468

Exercise of options 21,182 28,428 59,245

Net cash provided by (used in) financing activities $ 25,702 $ 440,209 $ 61,681

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Income taxes paid (refunded), net $ 3,110 $ ( 3,261 ) $ 11,241

Interest $ 8,686 $ 13,699 $ 13,334

Interest paid $ 101 $ 8,686 $ 13,699

Non-cash activities:

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dollars in thousands (except share and per share data)

NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") delivery systems, including Optune and Optune Lua (our "Products"), for the treatment of solid tumor cancers.

The Company currently markets Optune in the U.S., Austria, Germany, Israel, Japan, Sweden and Switzerland.

NovoCure Limited (including its consolidated subsidiaries, the "Company") was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields ("TTFields") devices, including Optune and Optune Lua (collectively, our "Products"), for the treatment of solid tumor cancers.

The Company currently markets Optune in the United States ("U.S."), Germany, Japan and certain other countries.

The Company currently markets Optune Lua in the U.S.

and European Union.

The Company also has a License and Collaboration Agreement (the "Zai Agreement") with Zai Lab (Shanghai) Co., Ltd.

("Zai") to market Optune in Greater China.

("Zai") to market Optune in China, Hong Kong, Macau and Taiwan ("Greater China").

During the year ended December 31, 2019, the Company implemented changes to its corporate entity operating structure, including transferring certain intellectual property to its Swiss subsidiary, primarily to align corporate entities with the Company’s evolving operations and business model.

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, tax liabilities, useful-life of field equipment, right-of-use assets and lease liabilities, convertible notes, pension liabilities, revenue recognition, and share-based compensation costs.

The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made.

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For the years ended December 31, 2021 and 2020, all securities are classified as held-to-maturity since the Company has the intent and ability to hold the securities to maturity and, accordingly, debt securities are stated at amortized cost.

The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any other than temporary impairment losses.

The amortized cost of held-to-maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity and any credit losses.

Such amortization and interest are included in the consolidated statement of operations as financial income or expenses, as appropriate.

For the three years ended December 31, 2020, no impairment losses have been identified.

For the three years ended December 31, 2021, no credit losses have been identified.

Restricted cash

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The Company’s trade receivables balance contains billed and unbilled commercial activities.

As needed, the Company records an allowance for doubtful accounts by reserving for specifically identified doubtful accounts.

The Company records an allowance for credit losses, if identified.

The Company periodically reviews its customers’ credit risk and payment history.

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The Company regularly evaluates its ability to realize the value of inventory.

If the inventories are deemed damaged, if actual demand for the Company’s delivery systems deteriorates, or if market conditions are less favorable than those projected, inventory write-offs may be required.

If the inventories are deemed damaged, if actual demand for the Company’s devices deteriorates, or if market conditions are less favorable than those projected, inventory write-offs may be required.

Inventory write-offs of $ 1,045 , $ 616 and $ 310 , respectively, were recorded for the years ended December 31, 2021, 2020 and 2019.

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Leasehold improvements Over the shorter of the term of the lease or its useful life

Land and assets held within construction in progress are not depreciated.

Construction in progress is related to the construction or development of property and equipment that is not yet ready for its intended use.

Field equipment:

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Other long-term assets:

Restricted deposits and long-term lease deposits associated with office rent and vehicles under operating leases are presented in other long-term assets.

Restricted deposits, long-term lease deposits associated with office rent and vehicles under operating leases, prepaid and vendors down payments are presented in other long-term assets.

Revenue recognition:

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The electric field generator and arrays are always supplied and function together and are not sold on a standalone basis.

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (Topic 606) (ASU 2014-9), an updated standard on revenue recognition and issued subsequent amendments to the initial guidance in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-8, 2016-10, 2016-12 and 2016-20, respectively (collectively, "ASC 606").

The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods and services to patients in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services.

In addition, the new standard requires expanded disclosures.

The Company has adopted the standard effective January 1, 2018 using the modified retrospective method for all contracts.

The Company uses the portfolio approach to apply the standard to portfolios of contracts with similar characteristics.

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The transaction price is determined based on the consideration to which the Company will be entitled in exchange for providing a Product to the patient.

To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

the most likely amount method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

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ASC 606 requires that the Company recognize this variable consideration as an implicit discount in the billing period.

The implicit discount includes both an estimate of claims that will pay at an amount less than billed and an estimate of claims that will not pay within a given time horizon.

The implicit discount includes both an estimate of claims that will pay at an amount less than billed and an estimate of claims that

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

will not pay within a given time horizon.

The implicit discount adjustments to the transaction price are due to concessions, not collectability concerns driven by payer credit risk.

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The Black-Scholes model requires a number of assumptions, of which the most significant are the share price, expected volatility and the expected award term.

The computation of expected volatility is based on actual historical share price volatility of comparable companies when there is not sufficient historical information for the Company.

Expected term of options granted is calculated

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

using the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant.

Beginning with the first quarter of 2021, the computation of expected volatility is based on a combination of actual historical share price volatility of comparable publicly-traded companies and the historical volatility the Company's shares.

Prior to the first quarter of 2021, due to the lack of sufficient historical information for the Company, the computation was based on actual historical volatility of comparable publicly-traded companies.

Beginning with the first quarter of 2021, the expected term of options granted is calculated using the Company's historical and future exercise behavior.

Prior to the first quarter of 2021, it was calculated using the average between the vesting period and the contractual term to the expected term of the options in effect at the time of grant.

The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model.

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treasury bonds with equivalent terms.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Fair value of financial instruments:

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Cash, cash equivalents and short-term investments are invested at top tier financial institutions globally.

As such, these investments may be in excess of insured limitations or not insured in certain jurisdictions.

Generally, these investments may be redeemed upon demand and therefore, bear minimal risk.

Our trade receivables are due from numerous governments and federal and state agencies that are paid from their respective budgets, and from hundreds of health insurance companies.

The Company does not believe that there

NovoCure Limited and subsidiaries

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dollars in thousands (except share and per share data)

such, these investments may be in excess of insured limitations or not insured in certain jurisdictions.

Generally, these investments may be redeemed upon demand and therefore, bear minimal risk.

are significant default risks associated with these governments, agencies and health insurance companies based upon the Company's the historical experience with them.

The Company has no off-balance sheet concentrations of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

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The Company began making matching contributions as of January 1, 2019.

For the years ended December 31, 2020 and 2019, the Company had made matching contributions in the amount of $ 1,589 and $ 978 , respectively, pursuant to the plan.

For the years ended December 31, 2021, 2020 and 2019, the Company had made matching contributions in the amount of $ 1,967 and $ 1,589 and $ 978 , respectively, pursuant to the plan.

The Company sponsors a defined benefit plan (the "Swiss Plan") for all its employees in Switzerland for retirement benefits, as well as benefits on death or long-term disability, whereby the employee and the Company contribute a portion of the employee's compensation to the plan.

The Swiss Plan is part of a collective pension foundation “Asga Pensionskasse.” Asga is an autonomous pension foundation, meaning that the underlying investment risk and all biometrical risks (disability, death, longevity) are born by the pension foundation itself.

The Swiss Plan is part of a collective pension foundation “Asga Pensionskasse”.

Asga is an autonomous pension foundation, meaning that the underlying investment risk and the all biometrical risks (disability, death, longevity) are born by the pension foundation itself.

Notwithstanding, the Company and its employees bear the risk of having to pay recovery contributions in a financial distress situation.

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The Company determines if an arrangement is a lease and the classification of that lease at inception based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic

(1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use

NovoCure Limited and subsidiaries

1 unchanged sentence

dollars in thousands (except share and per share data)

benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset.

of the asset.

The Company elected to not recognize a lease liability or right-of-use ("ROU") asset for leases with a term of twelve months or less.

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Convertible note:

The Company accounts for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options".

Prior to January 1, 2021, the Company accounted for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options".

Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the convertible senior notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument.

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The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on the same proportions as the proceeds from the notes.

Recently adopted accounting pronouncements:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

Commencing January 1, 2021, the Company early adopted ASU 2020-06, see note 2(z).

NovoCure Limited and subsidiaries

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dollars in thousands (except share and per share data)

(“ASU 2016-13”).

ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses, with an effective date for the first quarter of fiscal year 2020.

The Company adopted the standard effective as of January 1, 2020 and the adoption of this standard did not have an impact on the Company's consolidated financial statements.

In August 2018, FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of income as the costs related to the hosting fees.

The Company adopted the standard effective as of January 1, 2020 and the adoption of this standard did not have an impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements:

In August 2020, the FASB issued ASU No.

Recently adopted accounting pronouncements:

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

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Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification ("ASC Topic 815"), Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.

The Company early adopted ASU 2020-06, effective January 1, 2021.

See Note 20 for the impact of this adoption.

The Company early adopted ASU 2020-06, effective January 1, 2021 on a modified retrospective basis.

The impact of the Company’s adoption of ASU 2020-06 on the balance sheet as of January 1, 2021 was an increase in long term debt, net of $ 128,972 , a decrease in additional paid-in capital of $ 132,474 , and a decrease in accumulated deficit of $ 3,502 .

Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.

For additional information see Note 10 of these audited consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12).

This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.

As of December 31, 2020 the Company had not early adopted ASU 2019-12.

The Company is evaluating the potential effect of the new guidance and believes there will be no material impact to the consolidated financial statements.

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance.

ASU 2019-12 is effective for the Company as of January 1, 2021 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Cash and Cash equivalents and Short-term investments

Cash and cash equivalents:

Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased.

Cash equivalents include items almost as liquid as cash, such as certificates of deposit and term deposits with maturity periods of three months or less when purchased.

The Company’s cash and cash equivalents were composed of:

Cash $ 3,139 $ 20,339

Money market funds 64,668 214,335

Certificate of deposits, notes and term deposits 140,995 —

Total cash and cash equivalents $ 208,802 $ 234,674

Short-term investments

The following table sets forth the Company’s short-term investments:

Term deposits $ 424,094 $ —

US treasury bills 199,981 607,902

Corporate debt securities 104,823 —

Total short-term investments $ 728,898 $ 607,902

NovoCure Limited and subsidiaries

1 unchanged sentence

dollars in thousands (except share and per share data)

Short-term investments

The Company invests in marketable U.S.

Treasury Bills ("T-bills") that are classified as held-to-maturity securities.

The amortized cost and recorded basis of the T-bills are presented as short-term investments.

Short-term investments $ 607,902 $ 148,769

Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they are categorized as Level 1 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair value of our short-term investments as of December 31, 2020 and 2019 was $ 607,905 and $ 148,738 , respectively.

treasury Bills (“T-bills”), term deposits, notes, and corporate debt securities that are classified as held-to-maturity securities and are presented as cash and cash equivalents and short-term investments according their maturity periods.

The Company measures its cash equivalents and short-term investments at fair value and classifies them within Level 1 or 2.

The Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The fair value of the Company's Level 1 financial assets is based on quoted market prices of the identical underlying security.

The fair value of the Company's level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including the readily-available pricing sources for the identical underlying security that may not be actively traded.

The estimated fair value of our short-term investments as of December 31, 2021 and 2020 was $ 728,906 and $ 607,905 , respectively.

As of December 31, 2021 and 2020, amounts of $ 624,083 and $ 607,905 , respectively, were categorized as level 1, and the remaining balance as level 2 in accordance with ASC 820, “Fair Value Measurements and Disclosures.”

Receivables and prepaid expenses

20 unchanged sentences

Production equipment 2,377 1,628

Land and building $ 11,155 $ —

Leasehold improvements 7,076 6,501

30 unchanged sentences

The Swiss Plan is part of a collective pension foundation of pooled investments managed by a top tier insurance company.

The Company and the employees pay retirement contributions, which are defined as a percentage of the employees’ covered salaries.

Interest is credited to the employees’ account at the minimum rate provided in the Swiss Plan, which represents the Swiss Plan’s primary asset.

The Company and the employees pay retirement contributions, which are defined as a percentage of the employees’ covered salaries.The basis for the determination of the interest on employee’s savings account is the return on plan assets, considering legal minimum requirements.

The targeted allocation for these funds is as follows:

Asset Allocation by Category as of September 30, 2020:

Asset Allocation by Category as of December 31, 2021:

allocation (%)

3 unchanged sentences

Equity Securities 37 %

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

The following table sets forth the Swiss Plan’s funded status and amounts recognized in the consolidated financial statements for the year ended December 31, 2021 and 2020:

23 unchanged sentences

Accrued benefit liability at end of year $ ( 4,008 ) $ ( 4,671 )

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Non-current plan assets $ 25,967 $ 18,083

10 unchanged sentences

The level of inputs used to measure fair value was Level 2.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Net Periodic Benefit Cost

2 unchanged sentences

Expected return on plan assets ( 508 ) ( 31 )

Amortization of transition obligation 120 54

Amortization of actuarial (gain) loss

Amortization of prior service costs ( 94 ) ( 21 )

7 unchanged sentences

(*) Mortality data used for actuarial calculation.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Long-term debt, net

4 unchanged sentences

$ 562,216 $ 429,905

Convertible note

Convertible Notes

On November 5, 2020, the Company issued $ 575,000 aggregate principal amount of 0 % Convertible Senior Notes due 2025 (the “Notes”).

5 unchanged sentences

The Notes are convertible into cash, the Company’s ordinary shares or a combination of cash and the Company’s ordinary shares at the Company’s election at an initial conversion rate of 5.9439 ordinary shares per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $ 168.24 per ordinary share.

For additional information see note 20.

In January 2021, the Company irrevocably elected to settle all conversions of Notes by a combination of cash and the Company's ordinary shares and that the cash portion per $ 1,000 principal amount of Notes for all conversion settlements shall be $ 1,000 .

Accordingly, from and after the date of the election, upon conversion of any Notes,

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

holders of Notes will receive, with respect to each $ 1,000 principal amount of Notes converted, cash in an amount up to $ 1,000 and the balance of the conversion value, if any, in ordinary shares (the "Conversion Shares").

The Notes are not redeemable prior to November 6, 2023, except in the event of certain tax law changes.

6 unchanged sentences

If the Company intends to (i) issue warrants/rights/options to existing shareholders with an exercise price less than the ten -day trailing last trading price average or (ii) distribute to shareholders assets, securities or rights with a value per share greater than 10 % of the last reported trading price, then the Company must give holders of the Notes thirty-five ( 35 ) trading days’ notice of such event, at which time a holder may convert their Notes during such 35 trading day period (or until the Company revokes its decision to issue/distribute the securities, whichever comes sooner).

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

In addition, upon the occurrence of a fundamental change (as defined in the indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be.

During the year ended December 31, 2020, the conditions allowing holders of the Notes to convert were not met.

As of December 31, 2021, the conditions allowing holders of the Notes to convert were not met.

The Notes are therefore not convertible as of December 31, 2021 and are classified as long-term liability.

The net carrying amount of the liability and equity components of the Convertible Notes as of December 31, 2020 is as follows:

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

The net carrying amount of the liability and equity components of the Convertible Notes (see note 2(z) for additional information) as of December 31, 2021 and 2020 are as follows:

Liability component, net:

6 unchanged sentences

Issuance costs

$ — ( 3,928 )

Net carrying amount of equity component $ — $ 132,474

(1) An effective interest rate determines the fair value of the Notes, therefore they are categorized as Level 3 in accordance with ASC 820, "Fair Value Measurements and Disclosures." The estimated fair value of the Net carrying amount of liability component of the Notes as of December 31, 2020 was $ 450,437 .

Finance expense related to the Convertible Notes was as follows:

Finance expense related to the Notes were as follows:

Year ended December 31,

Amortization of debt discount

Amortization of debt issuance costs

$ 3,339 $ 333

Amortization of debt discount

Total finance expense recognized

$ 3,339 $ 3,938

Loan and Security Agreement

4 unchanged sentences

The un-amortized issuance costs in the amount of $ 478 that were fully amortized upon the repayment and the prepayment premium were reported in the Company’s finance expenses.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Other long-term liabilities

Deferred rent liability $ — $ 40

Leasehold improvements financing and other $ 12 $ 40

Unrecognized tax benefits (Note 13(e)) 154 297

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Commitments and contingent liabilities

4 unchanged sentences

Under ASC 842, all leases with durations greater than 12 months, including non-cancelable operating leases, are recognized on the balance sheet.

The aggregated present value of lease agreements, net of deferred rent, is recorded as a long-term asset titled right-of-use assets.

The corresponding lease liabilities are split between other payables and long-term lease liabilities.

Upon implementation of ASC 842, effective January 1, 2019, the Company recorded an increase in right-of-use assets obtained in exchange for lease obligations of $ 15,733 on our opening balance sheet.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2020, are as follows:

The aggregated present value of lease payments is recorded as a long-term asset titled right-of-use assets.

The corresponding lease liabilities are split between other payables and long-term lease liabilities, and as of December 31, 2021, are as follows:

Future minimum lease payments:

9 unchanged sentences

Weighted average of operating lease discount rate 5.62 %

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Lease and rental expense for the years ended December 31, 2021, 2020 and 2019 was $ 7,349 , $ 5,950 , and $ 5,410 , respectively.

3 unchanged sentences

On November 6, 2020, the Company entered into a new three-year $ 150,000 senior secured revolving credit facility with a syndicate of relationship banks.

The Company may, subject to certain conditions and limitations, increase the revolving credit commitments outstanding under the revolving credit facility or incur new incremental term loans in an aggregate principal amount not to exceed an additional $ 100,000 .

The Company may, subject to certain conditions and limitations, increase the

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

revolving credit commitments outstanding under the revolving credit facility or incur new incremental term loans in aggregate principal amount not to exceed $ 250.0 million in total.

The commitments under the revolving credit facility are guaranteed by certain of the Company's subsidiaries and secured by a first lien on the Company's and certain of the Company's subsidiaries’ assets.

Outstanding loans will bear interest at a sliding scale based on the Company's secured leverage ratio from LIBOR plus 2.75 % to LIBOR plus 3.25 % per annum.

Outstanding loans will bear interest per annum at a sliding scale based on the Company's secured leverage ratio from 2.75 % to 3.25 % above the applicable interbank borrowing reference rate for the currency in which the loan is denominated.

Additionally, the facility contains a fee for the unused revolving credit commitments at a sliding scale based on the Company's secured leverage ratio from 0.35 % to 0.45 %.

33 unchanged sentences

Total income tax provision $ 6,276 $ ( 1,706 ) $ ( 1,594 )

In accordance with the changes to the U.S.

tax code enacted in response to the economic impacts of COVID-19 signed into legislation on March 27, 2020, the Company recorded a new tax benefit of $ 11,269 in the first quarter of 2020.

The benefit results from net operating loss carry-backs in the U.S.

Theoretical tax

3 unchanged sentences

A reconciliation of the provision for income taxes compared with the amounts at the notional federal statutory rate was:

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Year ended December 31,

4 unchanged sentences

federal income taxes at statutory rate $ ( 10,936 ) $ 3,801 $ ( 1,853 )

Non-deductible expenses 260 357 912

Foreign taxes rate differential 14,651 4,024 ( 4,216 )

Change in valuation allowance (see Note 13(c)) 6,821 244,344 28,657

State income taxes 607 ( 16,679 ) 1,957

Change in excess tax benefit ( 6,190 ) ( 26,528 ) 2,088

Unamortized intangible assets — ( 189,410 ) —

Share based compensation ( 12,669 ) ( 6,190 ) ( 26,528 )

Change in valuation allowance 11,643 6,821 244,344

Return to provision true-ups 2,416 654 ( 5,204 )

Research and Development Credits ( 2,216 ) ( 5,243 ) ( 2,333 )

State income taxes 1,572 607 ( 16,679 )

Withholding Taxes 273 2,366 384

Non-deductible expenses ( 147 ) 260 357

Unamortized intangible assets — — ( 189,410 )

2020 Cares Act — ( 8,694 ) —

2 unchanged sentences

Effective tax rate ( 12.1 ) % ( 9.4 ) % 18.1 %

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Deferred income tax

2 unchanged sentences

Deferred tax assets:

Implicit discounts recognized under ASC 606 (see Note 2) $ 128,149 $ 124,255

Unamortized intangible assets $ 138,978 $ 157,930

Impact of revenue recognition $ 112,251 $ 131,395

Net operating loss carryforwards $ 77,664 $ 40,314

Share based compensation $ 25,644 $ 17,595

Deferred revenue 3,246 2,450

Interest limitations 6,975 4,028

Unamortized intangible assets 157,930 176,783

Research and development $ 12,146 $ 9,186

Other assets 3,828 1,559

Interest limitations $ 7,948 $ 6,975

Lease liability $ 4,836 $ 1,006

Other temporary differences $ 3,032 $ 2,822

Total gross deferred tax assets $ 382,499 $ 367,223

2 unchanged sentences

Deferred tax liabilities:

Right of use assets 4,559 936

Fixed assets 2,214 2,185

2 unchanged sentences

Net deferred taxes assets (liability) $ — $ —

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Carryforward loss:

As of December 31, 2020, the Company had $ 80,128 of U.S.

federal net operating loss carryforwards ("NOLs") and $ 120,188 of U.S.

The Company had $ 790,668 of gross non-U.S net operating carryforwards (NOLs) as of December 31, 2021 of which $ 1,968 carry forward indefinitely.

The remainder expires from 2026 through 2038.

Approximately $ 783,347 of these NOLs are attributable to Novocure Switzerland with $ 405,553 available at the Federal level and $ 377,794 available at the cantonal level.

In the U.S., the Company had $ 98,120 of U.S.

federal NOLs and $ 124,146 of U.S.

federal NOLs carry forward indefinitely.

1 unchanged sentence

state NOLs carry forward indefinitely, with the remainder expiring from 2023 through 2040.

In addition, the Company had $ 131,614 of non-U.S NOLs as of December 31, 2020, which expire between 2027 and 2037.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Uncertain tax benefits:

2 unchanged sentences

Balance at beginning of the year $ 297 $ 116 $ 103

Additions (reductions) for taxes positions related current year — — ( 141 )

Additions (reductions) for taxes positions related to prior years ( 143 ) 181 13

2 unchanged sentences

During the years ended December 31, 2021, 2020 and 2019, the Company accrued $ 5 , $ 21 and $ 13 , respectively, for interest and penalties expenses related to uncertain tax positions.

We file income tax returns in the U.S.

The Company files income tax returns in the U.S.

and various state and foreign jurisdictions.

We are currently not under examination by the Internal Revenue Service, and any state, local or foreign taxing jurisdictions.

Currently, the Company is under examination by the tax authorities in Israel for the tax years 2017, 2018 and 2019 and is not under examination by any other tax authority.

Additional tax years within the period 2015 to 2020 remain subject to examination by the U.S.

7 unchanged sentences

Ordinary shares no par value 103,971,263 102,334,276

As part of the Series 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.

In the year ended December 31, 2018, warrants to purchase 504,225 ordinary shares were cashlessly exercised, resulting in the issuance of 437,081 ordinary shares.

Also, in the year ended December 31, 2018, warrants to purchase 3,879 ordinary shares, with an exercise price of $ 3.59 per share were exercised for cash.

No warrants were outstanding as of December 31, 2020 and 2019.

Share option plans and ESPP:

Equity incentive plans:

Stock option plan

Until the IPO in October 2015, the Company maintained and granted option awards under the 2003 Share Option Plan (the "2003 Plan") and the 2013 Equity Incentive Share Option Plan (the "2013 Plan") for the Company’s officers, directors, employees and advisors.

The 2003 Plan and the 2013 Plan terminated as of the IPO as to future awards, but they continue to govern option awards previously granted thereunder.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

In September 2015, the Company adopted 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 ("RSUs"), performance units ("PSUs"), long-term cash award and other share-based awards.

Options granted under the 2015 Plan 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 grants.

RSUs granted under the 2015 Plan vest in equal installments over a three-year period.

Under the 2015 Plan, the Company can issue various types of equity compensation awards such as restricted shares, performance shares, restricted stock units ("RSUs"), performance share units ("PSUs"), long-term cash award and other share-based awards.

Options granted under the 2015 Plan generally have a vesting period of four years and expire ten years after the date of grant.

RSUs granted under the 2015 Plan vest in equal installments over three years .

PSUs granted under the 2015 Plan generally vest have a vesting period between three and six years , as performance targets are attained.

Options, RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants.

On December 31, 2021, 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 31, 2021.

1 unchanged sentence

As of December 31, 2021, 18,581,409 ordinary shares are available for grant under the 2015 Plan.

Employee Stock Purchase Plan

In September 2015, the Company adopted an 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.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

The Company began its offerings under the ESPP on August 1, 2016.

The Company issued 51,370 ordinary shares for the plan period from January 1, 2021 through December 31, 2021.

On December 31, 2020, in accordance with the terms of the ESPP, the number of shares available for purchase by eligible employees who participate in the ESPP automatically increased by 1 % of the Company’s outstanding ordinary shares outstanding on December 30, 2020.

The terms of the ESPP provide that on December 31 of each year, the number of shares available for purchase by eligible employees who participate in the ESPP automatically increases by 1 % of the Company’s outstanding ordinary shares outstanding, unless the Company determines that such an increase is not necessary.

The Company determined that an such increase was not necessary and no such increase took place.

As of December 31, 2021, 4,954,997 ordinary shares are available for offering under the ESPP.

The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants.

For market condition awards, the Company also applied the Monte-Carlo simulation model, with the following underlying assumptions:

The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants and for market condition awards.

The Company also applied the Monte-Carlo simulation model, with the following underlying assumptions:

Year ended December 31,

14 unchanged sentences

A summary of the status of the Company’s options to purchase ordinary shares as of December 31, 2021 and changes during the year ended on that date is presented below:

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Year ended December 31, 2021

5 unchanged sentences

Exercisable options 5,145,149 $ 19.76 $ 285,295

A summary of the status of the Company’s RSUs as of December 31, 2020 and changes during the year ended on that date is presented below:

A summary of the status of the Company’s RSUs and PSUs as of December 31, 2021 and changes during the year ended on that date is presented below:

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

Year ended December 31, 2021

5 unchanged sentences

Unvested at end of year (1) 4,459,107 $ 65.56 $ 334,790

(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of market performance which are not probable, as of December 31, 2020, in accordance with ASC 718 as follows:

(1) Includes PSUs that have a mix of service, market and other milestone performance vesting conditions which are vested upon achievements of market and performance conditions which are not probable, as of December 31, 2021, in accordance with ASC 718 as follows:

December 31, 2021

4 unchanged sentences

10,532 94.94 1,000

189,626 $ 114.26 $ 21,667

3,029,835 $ 161,885

These PSUs will be expensed over the performance period when the vesting conditions become probable in accordance with ASC 718.

The total equity-based compensation expense related to all of the Company’s equity-based awards recognized for the years ended December 31, 2020, 2019 and 2018, was comprised as follows:

The total equity-based compensation expense related to all of the Company’s equity incentive plans recognized for the years ended December 31, 2021, 2020 and 2019, was comprised as follows:

Year ended December 31,

1 unchanged sentence

Cost of revenues $ 3,471 $ 2,221 $ 2,231

Research, development and clinical trials 18,125 7,570 4,709

Research, development and clinical studies 27,597 18,125 7,570

Sales and marketing 22,673 17,672 11,897

2 unchanged sentences

As of December 31, 2021, unamortized share-based compensation costs amounted to $ 96,379 and are expected to be recognized over a weighted average period of approximately 2.63 years.

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

The weighted average grant date exercise price of the Company’s options granted during the years ended December 31, 2021, 2020 and 2019 were $ 149.96 , $ 71.87 and $ 50.45 per share, respectively.

2 unchanged sentences

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 $ 173.04 , $ 84.27 and $ 33.48 per share as of December 31, 2020, 2019, and 2018, respectively.

The options outstanding as of December 31, 2020 are as follows:

NovoCure Limited and subsidiaries

Notes to consolidated financial statements

dollars in thousands (except share and per share data)

deemed the fair value of the Company’s ordinary shares to be $ 75.08 , $ 173.04 and $ 84.27 per share as of December 31, 2021, 2020, and 2019, respectively.

Options outstanding as of December 31, 2021 are as follows:

Exercise price Number

14 unchanged sentences

160.01 - 220.00

11,220 9.42 — 0.00

8,549,322 5.97 5,145,149 5.24

Financial expenses, net

4 unchanged sentences

Interest expense $ ( 101 ) $ ( 13,068 ) $ ( 13,718 )

Revolving credit facility fee ( 588 ) ( 79 ) —

Amortization of discount and issuance costs ( 3,339 ) ( 4,514 ) ( 156 )

3 unchanged sentences

Financial income:

Amortization of treasury bills premium $ 1,316 $ 2,331 $ 1,986

Amortization of investments premium $ 306 $ 1,316 $ 2,331

Foreign currency transaction gains — 2,648 —

4 unchanged sentences

Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period.

Diluted net income per share is computed based on the weighted average number

Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus potential dilutive shares (deriving from options, RSUs, PSUs, convertible notes and the ESPP) considered outstanding during the period, in accordance with ASC 260-10, as determined under the treasury stock method.

NovoCure Limited and subsidiaries

1 unchanged sentence

dollars in thousands (except share and per share data)

of ordinary shares outstanding during the period, plus potential dilutive shares (deriving from options, RSUs, PSUs, convertible notes and the ESPP) considered outstanding during the period, in accordance with ASC 260-10, as determined under the treasury stock method.

The following table sets forth the computation of the Company’s basic and diluted net loss per ordinary share:

15 unchanged sentences

Subcontractor

In certain markets and for certain key components, the Company is currently dependent upon sole source suppliers used in its delivery systems.

In certain markets and for certain key components, the Company is currently dependent upon sole source suppliers used in its devices.

The Company’s management believes that in most cases other suppliers could provide similar components at comparable terms.

2 unchanged sentences

The following table presents long-lived assets by location:

2020 2019 2018

United States $ 23,263 $ 11,868

Switzerland 2,849 3,067 2,513

Israel 5,297 4,370

Japan 1,230 999 632

Switzerland 4,085 2,849

Germany 1,020 1,075

Japan 799 1,230

Others 1,152 1,233

38 unchanged sentences

Net income (loss) 4,260 1,930 ( 1,270 ) ( 12,150 )

Basic and diluted net income (loss) per ordinary share $ ( 0.17 ) $ ( 0.13 ) $ ( 0.17 ) $ ( 0.23 )

Weighted average number of ordinary shares used in computing basic and diluted net income (loss) per share 93,083,298 92,911,375 91,331,862 89,985,612

Subsequent event

In January 2021, the Company irrevocably elected to settle all conversions of Notes by a combination of cash and the Company's ordinary shares and that the cash portion per $1,000 principal amount of Notes for all conversion settlements shall be $ 1,000 .

Accordingly, from and after the date of the election, upon conversion of any Notes, holders of Notes will receive, with respect to each $1,000 principal amount of Notes converted, cash in an amount up to $ 1,000 and the balance of the conversion value, if any, in ordinary shares.

As a result of the early adoption of ASU 2020-06 on January 1, 2021, using the modified retrospective method, and the irrevocable election of the settlement method, the Company will eliminate the bifurcation of the debt and equity components of the Notes and the Notes will be presented, in their entirety, as a liability in long-term debt.

The cumulative effect of reversing the discount amortization will be recognized as an adjustment to the opening balance of retained earnings and the convertible debt will not be included in the denominator when calculating diluted earnings per share.

Basic net income (loss) per ordinary share $ 0.04 $ 0.02 $ ( 0.01 ) $ ( 0.13 )

Weighted average number of ordinary shares used in computing basic net income (loss) per share 99,226,445 98,485,519 96,356,317 94,811,282

Diluted net income (loss) per ordinary share $ 0.04 $ 0.02 $ ( 0.01 ) $ ( 0.13 )

Weighted average number of ordinary shares used in computing diluted net income (loss) per share 107,911,519 107,604,578 96,356,317 94,811,282

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data