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Item 9A. Controls and Procedures

2021-02-19 compared with 2017-02-06 · 1353 added, 1839 removed, 326 unchanged (91% of the section changed)

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Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2016.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S.

generally accepted accounting principles.

Management assessed our internal control over financial reporting as of June 30, 2016, the end of our 2016 fiscal year.

Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S.

Management assessed our internal control over financial reporting as of December 31, 2020.

Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end of the year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S.

generally accepted accounting principles.

We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.

Our independent registered public accounting firm, Ernst & Young, independently assessed the effectiveness of the company’s internal control over financial reporting, as stated in the firm’s attestation report, which is incorporated by reference into Part II, Item 8 of this Form 10-K.

We reviewed the results of management’s assessment with the Audit Committee of our Board of Directors.

Our independent registered public accounting firm, Kost Forer Gabbay & Kasierer, a member of Ernst & Young, independently assessed the effectiveness of the company’s internal control over financial reporting, as stated in the firm’s attestation report, which is incorporated by reference into Part II, Item 8 of this Form 10-K.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fourth fiscal quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our Executive Officers

Position (s) Held

Chief Executive Officer and Chairman of the Board

Chief Financial Officer

Rachel Prishkolnik

Vice President, General Counsel & Corporate Secretary

Vice President, Global Sales

Lior Handelsman

Vice President, Marketing and Product Strategy

Vice President, Research & Development

Vice President, Core Technologies

(1) As of June 30, 2016.

Guy Sella is a co-founder of SolarEdge and has served as Chairman of the board of directors and Chief Executive Officer since 2006.

Prior to founding SolarEdge, Mr.

Sella was a partner at Star Ventures, a leading venture capital firm, where he led investments in several startups, including AeroScout, Inc.

(acquired by Stanley Black & Decker, Inc.) and Vidyo, Inc.

Previously, Mr.

Sella acted as the director of technology for the Israeli National Security Council and as the secretary for the National Committee for Cyber Protection.

Sella also served as the head of the Electronics Research Department (“ERD”), one of Israel’s national labs, which is tasked with developing innovative and complex systems.

Sella holds a B.S.

in Engineering from the Technion, Israel’s Institute of Technology in Haifa.

Sella brings to our board of directors demonstrated senior leadership skills, expertise from years of experience in electronics industries, and historical knowledge of our Company from the time of its founding.

Ronen Faier joined SolarEdge in 2011 as our Chief Financial Officer.

Prior to joining SolarEdge, Mr.

Faier served from 2008 to 2010 as the chief financial officer of Modu Ltd, a privately owned Israeli company, which entered into voluntary liquidation proceedings in Israel in December 2010.

Between 2004 and 2007, Mr.

Faier held several senior finance positions, including chief financial officer at M-Systems prior to its acquisition by SanDisk Corporation in 2006.

Previously, Mr.

Faier served as corporate controller of VocalTec Communications Ltd.

Faier holds a CPA (Israel) license, an MBA (with Honors) from Tel Aviv University and a B.A.

in Accounting and Economics from the Hebrew University in Jerusalem.

Rachel Prishkolnik joined SolarEdge in 2010 as our Vice President, General Counsel and Corporate Secretary.

Prior to joining SolarEdge, Mrs.

Prishkolnik served as the vice president, general counsel & corporate secretary of Gilat Satellite Networks Ltd.

At Gilat she held various positions beginning as legal counsel in 2001 and becoming corporate secretary in 2004 and vice president, general counsel in 2007.

Prior to Gilat, she worked at the law firm of Jeffer, Mangels, Butler & Marmaro LLP in Los Angeles.

Before that, Mrs.

Prishkolnik worked at Kleinhendler & Halevy (currently GKH Law Offices.) in Tel Aviv.

Prishkolnik holds an LLB law degree from the Faculty of Law at the Tel Aviv University and a B.A.

from Wesleyan University in Connecticut.

She is licensed to practice law and is a member of the Israeli Bar.

Zvi Lando joined SolarEdge in 2009 as our Vice President, Global Sales.

Lando had previously spent 16 years at Applied Materials, based in Santa Clara, California, where he held several positions, including process engineer for metal disposition and chemical vapor deposition systems, business manager for the Process Diagnostic and Control Group, vice president, and general manager of the Baccini Cell Systems Division in the Applied Materials Solar Business Group.

Lando holds a B.S.

in Chemical Engineering from the Technion, Israel’s Institute of Technology in Haifa, and is the author of several publications in the field of chemical disposition.

Lior Handelsman co-founded SolarEdge in 2006 and currently serves as our Vice President, Marketing and Product Strategy where he is responsible for SolarEdge’s marketing activities, product management and business development.

Previously, Mr.

Handelsman served as Vice President, Product Strategy and Business Development, from 2009 through 2013 and Vice President, Product Development, from our founding through 2009.

Handelsman also served as acting Vice President, Operations, from 2008 through 2010.

Prior to co-founding SolarEdge, Mr.

Handelsman spent 11 years at the ERD, where he held several positions including research and development power electronics engineer, head of the ERD’s power electronics group and manager of several large-scale development projects and he was a branch head in his last position at the ERD.

Handelsman holds a B.S.

in Electrical Engineering (cum laude) and an MBA from the Technion, Israel’s Institute of Technology in Haifa.

Yoav Galin co-founded SolarEdge in 2006 and has served since our founding as our Vice President, Research & Development where he is responsible for leading the execution of our technology strategy, building and managing the technology team and overseeing research and development of SolarEdge’s innovative PV power harvesting products.

Prior to joining SolarEdge, Mr.

Galin served for 11 years at the ERD.

During this period, Mr.

Galin held various research and development and management positions, including his last position at the ERD where he led a project and its development team of over 30 hardware and software engineers.

He was also responsible for overseeing the research and development of future technologies.

Galin holds a B.S.

in Electrical Engineering from Tel Aviv University.

Meir Adest co-founded SolarEdge in 2006 and has served since 2007 as our Vice President, Core Technologies where he is responsible for SolarEdge’s certification and long-term reliability of SolarEdge products and research of future technologies.

Prior to co-founding SolarEdge, Mr.

Adest spent 7 years at the ERD, where he held a number of positions, starting as an embedded software engineer for mission-critical systems, progressing to the position of a software team leader, managing a large-scale techno-operational project, and finally managing a multi-disciplinary section with approximately 25 hardware and software engineers.

Adest holds a B.Sc in mathematics, physics, and computer science from the Hebrew University in Jerusalem.

Our Board of Directors

The following table sets forth certain information concerning our directors:

Position(s) Held

Chief Executive Officer and Chairman of the Board

Yoni Cheifetz

(1) As of June 30, 2016

* Our board of directors has determined that this director is independent under the standards of the NASDAQ Global Select Market.

Please see Item 1 of Part I, “ITEM 1.

Business—Executive Officers of the Registrant.”

Dan Avida has served as a member of our board of directors since 2007.

Avida is a partner at Opus Capital.

Before joining Opus Capital in 2005, Mr.

Avida served for four years as president and chief executive officer at Decru Inc., a pioneering storage security company that Mr.

Avida co-founded in 2001.

Between 1989 and 1999 Mr.

Avida was employed by Electronics for Imaging, Inc.

(NASDAQ:EFII), where he held a number of positions and ultimately served as chairman and chief executive officer.

Prior to Electronics for Imaging, Mr.

Avida served as an officer in the Israel Defense Forces.

Avida holds a B.Sc.

in Computer Engineering (summa cum laude) from the Technion, the Israel Institute of Technology.

Avida’s historical knowledge of our company and years of experience in working with innovative companies in the United States and Israel provide a valuable perspective to the board of directors.

Yoni Cheifetz has served as a member of our board of directors since 2010.

Since 2006, Mr.

Cheifetz has served as a Partner at Lightspeed Venture Partners, where he focuses on investment activity in Israel in areas of interest, including the Internet, general media, mobile, communications, software, semiconductors and cleantech.

Prior to joining Lightspeed Venture Partners, Mr.

Cheifetz was a partner with Star Ventures from 2003 to 2006.

Before joining Star Ventures, Mr.

Cheifetz was a serial entrepreneur and the founder, CEO and Chairman of several privately held software companies most of which have been acquired.

Chiefetz holds a B.Sc.

in Applied Mathematics from Tel Aviv University and a M.Sc.

in Applied Mathematics and Computer Science from the Weizmann Institute of Science.

Cheifetz’s historical knowledge of our company and extensive experience in working with technology companies qualify him to serve as a member of our board of directors.

Marcel Gani has served as a member of our board of directors since 2015.

From 2005 to 2009, Mr.

Gani lectured at Santa Clara University, where he taught classes on accounting and finance.

Gani joined Juniper Networks, Inc.

where he served as chief financial officer and executive vice president from December 1997 to December 2004, and as chief of staff from January 2005 to March 2006.

Prior to joining Juniper, Mr.

Gani served as chief financial officer at various companies, including NVIDIA Corporation, Grand Junction Networks, Primary Access Corporation and Next Computers.

Gani served as corporate controller at Cypress Semiconductor from 1991 to 1992.

Prior to joining Cypress Semiconductor, Mr.

Gani worked at Intel Corporation from 1978 to 1991.

Gani holds a B.A.

in Applied Mathematics from Ecole Polytechnique Federal and an M.B.A.

from University of Michigan, Ann Arbor.

Gani serves on the board of directors of Infinera, where he is a member of the audit committee and the chairman of the compensation committee.

Gani brings valuable financial and business experience to our board through his years of experience as a chief financial officer with public companies and experience as a director of other public companies.

Doron Inbar has been a venture partner at Carmel Ventures, an Israeli‑based venture capital firm that invests primarily in early stage companies in the fields of software, communications, semiconductors, internet, media, and consumer electronics, since 2006.

Previously, Mr.

Inbar served as the president of ECI Telecom Ltd., a global telecom networking infrastructure provider, from November 1999 to December 2005 and its chief executive officer from February 2000 to December 2005.

Inbar joined ECI Telecom Ltd.

in 1983 and during his first eleven years with the company, served in various positions at its wholly‑owned U.S.

subsidiary, ECI Telecom, Inc., in the U.S., including executive vice president and General Manager.

In July 1994, Mr.

Inbar returned to Israel to become vice president, corporate budget, control and subsidiaries of ECI Telecom Ltd.

In June 1996, Mr.

Inbar was appointed senior vice president and chief financial officer of ECI Telecom Ltd., and he became executive vice president of ECI Telecom Ltd.

in January 1999.

Inbar has served on the board of directors of Alvarion Ltd.

ALVR), a company that designs and sells broadband wireless and Wi‑Fi products, since September 2009 and is a member of its audit and compensation committees and serves as chairman of its nominating and governance Committee.

Inbar also serves on the board of directors of SolarEdge Technologies Inc., an innovative start up in the photovoltaic industry, as chairman of the board of Archimedes Global Ltd., a company which provides health insurance and health provision in East Europe, and on the board of directors of MaccabiDent Ltd., the largest chain of dental service clinics in Israel.

Inbar joined the board of directors of Comverse Technology Inc.

CNSI), where he is a member of the audit committee and corporate governance committee.

Inbar serves also as a board member and management consultant at Degania Medical Ltd., a medical device designer and manufacturer, and as a board member and management advisor to the board of Tzinorot Ltd.

Previously, Mr.

Inbar served as chairman of the board of C‑nario Ltd., a global provider of digital signage software solutions, chairman of the board of Followap Ltd., which was sold to Neustar, Inc.

in November 2006, and chairman of the board of Enure Networks Ltd.

Inbar holds a B.A.

in Economics and Business Administration from Bar‑Ilan University, Israel.

Avery More has served as a member of our board of directors since 2006.

More was the sole seed investor in the Company through his fund, ORR Partners I, L.P., and has participated in all successive rounds.

More joined Menlo Ventures in 2013 as a venture partner, and focuses on investments in technology companies.

Prior to joining Menlo Ventures, Mr.

More was the president and chief executive officer of CompuCom Systems Inc.

from 1989 to 1993.

More currently serves on the board of directors of Vidyo, Inc., QualiSystems Ltd., Takipi BuzzStream, AppDome and Dome9.

More has specific attributes that qualify him to serve as a member of our board of directors, including his historical knowledge of our company and his experience as a director of other private and public technology companies.

Tal Payne has served as a member of our board of directors since 2015.

Tal Payne brings over 15 years of financial management experience, serving as Chief Financial Officer in Check Point Software Technologies Ltd.

(“Check Point”) since joining in 2008 and as Chief Financial and Operations Officer since 2015.

Prior to joining Check Point, Ms.

Payne served as Chief Financial Officer at Gilat Satellite Networks, Ltd., where she held the role of Vice President of Finance for over five years.

Payne began her career as a CPA in public accounting at PricewaterhouseCoopers.

Payne holds a B.A.

in Economics and Accounting and an Executive M.B.A., both from Tel Aviv University.

Payne is a certified public accountant.

Payne brings valuable financial and business experience to our board through her years of experience as a chief financial officer with publicly traded companies.

Committees of our Board of Directors

Our board of directors has established audit, compensation, and nominating and corporate governance committees.

The composition, duties and responsibilities of these committees are set forth below.

Our board of directors may from time to time establish certain other committees to facilitate the management of the Company.

Audit Committee

Our board of directors has established an audit committee, which operates under a written charter that is available on our website at http://investors.solaredge.com and that satisfies the applicable standards of the SEC and the listing requirements of NASDAQ.

The audit committee’s responsibilities include, but are not limited to:

(1) appointing, compensating, retaining, evaluating, terminating and overseeing our outside auditor;

(2) at least annually, reviewing the independence of our outside auditor;

(3) reviewing with our independent registered public accounting firm the matters required to be reviewed by applicable auditing requirements;

(4) approving in advance all audit and permissible non‑audit services to be performed by our independent registered public accounting firm;

(5) meeting to review and discuss with management and the outside auditor the annual audited and quarterly financial statements of the Company and the independent auditor’s reports related to the financial statements;

(6) receiving reports from management regarding, and reviewing and discussing the adequacy and effectiveness of, the Company’s disclosure controls and procedures ;

(7) establishing and overseeing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls, auditing and federal securities law matters;(8) establishing and periodically reviewing policies and procedures for the review, approval and ratification of related person transactions;

and (9) oversee the preparation of the report of the audit committee that SEC rules require to be included in our annual proxy statement .

Our audit committee consists of Marcel Gani, Tal Payne and Doron Inbar, with Marcel Gani serving as chairman.

Rule 10A‑3 of the Exchange Act and NASDAQ Global Select Market rules require us to have one independent audit committee member upon the listing of our common stock on the NASDAQ Global Select Market, a majority of independent directors within 90 days of the date of listing and all independent audit committee members within one year of the date of listing.

We comply with the independence requirements.

Our board of directors has determined that Marcel Gani and Tal Payne each qualify as an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable NASDAQ Global Select Market rules and regulations.

Compensation Committee

Our board of directors has established a compensation committee, which operates under a written charter that is available on our website at http://investors.solaredge.com and that satisfies the applicable standards of the SEC and the listing requirements of NASDAQ.

The compensation committee’s responsibilities include, but are not limited to:

(1) overseeing our overall compensation philosophy, policies and programs;

(2) reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluating the Chief Executive Officer’s performance in light of those goals and objectives, approving grants of equity awards to the Chief Executive Officer and recommending to the independent directors the Chief Executive Officer’s compensation based on this evaluation;

(2) overseeing the evaluation of other executive awards and approving equity awards to these officers, and setting their compensation based upon the recommendation of the Chief Executive Officer;

(3) reviewing and approving the design of other benefit plans pertaining to executive officers;

(4) reviewing and approving employment agreements and other similar arrangements between us and our executive officers;

and (4) overseeing preparation of the report of the compensation committee to the extent required by SEC rules to be included in our annual meeting proxy statement .

Our compensation committee consists of Avery More, Marcel Gani, Dan Avida and Doron Inbar, with Avery More serving as chairman.

The composition of our compensation committee meets the requirements for independence under current rules and regulations of the SEC and the NASDAQ Global Select Market.

Each member of the compensation committee is also a non‑employee director, as defined pursuant to Rule 16b‑3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended.

Nominating and Corporate Governance Committee

Our board of directors has established a nominating and corporate governance committee, which operates under a written charter that is available on our website at http://investors.solaredge.com and that satisfies the applicable standards of the SEC and the listing requirements of NASDAQ.

The nominating and corporate governance committee’s responsibilities include, but are not limited to:

(1) identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;

(2) assessing the contributions and independence of incumbent directors in determining whether to recommend them for reelection to the board;

(3) developing and recommending to our board of directors a set of corporate governance guidelines and principles;

(4) establishing procedures for the consideration of board candidates recommended by the Company’s stockholders;

(5) recommending to the board candidates to be elected by the board to fill vacancies and newly created directorships and candidates for election or reelection at each annual stockholders’ meeting;

(6) periodically reviewing the board’s leadership structure, size, composition and functioning;

(7) overseeing succession planning for positions held by executive offices;

(8) overseeing the evaluation of the board and its committees;

and (9) annually reviewing the compensation of directors for service on the board and its committees and recommend changes in compensation to the board as appropriate.

Our nominating and corporate governance committee consists of Avery More, Yoni Cheifetz and Dan Avida, with Avery More serving as chairman.

The composition of our nominating and corporate governance committee meets the requirements for independence under current rules and regulations of the SEC and the NASDAQ Global Select Market.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is, or was in fiscal 2016, an officer or employee of the Company.

None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Director Compensation for Fiscal 2016

Director Compensation Table

The following table sets forth the total cash and equity compensation paid to our non‑employee directors for their service on our board of directors and committees of our board of directors during fiscal 2016.

Sella is not eligible to receive any additional compensation for serving on our board of directors.

His compensation for serving as our Chief Executive Officer is disclosed in the “—Summary Compensation Table” below.

Incentive Plan

Compensation ($)

Dan Avida (2)

Yoni Cheifetz (3)

Marcel Gani (4)

Doron Inbar (5)

Avery More (6)

Tal Payne (7)

(1) Amounts in this column reflect the amount of pro-rated annual retainers for board and committee service, as detailed below.

See “Director Compensation Program

Avida was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

Cheifetz was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

Gani was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

In January 2011, Mr.

Inbar was granted an option to purchase 223,333 shares of our common stock at $2.01.

As of June 30, 2016, all of the 223,333 options are outstanding.

In addition, in March 2015, Mr.

Inbar was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

More was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

Payne was granted 11,240 restricted stock units, 4,496 of which were unvested as of June 30, 2016.

Director Compensation Program

Each of our non‑employee directors is eligible to receive compensation for his or her service on our board of directors consisting of annual cash retainers and equity awards.

Specifically, as of July 1, 2016, our non‑employee directors are entitled to receive the following annual retainers for their service on our board of directors, which are in four equal quarterly installments and prorated for any partial year of service on our board of directors.

Directors serving as chair of a committee do not also receive compensation as a general member of such committee.

Audit Committee Chair

Compensation Committee Chair

Nominating and Corporate Governance Committee Chair

Audit Committee Member

Compensation Committee Member

Nominating and Corporate Governance Committee Member

The equity awards for our non‑employee directors consist of (i) an initial equity award in the form of restricted stock units, granted upon the individual’s initial appointment to our board of directors, with a grant date value of $150,000, and (ii) an annual equity award in the form of restricted stock units with a grant date value of $100,000, subject to proration, for directors whose commencement of board service is in the midst of a particular year.

The initial restricted stock unit awards vest in equal annual installments over three years and annual restricted stock unit awards vest in full on the earlier of:

(i) after one year after their grant;

and (ii) at the annual shareholders meeting following their grant (or the balance of this period in which the award is granted, in the case of pro‑rated annual awards), subject in each case to continued board service through the applicable vesting date.

As of July 1, 2016, all equity awards granted to directors will automatically accelerate upon death or disability.

Our directors are reimbursed for travel, food, lodging and other expenses directly related to their activities as directors.

Our directors are also entitled to the protection provided by the indemnification provisions in our by‑laws.

Our board of directors may revise the compensation arrangements for our directors from time to time.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to our directors and an Employee Code of Conduct that applies to our officers and employees, including our principal executive, financial and accounting officers, or persons performing similar functions.

These Codes are published on our corporate governance website located at http://investors.solaredge.com/phoenix.zhtml?c=253935&p=irol-govHighlights .

We intend to disclose future amendments to certain provisions of our Code, or waivers of such provisions granted to executive officers and directors, on the website within four business days following the date of such amendment or waiver.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 and SEC rules require our directors, executive officers and persons who own more than 10% of any class of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC.

Statements of Changes of Beneficial Ownership of Securities on Form 4 are generally required to be filed within two business days of a change in beneficial ownership of securities.

Based solely on our review of the reports filed during fiscal 2016, and on written representations from such reporting persons, we determined that all of our directors and reporting officers failed to timely file one Form 4, each with respect to the vesting of RSUs that had been reported as granted.

Procedures for Nomination of Directors by Stockholders

The Company identifies new director candidates through a variety of sources.

The nominating and corporate governance committee will consider director candidates recommended by stockholders in the same manner it considers other candidates, as described below.

Stockholders seeking to recommend candidates for consideration by the nominating and corporate governance committee should submit a recommendation in writing describing the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as director.

Please submit this information to the Corporate Secretary at1 Hamada Street Herziliya Pituach, Israel, 4673335.

Stockholders may also propose director nominees by adhering to the advance notice procedure included in our bylaws.

In order to be timely under our bylaws, notice of stockholder proposals related to stockholder nominations for the election of directors (or stockholder proposals not related to director nominations) must be received by the Corporate Secretary of the Company in the case of an annual meeting of the stockholders, no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary date of the preceding year’s annual meeting of stockholders.

If the next annual meeting is called for a date that is more than 30 days before or more than 30 days after that anniversary date, or if no annual meeting was held in the preceding year, notice by the stockholder in order to be timely must be received no earlier than the close of business on the 120th day prior to such annual meeting nor later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the date on which public announcement is first made by the Company of the date of such meeting.

Stockholder nominations for the election of directors at a special meeting of the stockholders must be received by the Corporate Secretary of the Company no earlier than the close of business on the 120 th day prior to such special meeting nor later than the close of business on the later of the 90 th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of such special meeting.

A stockholder’s notice to the Corporate Secretary of the Company must be in proper written form and must include the information and consents required by our bylaws related to the stockholder giving the notice, the beneficial owner (if any) on whose behalf the nomination or proposal is made and each person whom the stockholder proposes to nominate for election as a director or the business desired to be brought before the meeting.

A copy of the full text of the bylaw provisions discussed above may be obtained by writing to the Corporate Secretary of the Company at 1 Hamada Street Herziliya Pituach, Israel, 4673335.

Director Qualifications

The nominating and corporate governance committee and the board believe that candidates for director should have certain minimum qualifications, including, without limitation:

demonstrated business acumen and leadership, and high levels of accomplishment;

ability to exercise sound business judgment and to provide insight and practical wisdom based on experience;

commitment to understand the Company and its business, industry and strategic objectives;’

integrity and adherence to high personal ethics and values, consistent with our Code of Business Conduct and Ethics;

ability to read and understand financial statements and other financial information pertaining to the Company;

commitment to enhancing stockholder value;

willingness to act in the interest of all stockholders;

for non-employee directors, independence under NASDAQ listing standards and other applicable rules and regulations.

Other requirements, such as industry experience or experience in a particular business discipline, that are expected to contribute to the Board’s overall effectiveness and meet the needs of the board of directors and its committees may be considered.

The Company values diversity on a company-wide basis and seeks to achieve a diversity of occupational and personal backgrounds on the board of directors, but has not adopted a specific policy regarding board diversity.

Compensation Committee Report

This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent the Company specifically incorporates this report by reference, and shall not otherwise be deemed filed under such Acts.

The compensation committee has reviewed and discussed the below Compensation Discussion and Analysis with management and its independent consultant and, based on the review and discussions, recommended to our board that this Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

The Compensation Committee,

Avery More, Chairman

EXECU TIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Strategy

The main objectives of our pay-for-performance compensation program are to:

motivate our executives to maximize stockholder value;

provide compensation that varies based on performance;

attract and retain managerial talent, without promoting unreasonable risk taking.

These guiding principles apply to all of our executive pay practices discussed.

Compensation Governance Highlights

In addition to aligning pay with performance, our executive compensation program is intended to be consistent with corporate governance best practices.

This is demonstrated by the following elements in our 2016 executive officer compensation arrangements:

robust selling restrictions;

restrictions on hedging and pledging the Company’s common stock;

use of objective, performance criteria in our short- and long-term incentive plans;

advice from independent compensation consultants retained by the compensation committee;

no specific retirement benefit plans designed solely for senior executives or related entitlements such as executive benefits and perquisites, tax gross-ups, etc.

2016 Results and Key Events and Impact on Compensation

The Company’s performance in fiscal 2016 was significantly better than fiscal 2015 in all parameters.

Our revenues grew from $325.1 million in fiscal 2015 to $489.8 million in fiscal 2016.

Gross margins also grew from 25.2% in fiscal 2015 to 31.0% in fiscal 2016.

Our net profits were $21.1 million in fiscal 2015 and $76.6 million for fiscal 2016.

In addition, the Company generated $52.4 million in cash from operating activities for the fiscal year ended June 30, 2016.

In fiscal 2016 we also introduced a new inverter technology, the HD Wave which embodies a new power conversion topology that the Company believes is one of the most significant leaps in solar technology in the past 20 years.

The Company also announced the commercial availability of products for storage solutions that are compatible with leading home battery manufacturers.

In line with our emphasis on pay-for-performance and our performance relative to our peers, compensation awarded to our named executive officers (“NEOs”) for 2016 reflected our positive financial results.

Named Executive Officers

Our named executive officers, or NEOs, for fiscal 2016 are:

our Chief Executive Officer and Chairman of the Board, Guy Sella;

our Chief Financial Officer, Ronen Faier;

our Vice President, Global Sales, Zvi Lando;

our VP Research and Development, Yoav Galin, and our VP General Counsel and Corporate Secretary, Rachel Prishkolnik.

Compensation Objectives and Guiding Principles

The primary objectives of our executive compensation program are as follows:

Pay for Performance:

Motivate, recognize and reward superior performance and individual contributions.

Alignment of Interests:

We seek to align the interests of our senior executives with those of our stockholders.

Attraction, Motivation, and Retention of Talent:

Our senior executive compensation programs are designed to help us attract, motivate and retain key management talent who drive profitability and the creation of stockholder value

Elements of Compensation

The following table describes each element of our senior executive compensation program and how these elements achieve our compensation objectives:

Compensation Element

Rationale/Key Characteristics

• Fixed compensation

• Intended to be commensurate with each senior executive’s position and level of responsibility

• Evaluated annually or as necessary in response to organizational/business changes, individual performance, market data, etc., but are not automatically increased

Annual Cash Incentive Compensation

Alignment of Interests

• Tied to Company and, for all NEOs other than the CEO, individual performance

• Designed to reward achievement of annual performance goals that we consider important contributors to stockholder value

• Performance goals and targets are established by the compensation committee at the beginning of each calendar year

• The compensation committee approves annual cash incentive award payouts based on the level of achievement of these pre-established goals

Long-Term Incentives

Restricted Stock Units

Performance-Vested Restricted Stock Units (“PRSUs”)

Alignment of Interests

Alignment of Interest

• Since options have no value unless the value of our common stock increases, it aligns the interests with our stockholders.

• The multiyear vesting encourages retention since recipients need to remain

employed in order for vesting to occur.

• Variable compensation designed to reward contributions to our long-term strategic, financial and operational success, motivate future performance, align the interests of senior executives with those of stockholders and retain key senior executives through the term of the awards

• PRSUs are at risk through the applicable performance period and depend upon the achievement of key performance measures that drive value for our stockholders thus aligning the interests of our senior executives with our stockholders and, following achievement of applicable performance goals, become subject to service-based vesting restrictions that serve to retain senior executives

Other Compensation and Benefits

· NEOs receive benefits that are generally available to all salaried employees in Israel, where the NEOs are located.

This includes contributions to an education fund and to a fund known as Manager’s Insurance, which provides a combination of retirement plan, insurance and severance pay benefits to Israeli employees.

· NEOs receive benefits that we generally make available to all salaried employees, including participation in the Employee Stock Purchase Plan.

Change in Control Arrangements

• Certain of our NEOs have a clause in their employment agreement that entitles them to immediate vesting of equity in the event of a termination within one year following a change in control (“double-trigger” equity vesting)

• Keep management’s highest priority on stockholder interests in the face of events that may result in a change-in-control and not on potential individual implications of any such events

• Reasonable change-in-control protections for our senior executives are necessary in order for us to attract and retain qualified employees

• We periodically review the necessity and design of our senior executive severance and change-in-control arrangements

Implementing Compensation Objectives

Determining Compensation

In making compensation decisions, we review the performance of the Company and each senior executive.

We also consider the senior executive’s level of responsibility, the importance of the senior executive’s role in achieving our corporate objectives, and the senior executive’s long-term potential, while taking into account his or her current target compensation, value of outstanding equity awards and stock ownership levels, and our stock selling restrictions for senior executives.

Finally, we weigh competitive practices, relevant business and organizational changes, retention needs and internal pay equity.

In order to attract, retain and motivate the best management talent, we believe that we must provide a target compensation package that is competitive relative to our peers.

In connection therewith, the compensation committee considers practices of specific companies that we identified as our peers for executive compensation in 2016 (the “2016 Peer Group”), as well as size-appropriate technology industry survey data.

Each year, the compensation committee reviews the market data with the assistance of its external compensation consultant and makes changes as appropriate in order to ensure it continues to appropriately reflect the Company’s size, industry and scope of operations.

For fiscal 2016, working with Frederic W.

Cook & Co., Inc.

(“FW Cook”), the compensation committee approved the below 2016 Peer Group based on multiple factors, including business similarities and broadly comparable financial profiles ( i.e.

, revenue, market capitalization, enterprise value and growth profiles).

The 2016 Peer Group used for establishing 2016 senior executive target compensation was as follows:

Generac Holdings Inc., Verint Systems Inc., MKS Instruments Inc., Stratasys Ltd., Powell Industries Inc., Polypore International Inc., Advanced Energy Industries Inc., Ormat Technologies Ltd., Mellanox Technologies Ltd., Xura Ltd.

(formerly Comverse, Inc.), Enphase Energy, Inc., Tessera Technologies Inc., SolarCity Corporation, Vicor Corporation and Wix.com Ltd.

When the compensation committee evaluated the 2016 Peer Group, our revenues were positioned at approximately the thirty-fifth percentile compared to the group, our operating income was at approximately the fifty-third percentile and our market capitalization was at approximately the forty-first percentile.

After reviewing the peer group data described above, we determined the approximate range within which to target total direct compensation (the sum of base salary, target annual incentive and the grant date fair value of long-term incentives) for our senior executives for 2016.

Within that range, we incorporated flexibility to respond to and adjust for the evolving business environment and our specific hiring and retention needs.

In general for 2016, we set base salary and short- and long-term incentive compensation opportunities for our senior executives, including the NEOs, at or near the median of the peer group proxy and survey data, where applicable.

As described below, individual levels varied from the targeted position for each of the elements of target total direct compensation based on the compensation committee’s overall subjective evaluation of individual performance, senior executive responsibilities relative to benchmark position responsibilities, and individual skill set and experience.

Role of Compensation Committee and Management

The compensation committee has primary responsibility for overseeing the design and implementation of our senior executive compensation programs.

The compensation committee, with input from the other independent directors, evaluates the performance of the CEO.

The compensation committee then recommends CEO compensation to the independent directors for approval.

The CEO and the compensation committee together review the performance of our other senior executives, and the compensation committee determines their compensation based on recommendations from the CEO.

The executives do not play a role in their own individual compensation determinations.

Role of Compensation Consultants

With respect to decisions for 2016 target compensation of the NEOs, competitive review of senior executive and non-employee director compensation programs and peer group review for 2016, the compensation committee retained FW Cook to review market trends and advise the compensation committee.

FW Cook is the sole compensation consultant of the compensation committee.

Our compensation committee has concluded that no conflicts of interest exist with respect to FW Cook’s provision of services after considering the following six factors:

(i) the provision of other services to us by FW Cook;

(ii) the amount of fees FW Cook received from us as a percentage of the total revenue of FW Cook;

(iii) the policies and procedures of FW Cook that are designed to prevent conflicts of interest;

(iv) any business or personal relationship of the FW Cook consultants with a member of the compensation committee;

(v) any of our stock owned by the FW Cook consultants;

and (vi) any business or personal relationship of the FW Cook consultants or FW Cook with any of our executive officers.

The compensation committee is directly responsible for the appointment, compensation and oversight of FW Cook.

FW Cook reported directly to the compensation committee, although the compensation committee instructed FW Cook to work with management to compile information and to gain an understanding of the Company and any Company-related issues for consideration by the compensation committee, including market trends.

Compensation-Related Governance Policies

Stock Ownership and Holding Guidelines

Effective March 31, 2015, all of our employees, including the NEOs, are subject to our Insider Trading Policy which forbids employees to trade in the Company’s stock, or any derivatives thereof, while holding non-public material information or during the Company’s set “black-out periods”.

Compensation of the Named Executive Officers

In determining target total compensation for our NEOs for 2016, we evaluated the financial and operational performance of the Company and considered each senior executive’s contributions to that performance.

As part of the annual senior executive compensation review, the compensation committee reviewed independent market data as well as then-current pay levels of the Company’s senior executives, the Company’s pay philosophy and corporate performance, and the individual performance of the Company’s senior executives.

For a discussion of the Company’s 2016 performance, see “ Executive Summary — 2016 Results and Key Events ” above.

The compensation committee (and the independent directors, in the case of the CEO) approved fiscal 2016 base salaries for the NEOs in August 2015.

The salaries reflected significant increases in base salaries for all of our NEOs, which were made to:

(i) align the cash/equity mix of compensation to that of a publicly–traded, profitable Company following the Company’s recent IPO;

and (ii) to fall within the range of the median relative to the benchmarking market data, consistent with the compensation committee’s stated philosophy, as noted above.

The following table sets forth the 2016 base salaries for the NEOs:

Name and Principal Position

Annual base salary prior to increase

Annual base salary after increase

Percentage increase

Guy Sella - Chief Executive Officer and Chairman of the Board

Ronen Faier - Chief Financial Officer

Zvi Lando - Vice President, Global Sales

Yoav Galin - VP Research and Development

Rachel Prishkolnik - VP General Counsel and Corporate Secretary

Annual Cash Incentive Compensation

For calendar year 2015, each NEO was eligible to receive an annual incentive compensation payment based on achievement of pre‑established performance goals.

Sella, the performance goals were 100% weighted based upon Company‑related financial, operational and strategic objectives, comprised of 70% financial achievement, 10% operations, 10% strategy and 10% scalability.

For the remaining NEOs, the performance goals were weighted based upon 50% Company‑related financial, operational and strategic objectives (the same as for the CEO) and 50% individual performance.

The Company exceeded the financial goals by exceeding revenues, profitability and gross margin targets.

Specifically, the financial achievement parameters of the bonuses were contingent upon the Company meeting its targeted annual calendar revenues of $345 million, a net income of $20 million and achieving a gross margin of above 25%.

The Company exceeded all of these parameters by achieving revenues of $424.7 million, a net income of $53.8 million and a gross margin of 29.2%.

The individual performance goals relate to each NEO’s specific areas of contribution to the Company such as specific goals for the development of products for our Vice President of Research and Development or the penetration of sales in certain new geographic regions for our Vice President of Sales.

Each of the NEOs received a bonus under the compensation plan that had been preapproved by the Committee and after review by the Committee of the specific performance goals and determination of their level of achievement.

Specifically, Mr.

Sella was awarded $714,528 which represents 140% of his Base Salary;

Faier was awarded $260,841 which represents 87% of his Base Salary;

Lando was awarded $247,065 which represents 82% of his Base Salary;

Galin was awarded $235,933 which represents 86% of his Base Salary and Ms.

Prishkolnik was awarded $202,542 which represents 81% of her Base Salary.

These performance-based cash bonuses were paid in March 2016 for achievement of business objectives established by the Committee for calendar year 2015.

Equity Compensation

In August 2015, the Committee evaluated the equity compensation of the CEO and other senior executives as part of the study performed by FW Cook.

In order to align NEO compensation with the median of the 2016 Peer Group (with adjustments as necessary based on the Committee’s overall subjective evaluation of individual performance, senior executive responsibilities relative to benchmark position responsibilities, and individual skill set and experience), the Committee approved annual long-term incentive grants for the CEO and other NEOs (as well as the other senior executives) consisting of 50% RSUs, 40% options and 10% performance-based RSUs.

All of the equity grants have a four-year vesting period.

The options were granted at an exercise price of $25.09, which was the fair market value of the shares as of the date of the grant.

The rationale of granting options to senior executives is to create more leverage and greater wealth creation opportunity that can materially impact financial and stock price performance, consistent with typical market practice and aligning senior executives with the interests of the Company’s shareholders.

The options have strong performance orientation since they only provide value if the stock price increases.

The time-vested RSUs, which are granted to all of the Company’s employees, offer more certainty in value delivery (while still being shareholder aligned) thereby driving executive retention.

The Committee also allocated 10% of the equity grants to the CEO and other NEOs in the form of performance based RSUs which were linked to the same Company and individual performance goals used in the annual incentive program for calendar 2015.

Entitlement to the performance based RSUs was evaluated based on the achievement of the same calendar 2015 bonus criterion vest over a four year period from the date of grant.

Employment Agreements

During fiscal 2016 we were party to employment agreements with Messrs.

Sella, Faier, Lando, Galin and Ms.

Each of these employment agreements provides for employment of the NEO on an “at‑will” basis and provide for a base salary, vacation, sick leave, payments to a pension and severance fund as well as an Israeli recreational fund and recuperation pay in accordance with Israeli law.

See the section below titled “ Executive Compensation Table Narrative -- Employment Agreements” for more information.

Other Compensation

Our CEO and the remaining NEOs receive benefits that we generally make available to all salaried employees in Israel, where the NEOs are located.

These include contributions to an education fund and to a fund known as Manager’s Insurance, which provides a combination of retirement plan, insurance and severance pay benefits to Israeli employees.

See the section below titled “ Executive Compensation Table Narrative -- Employment Agreements” for more information.

Executives do not receive any special perquisites not extended to other employees of the Company.

Tax Deductibility of Compensation

In general, Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a limit of $1 million on the amount that a publicly held corporation may deduct for federal income tax purposes for compensation paid to the company’s “covered employees” (generally, its chief executive officer and three other executive officers (other than its chief financial officer) whose compensation is disclosed).

This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation ( i.e.

, compensation paid only if performance meets pre-established, objective goals established by a compensation committee that is comprised solely of two or more “outside directors,” based on criteria approved by stockholders).

With respect to the deductibility limit of Section 162(m) of the Internal Revenue Code of 1986, as amended, we generally try to preserve the federal income tax deductibility of compensation paid when it is appropriate and is in our best interests.

However, we reserve the right to authorize the payment of non-deductible compensation if we deem that it is appropriate to do so under the circumstances.

COMPENSATION RISK

Our compensation programs are designed to balance risk and reward in relation to the Company’s overall business strategy.

Management assessed, and the compensation committee reviewed, our senior executive and broad-based compensation and benefits programs.

Based on this assessment, we have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.

Among the program attributes that discourage inappropriate risk-taking are:

the balance between annual and long-term compensation, including the fact that a significant portion of compensation is delivered in the form of equity incentives that vest over several years;

the use of multiple financial metrics for performance-based annual and long-term incentive awards and the use of individual goals under our annual cash incentive program;

the compensation committee’s ability to modify annual cash incentives to reflect the quality of earnings, individual performance, and other factors that it believes should influence compensation;

our management stock selling restrictions encourage a longer-term perspective and align the interests of senior executives and the Board, as applicable, with other stockholders.

EXECUTIVE COMPENSATION TABLES AND DISCUSSION

Fiscal 2016 Summary Compensation Table

Name and Principal Position

Option Awards($)(4)

Stock Awards($)(4)

Non Equity Incentive Plan Compensation($)(1)(5)

Chief Executive Officer and Chairman of the Board

Chief Financial Officer

Vice President, Global Sales

VP Research and Development

Rachel Prishkolnik

VP General Counsel and Corporate

We paid the amounts reported for each named executive officer in New Israeli Shekels.

We have translated amounts paid in New Israeli Shekels into U.S.

dollars at the foreign exchange rate published by the Bank of Israel as of the date of payment.

Represents discretionary bonuses paid to Mr.

Faier and Mr.

Lando in respect of the Company’s performance in calendar 2014.

Represents one time bonuses to Mr.

Sella and Mr.

Faier in connection with the completion of our initial public offering.

The amounts in this column represent the aggregate grant date fair value of the option awards granted to our NEOs, computed in accordance with FASB ASC Topic 718.

We provide information regarding the assumptions used to calculate the value of these option awards in Note 2v to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

There can be no assurance that these awards will vest or will be exercised (in which case no value will be realized by the individual), or that the value upon exercise will approximate the aggregate grant date fair value.

Represents the cash bonuses earned pursuant to our Management By Objectives (MBO) program calendar 2015.

Includes a $40,250 contribution by the Company to Mr.

Sella’s severance fund and $32,185 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $24,833 contribution by the Company to Mr.

Sella’s severance fund and $21,916 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $22,812 contribution by the Company to Mr.

Sella’s severance fund and $20,920 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $22,772 contribution by the Company to Mr.

Faier’s severance fund and $19,894 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance

Includes a $15,021 contribution by the Company to Mr.

Faier’s severance fund and $13,699 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $15,683 contribution by the Company to Mr.

Faier’s severance fund and $14,167 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $24,032 contribution by the Company to Mr.

Lando’s severance fund and $22,297 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $15,849 contribution by the Company to Mr.

Lando’s severance fund and $15,839 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $14,852 contribution by the Company to Mr.

Lando’s severance fund and $11,736 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $21,850 contribution by the Company to Mr.

Galin’s severance fund and $20,406 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Includes a $19,107 contribution by the Company to Ms.

Prishkolnik’s severance fund and $18,042 in aggregate Company contributions to pension and Israeli recreational funds and a recuperation allowance.

Fiscal 2016 Grants of Plan-Based Awards

Estimated Future Payouts Under Non-Equity Incentive Plan Awards

Estimated Future Payouts Under Equity Incentive Plan Awards

All Other Stock Awards:

Number of Shares of Stock or Units

All Other Option Awards:

Number of Securities Underlying Options

Exercise or Base Price of Option Awards ($/Share)

Grant Date Fair Value of Stock & Option Awards ($)(1)

Rachel Prishkolnik

The amounts in this column represent the aggregate grant date fair value of the options and RSU awards granted to our NEOs, computed in accordance with FASB ASC Topic 718.

Represents the grant of 6,000 performance-based restricted stock units, of which 100% were achieved based on the performance goal criterion.

Represents the grant of 2,400 performance-based restricted stock units, of which 100% were achieved based on the performance goal criterion.

Represents the grant of 1,400 performance-based restricted stock units, of which 100% were achieved based on the performance goal criterion.

The Non-Equity Incentive Plan does not include any thresholds or a maximum cap for the Non-Equity Awards .

Executive Compensation Table Narrative

Employment Agreements

We are party to an employment agreement with Mr.

Sella, pursuant to which he began serving as our (and SolarEdge Technologies Ltd.’s) Chief Executive Officer and Chairman of the Board, effective September 1, 2007.

In addition, SolarEdge Technologies Ltd.

is party to an employment agreement with (i) Mr.

Faier, effective as of January 2, 2011, pursuant to which he began serving as its Chief Financial Officer,;

Lando effective as of May 17, 2009, pursuant to which he began serving as its Global Vice President of Sales;

Galin effective as of June 1, 2006 pursuant to which he began serving as its Vice President, Research and Development;

and (iv) Mrs.

Prishkolnik, effective November 1, 2010, pursuant to which she began serving as VP General Counsel and Corporate Secretary.

Each of these employment agreements provides for employment of the NEO on an “at‑will” basis.

In all cases, either party may terminate the agreement by providing 60 days prior written notice;

provided, however, that we may terminate the agreements immediately and without prior notice and make a payment in lieu of advance notice, in accordance with applicable law.

In addition, we may also terminate the agreements immediately upon written notice in the event of “cause” (as defined therein).

The agreements provide for a base salary, vacation, sick leave, payments to a pension and severance fund as well as an Israeli recreational fund and recuperation pay in accordance with Israeli law.

Pursuant to the agreements, we have effected a manager’s insurance policy for each NEO pursuant to which we make contributions on behalf of each NEO as well as the required statutory deductions from salary and any other amounts payable under the agreements on behalf of each NEO to the relevant authorities in accordance with the requirements of Israeli law.

For all NEOs, we contribute 8.33% of each NEOs base salary toward the policy for the severance pay component, 5% for the savings and risk component (or 6% in the case of a pension fund, with such amount to be allocated to a provident fund or pension plan), 7.5% for the educational fund component, up to $4,100 per year and up to 2.5% for disability insurance.

In all cases we deduct 5% of each NEO’s base salary to be paid on behalf of the NEO toward the policy (or 5.5%, in the event an NEO chooses to allocate his payments to a pension plan) and 2.5% for the educational fund component.

On February 5, 2016, Amendment no.

12 of the Supervision of Financial Services (Provident Funds) Law, 5765-2005 and the corresponding Integrated Extension Order For Compulsory Pension came into effect pursuant to which as of July 1, 2016 employee and employer contribution rates for pension and manager’s insurance funds shall increase for all of our employees including our NEOs.

As of July 1, 2016 Employee pension fund contributions shall increase to 5.75% and employer pension fund contributions shall increase to 6.25%.

In the event that an employee has a manager’s insurance fund the employer shall be required to allocate a portion of its contributions to purchase disability insurance to insure 75% of an employee’s salary which allocation shall not decrease the severance component of the employer’s contributions below 5% or increase total employer contributions above 7.5%.

Outstanding Equity Awards as of June 30, 2016

The following table provides information regarding outstanding equity awards held by each of our NEOs as of June 30, 2016, including the applicable vesting dates.

Option Awards

Unexercisable

January 26, 2022

October 29, 2024

December 22, 2024

August 19, 2025

January 25, 2021

January 26, 2022

October 29, 2024

August 19, 2025

January 25, 2021

January 26, 2022

October 29, 2024

August 19, 2025

January 26, 2022

October 29, 2024

August 19, 2025

Rachel Prishkolnik

January 25, 2021

January 26, 2022

October 29, 2024

August 19, 2025

The shares subject to the stock option vest over a four‑year period commencing October 31, 2014, with 1/48 of the shares vesting monthly thereafter.

The shares subject to the stock option vest over a four‑year period commencing December 31, 2014, with 1/48 of the shares vesting monthly thereafter.

The shares subject to the stock option vest over a four‑year period commencing August 31, 2015, with 1/16 of the shares vesting quarterly thereafter.

The shares subject to the RSU vest over a four-year period commencing on August 31, 2015, with 1/16 of the shares vesting quarterly thereafter.

2016 Option Exercises and Stock Vested Table

The following table provides information regarding option exercises and stock vested during the last fiscal year for each named executive officer.

Option Awards

upon Exercise ($)(1)

Rachel Prishkolnik

(1) The value realized on exercise is calculated as the difference between (A) either (i) the actual sales price of the shares underlying the options exercised if the shares were immediately sold upon exercise or (ii) the closing price of the shares underlying options exercised if the shares were not immediately sold after exercise and (B) the applicable exercise price of the options.

(2) The value realized on vesting is calculated by multiplying (A) the closing price of a common share on the vesting date and (B) the number of shares acquired on vesting before withholding taxes.

Potential Payments upon Termination of Employment and Change of Control

Pursuant to the terms of the employment agreements with the NEOs, as well as in accordance with Israeli law, upon a termination of the NEO’s employment, the NEO is entitled to the payments we have made on behalf of each NEO to the Manager’s Insurance Policy.

Equity Acceleration

Pursuant to the terms of his employment agreement, if within 12 months following the occurrence of a “change in control” Mr.

Sella is terminated without “cause or if Mr.

Sella terminates his employment due to “justifiable reasons” (each such term as defined in his Mr.

Sella’s agreement), he will be entitled to full acceleration of any unvested shares of restricted stock or stock options held by him at the time of such termination.

Pursuant to the terms of their respective employment agreements, if Mr.

Lando employment agreements are terminated within 12 months of the date of a “transaction” without “cause” (each term as defined therein), then all outstanding and unvested stock options will become fully vested and exercisable as of the date of such termination.

In addition, pursuant to Mr.

Faier’s employment agreement if within 12 months following a “transaction”, Mr.

Faier terminates his employment due to “justifiable reason” (as defined therein) then all outstanding and unvested stock options will become fully vested and exercisable as of the date of such termination.

Galin and Mrs.

Prishkolnik’s respective employment agreements do not contain similar vesting acceleration provisions.

Furthermore, in the event of a “transaction” (as defined in our 2007 Global Incentive Plan (the “2007 Plan”), all outstanding equity held by each NEO will accelerate to the extent such awards are not assumed or substituted by a successor corporation in connection with such transaction.

Potential Payments as of June 30, 2016

The following tables show the value of the potential payments and benefits our named executive officers would receive in various scenarios involving a termination of their employment or a change in control or other qualifying corporate transaction, assuming a June 30, 2016 triggering date and, where applicable, using a price per share for our common stock of $19.60 (the closing price of a share of our common stock as of the last day of the fiscal year).

for Good Reason

Reason within

Israeli Social Benefits

Vested and Unvested Options/RSUs (1)

Accrued Vacation Pay

The value realized is based on the difference between the exercise price of the stock options or the base price of the stock appreciation rights and the closing price of our common stock on June 30, 2016 (the last trading day of fiscal 2016).

for Good Reason

Reason within

Israeli Social Benefits

Vested and Unvested Options/RSUs (1)

Accrued Vacation Pay

for Good Reason

w/o Cause within

Israeli Social Benefits

Vested and Unvested Options/RSUs (1)

Accrued Vacation Pay

Lando’s employment agreement entitles him to immediate vesting of all unexercised equity upon termination without cause within twelve months of a change of control only.

for Good Reason

Reason within

Israeli Social Benefits

Vested and Unvested Options/RSUs (1)

Accrued Vacation Pay

Rachel Prishkolnik

for Good Reason

Reason within

Israeli Social Benefits

Vested and Unvested Options/RSUs (1)

Accrued Vacation Pay

SE CURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 10 will be included under the captions “Directors and Corporate Governance”, “The Board’s Role in Risk Oversight”, “Board Committees”, “Director Compensation”, “Compensation Committee Report”, and “Section 16(a) Beneficial Ownership Reporting Compliance”

in our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the year ending December 31, 2020 (the "2021 Proxy Statement") and is incorporated herein by reference.

EXECUTIVE COMPENSATION

The information required by Item 11 will be included under the captions “Executive Compensation”

in our 2021 Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Except as set forth below, the information required by Item 12 will be included under the captions “Security Ownership of Certain Beneficial Owners and Management”

in our 2021 Proxy Statement and is incorporated herein by reference.

Equity Compensation Plan Information

The following table summarizes information as of June 30, 2016, about shares of common stock that may be issued under our equity compensation plans.

The following table summarizes information as of December 31, 2020, about shares of common stock that may be issued under our equity compensation plans.

Plan Category

Number of securities to be issued upon exercise of outstanding options and warrants (a)

Weighted-average exercise price of outstanding options and warrants

Number of securities to be issued upon exercise of outstanding stock awards(a)

Weighted-average exercise price of outstanding stock awards

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

1 unchanged sentence

Equity compensation plans not approved by security holders

______________________________

Includes in column (a) 1,100,754 shares of common stock issuable upon exercise of options outstanding under the Company’s 2015 Global Incentive Plan, 4,667,512 shares of common stock issuable upon exercise of options outstanding under the Company’s 2007 Global Incentive Plan.

Includes in column (c) 2,557,691 shares of common stock available for future issuance under the Company’s 2015 Global Incentive Plan and 888,569 shares of common stock available for future issuance under the Company’s Employee Stock Purchase Plan.

Upon consummation of our initial public offering, the Company’s 2007 Global Incentive Plan was terminated and no further awards can be granted under this plan.

Includes in column (a) 2,840,081 shares of common stock issuable upon exercise of stock awards outstanding under the Company’s 2015 Global Incentive Plan, 117,265 shares of common stock issuable upon exercise of options outstanding under the Company’s 2007 Global Incentive Plan.

Includes in column (c) 5,248,820, shares of common stock available for future issuance under the Company’s 2015 Global Incentive Plan and 2,075,222 shares of common stock available for future issuance under the Company’s Employee Stock Purchase Plan.

Upon consummation of our initial public offering, the Company’s 2007 Global Incentive Plan was terminated and no further awards can be granted under this plan.

Employee Stock Purchase Plan

We have adopted an employee stock purchase plan (“ESPP”), pursuant to which our eligible employees and eligible employees of our subsidiaries may elect to have payroll deductions made during the offering period in an amount not exceeding 10% of the compensation which the employees receive on each pay day during the offering period.

In the fourth quarter of 2016, we started granting eligible employees the right to purchase our common stock under the ESPP.

As of June 30, 2016, a total of 888,569 shares were reserved for issuance under the ESPP.

The number of shares of common stock reserved for issuance under the ESPP will increase annually on January 1st, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.

In the second quarter of calendar 2016, we started granting eligible employees the right to purchase our common stock under the ESPP.

As of December 31, 2020, a total of 2,687,451 shares were reserved for issuance under the ESPP.

Our board of directors may reduce the number of shares to be added to the share reserve for the ESPP in any particular year at their discretion.

As of June 30, 2016, no shares of our common stock had yet been purchased under the ESPP.

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information regarding the beneficial ownership of our common stock as of June 30, 2016 with respect to:

each person known by us to beneficially own 5% or more of the outstanding shares of our common stock;

each member of our board of directors and each NEO;

the members of our board of directors and our executive officers as a group.

Unless otherwise noted below, the address of each beneficial owner listed in the table below is c/o SolarEdge Technologies, Inc., 1 HaMada Street, Herziliya Pituach 4673335, Israel.

We have determined beneficial ownership in accordance with the rules of the SEC.

Except as indicated by the footnotes below, we believe, based on the information furnished to us, that each person or entity named in the table below has sole voting and investment power with respect to all shares of common stock that he, she or it beneficially owns, subject to applicable community property laws.

Applicable percentage of beneficial ownership is based on 40,889,922 shares of common stock that would be outstanding as of June 30, 2016.

Shares Beneficially Owned

Name of Beneficial Owner

5% Stockholders:

Affiliates of Opus Capital Venture Partners V, L.P.(1)

Genesis Partners III L.P.(2)

Affiliates of Pacven Walden Ventures VI, L.P.(3)

Directors and Named Executive Officers:

Guy Sella (5)

Ronen Faier (6)

Zvi Lando (7)

Yoav Galin (8)

Rachel Prishkolnik (9)

Dan Avida (10)

Yoni Cheifetz (11)

Marcel Gani (12)

Doron Inbar (13)

Avery More (14)

Tal Payne (15)

All directors and executive officers as a group (13 individuals)(16)

Represents beneficial ownership of less than 1%.

Opus Capital Venture Partners V, L.P.’s investment committee consists of Carl Showalter, Dan Avida, Gill Cogan and Joseph Cutts.

Each of these individuals has shared voting and investment power over the shares held by Opus Capital Venture Partners, L.P.

The principal business address of each of the Opus Capital Venture Partners Funds is 2730 Sand Hill Road, Suite 150, Menlo Park, CA 94025.

The investment committee of Genesis Partners III L.P.’s general partner, Genesis Partners III Management Ltd., consists of Eddy Shalev, Dr.

Eyal Kishon, Gary Gannot, Jonathan Saacks and Hadar Kiriati.

Each of these individuals has shared voting and investment power over the shares held by Genesis Partners III L.P.

The principal business address of Genesis Partners III L.P.

is 11B Hamenofim St., Hertzilia Pituach POB 12866 Israel 46733.

Consists of 2,105,647 shares held by Pacven Walden Ventures VI, L.P.

and 163,985 shares held by Pacven Walden Ventures Parallel VI, L.P.

(together with Pacven Walden Ventures VI, L.P., the “Pacven Walden Funds”).

The general partner of Pacven Walden Ventures VI, L.P.

(“Pacven VI”) and Pacven Walden Ventures VI Parallel VI, L.P.

(“Pacven VI Parallel”) is Pacven Walden Management VI Co.

Ltd., which is affiliated with Walden International, a venture capital firm.

Lip‑Bu Tan is the sole director and a member of the investment committee of Pacven Walden Management VI Co., Ltd.

and shares voting and investment power with respect to the shares held by Pacven VI and Pacven VI Parallel with other members of the investment committee, i.e., Andrew Kau, and Brian Chiang.

The business address of Pacven VI, Pacven VI Parallel and Walden International is One California Street 28th Floor, San Francisco, California 94111.

Based solely on a Schedule 13G filed with the SEC on February 12, 2016.

The address of FMR LLC is 245 Summer Street, Boston, MA 02210.

The shares are, or may be deemed, beneficially owned by FMR LLC and its subsidiaries and affiliates, including Fidelity Institutional Asset Management Trust Company.

Consists of 440,083 shares of common stock owned of record by Mr.

Sella and 518,660 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2016.

Consists of 2,700 shares of common stock owned of record by Mr.

Faier and 227,922 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2016.

Consists of 2,700 shares of common stock owned of record by Mr.

Lando and 266,255 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2016.

Consists of 436,033 shares of common stock owned of record by Mr.

Galin and 111,255 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2016.

Consists of 1,574 shares of common stock owned of record by Mrs.

Prishkolnik and 78,604 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2016.

Consists of shares described in Note (1) above and 6,744 shares of common stock owned of record by Mr.

Consists of 27,863 shares of common stock owned of record by Mr.

Consists of 6,744 shares of common stock owned of record by Mr.

Gani, 5,555 shares of common stock held directly by Marcel Gani 2002 Living Trust and 5,555 shares of common stock held directly by ALGA Partners LLC.

Gani, in his capacity as trustee, has voting and investment power over the shares owned by the Marcel Gani 2002 Living Trust.

Gani, in his capacity as manager, has voting and investment power over the shares owned by ALGA Partners LLC.

Consists of 6,744 shares of common stock owned of record by Mr.

Inbar and 223,333 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2015.

Consists of 164,572 shares of common stock owned of record by Mr.

More, 469,850 shares of common stock held by ORR Partners I GP, LP, a limited partnership controlled by Avery More, 28,752 shares held by Avery More's wife, Jerralyn Smith More, as to which Avery More disclaims any ownership interest and 25,000 shares held by MentorMore Foundation, a private charitable foundation of which Avery More serves as President;

Avery More disclaims any ownership interest in such shares.

Consists of 6,744 shares of common stock owned of record by Mr.

Consists of 13,968,803 shares of common stock and 1,960,045 shares of common stock issuable upon exercise of options exercisable within 60 days of June 30, 2015.

CER TAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

There have been no transactions since July 1, 2015 to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described under “— Executive Compensation” and “— Director Compensation” above.

Review, Approval or Ratification of Transactions with Related Persons

The audit committee of our board of directors has primary responsibility for reviewing and approving transactions with related parties.

Our audit committee charter provides that the audit committee shall review and approve in advance any related party transactions.

We adopted a formal written policy providing that our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our voting stock, any member of the immediate family of any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or principal or in a similar position, or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with us without the consent of our audit committee, subject to the exceptions described below.

In approving or rejecting any such proposal, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to our audit committee, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

Our audit committee has determined that certain transactions will not require audit committee approval, including certain employment arrangements of executive officers, director compensation, transactions with another company at which a related party’s only relationship is as a non‑executive employee or beneficial owner of less than 5% of that company’s shares, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis, and transactions available to all employees generally.

Director Independence

The Board has determined that each of our directors, other than Mr.

Sella, is an “independent director” within the meaning of the applicable NASDAQ rules.

In addition, the Board has determined that each of our directors, other than Mr.

Sella is an “independent director” as defined by Rule 10A-3 of the Securities Exchange Act of 1934, as amended (“Exchange Act”).

The board of directors has also determined that pursuant to heightened independence requirements applicable to compensation committee members as set forth in Rule 10C-1 of the Exchange Act (“Rule 10C-1”) and applicable NASDAQ rules, all of the Board members except for Mr.

Sella are independent as defined in these rules.

In making its determinations, the board of directors considered, among other things, all transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates.

There are no family relationships among any of our executive officers, directors or nominees for director.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 will be included under the captions “Transactions with Related Persons”

in our 2021 Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit and Related Fees

The following table sets forth the aggregate fees billed for professional services rendered by Ernst & Young for the audit of our financial statements for fiscal 2016 and 2015 and the aggregate fees for other services rendered by Ernst & Young billed in those periods:

(in thousands)

Audit fees(1)

Audit Related fees(2)

Total audit and related fees

“Audit fees” are fees for audit services for each of the years shown in this table, including fees associated with the annual audit (including audit of our internal control over financial reporting in fiscal year 2016), reviews of our quarterly financial results submitted on Form 10-Q, consultations on various accounting issues and services rendered for the filing of our Form S-1 and fees related to our initial public offering in fiscal year 2015.

(2) Represents accounting consultations regarding financial accounting and reporting standards.

Represents professional services rendered for tax compliance, tax advice, tax planning and review our Israeli tax returns.

In connection with our initial public offering, the board of directors adopted a written policy for the pre-approval of certain audit and non-audit services which Ernst & Young provides.

The policy balances the need to ensure the independence of Ernst & Young while recognizing that in certain situations Ernst & Young may possess both the technical expertise and knowledge of the Company to best advise the Company on issues and matters in addition to accounting and auditing.

In general, the Company’s independent registered public accounting firm cannot be engaged to provide any audit or non-audit services unless the engagement is pre-approved by the audit committee.

Certain services may also be pre-approved by the Chairman of the audit committee under the policy.

All of the fees identified in the table above were approved in accordance with SEC requirements and, following our initial public offering, pursuant to the policies and procedures described above.

All of the services of Ernst & Young for fiscal 2016 and 2015 described above were pre-approved by the audit committee.

EXHIBITS, FI NANCIAL STATEMENT SCHEDULES

The information required by Item 14 will be included under the captions “Audit and Related Fees”

in our 2021 Proxy Statement and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Our Consolidated Financial Statements and Notes thereto are included in ITEM 8 of this Annual Report on Form 10-K.

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All financial schedules have been omitted either because they are not applicable or because the required information is provided in our Consolidated Financial Statements and Notes thereto, included in ITEM 8 of this Annual Report on Form 10-K.

The Index to Exhibits, which appears immediately following the signature page and is incorporated herein by reference, is filed as part of this Annual Report on Form 10-K.

Index to Exhibits

Incorporation by Reference

Amended and Restated Certificate of Incorporation

Incorporated by reference to Exhibit 4.1 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Amended and Restated By‑Laws

Incorporated by reference to Exhibit 4.2 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Description of Common Stock

Filed with this report.

Specimen Common Stock Certificate of the Registrant

Incorporated by reference to Exhibit 4.1 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Indenture, dated September 25, 2020, between the Company and U.S.

Bank National Association, as trustee

Incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on September 25, 2020

Form of 0.000% Convertible Senior Note due 2025 (included in Exhibit 4.2)

Incorporated by reference to Exhibit 4.2 to Form 8-K filed with the SEC on September 25, 2020

Employment Agreement, dated August 20, 2019 between SolarEdge Technologies Ltd.

and Uri Bechor

Incorporated by reference to Exhibit 10.1 to Form 8-K filed with the SEC on August 21, 2019

Employment Agreement, dated December 1, 2010, between SolarEdge Technologies, Inc.

and Ronen Faier

Incorporated by reference to Exhibit 10.3 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Employment Agreement, dated May 17, 2009, between SolarEdge Technologies, Inc.

and Zvi Lando

Incorporated by reference to Exhibit 10.3 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

SolarEdge Technologies, Inc.

2007 Global Incentive Plan.

Incorporated by reference to Exhibit 99.3 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

SolarEdge Technologies, Inc.

2015 Global Incentive Plan

Incorporated by reference to Exhibit 99.1 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

SolarEdge Technologies, Inc.

2015 Employee Stock Purchase Plan

Incorporated by reference to Exhibit 99.2 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Incorporation by Reference

10.11 †

Form of Non-Employee Director RSU Award Agreement

Incorporated by reference to Exhibit 10.11 to Form 10-K filed with the SEC on August 20, 2015

10.12 †

Form of Non-Employee Director Stock Option Award Agreement

Incorporated by reference to Exhibit 10.12 to Form 10-K filed with the SEC on August 20, 2015

10.13 †

Form of Employee RSU Award Agreement

Incorporated by reference to Exhibit 10.13 to Form 10-K filed with the SEC on August 20, 2015

10.14 †

Form of Employee Stock Option Award Agreement

Incorporated by reference to Exhibit 10.14 to Form 10-K filed with the SEC on August 20, 2015

List of Subsidiaries of the Registrant

Filed with this report.

Consent of Kost Forer Gabbay & Kasierer, independent registered public accounting firm

Filed with this report.

Power of Attorney (included in signature page)

Filed with this report.

Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended

Filed with this report.

Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended

Filed with this report.

Certification of Chief Executive Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed with this report.

Certification of Chief Financial Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed with this report.

XBRL Instance Document - - embedded within the Inline XBRL document

Filed with this report.

XBRL Taxonomy Extension Schema Document

Filed with this report.

XBRL Taxonomy Extension Calculation Linkbase Document

Filed with this report.

XBRL Taxonomy Extension Definition Linkbase Document

Filed with this report.

XBRL Taxonomy Extension Label Linkbase Document

Filed with this report.

XBRL Taxonomy Extension Presentation Linkbase Document

Filed with this report.

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

Filed with this report.

Management contract or compensatory plan or arrangement.

FORM 10–K SUMMARY

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2016

AS OF DECEMBER 31, 2020

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of June 30, 2016 and 2015

Consolidated Statements of Operations for the years ended June 30, 2016, 2015 and 2014

Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2016, 2015 and 2014

Statements of Changes in Stockholders’ Equity (deficiency) for the years ended June 30, 2016, 2015 and 2014

Consolidated Statements of Cash Flows for the years ended June 30, 2016, 2015 and 2014

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Income for the year ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income for the year ended December 31, 2020, 2019 and 2018

Statements of Changes in Stockholders’

Equity for the year ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the year ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv 6706703, Israel

- - - - - - - - - - - - - - - - - - - - -

+972-3-5622555

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

SOLAREDGE TECHNOLOGIES, INC.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SolarEdge Technologies, Inc.

and its subsidiaries (the “Company”) as of June 30, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficiency) and cash flows for each of the three years in the period ended June 30, 2016.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at June 30, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2016, in conformity with U.S.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of 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.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of June 30, 2016, 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 August 17, 2016 expressed an unqualified opinion thereon.

Tel-Aviv, Israel

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 Treadway Commission (2013 framework) and our report dated February 19, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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.

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

Critical Audit Matters

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 financial statements and (2) involve our especially challenging, subjective or complex judgments.

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.

F - 2

Valuation of Warranty Obligations

Description of the Matter

As described in Notes 2.t and 13 to the consolidated financial statements, as of December 31, 2020, the warranty obligation was $204,994 thousand.

Substantially all of the Company's warranty obligations are related to the solar business.

The calculation of such warranty obligations requires significant judgment due to the inherent complexity in estimating the amount and timing of future warranty costs.

The Company's products include a warranty of up to 12 years for inverters and up to 25 years for its power optimizers.

In order to predict the failure rate of each product, the Company established a reliability model based on the estimated mean time between failures ("MTBF") and an additional model to capture non-systematic failures.

Predicted failure rates are updated periodically based on new product versions and analysis of the root cause of actual failures, as are warranty related replacement costs.

Auditing the management’s valuation of warranty obligations was complex and subject to judgment calls due to the significant estimation required in determining its amount.

In particular, the warranty obligation is subject to significant assumptions such as product failure rates, the average cost of products replacements and other warranty related costs.

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 accounting for warranties, including management's assumptions and data underlying the warranty obligation valuation.

Our substantive audit procedures included, among others, look back analyses and testing the accuracy and completeness of the underlying data used in management's warranty obligation valuation assessment.

We assessed the accuracy of historical data used in estimating forecasted failure rates, repair replacement ratios and other warranty related costs and compared them to actual warranty claims.

In addition, we involved a specialist to assess the assumptions and the precision of the inputs underlying the MTBF model, including, evaluating the appropriateness of the MTBF model and its consistency with data obtained from external sources.

Valuation of and Accounting for Convertible Notes at Issuance

Description of the Matter

As described in Note 11 to the consolidated financial statements, in September 2020, the Company issued $632.5 million aggregate principal amount of 0.00% Convertible Senior Notes (the “Notes”) in a private placement.

The nature of the convertible note transaction required management to allocate the proceeds between the liability and equity components, with the equity component representing the difference between the proceeds and the fair value of a similar liability that does not have an associated conversion feature.

Management applied significant judgment in estimating the borrowing rate for a comparable non-convertible note that does not have an associated conversion feature, including in determining the Company's synthetic credit rating.

Auditing the Company’s valuation of and accounting for convertible notes at issuance involved a high degree of auditor judgment, subjectivity, and effort due to significant management judgment required in determining the estimated borrowing rate of a comparable non-convertible note, which is a significant assumption in determining the fair value of a similar liability that does not have an associated conversion feature.

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 valuation of and accounting for the Notes, including management's assessment of the assumptions and data underlying the Notes.

Our substantive audit procedures included, among others, analyzing the methodology used by management to determine the fair value of a similar liability that does not have an associated conversion feature, evaluating management’s selection of the borrowing rate of a comparable non-convertible note, assessing the reasonableness of the underlying assumptions used to determine the borrowing rate, such as the Company’s synthetic credit rating, and performing an independent calculation of the carrying amounts attributable to the liability and equity components.

In addition, professionals with specialized skill and knowledge were used to assist in evaluating whether the borrowing rate of a comparable non-convertible note used by management was reasonable considering consistency with external market and industry data.

We have also evaluated the Company’s disclosures regarding the issuance of the Notes included in Notes 2.u and 11 to the consolidated financial statements.

/s/ Kost Forer Gabbay & Kasierer

August 17, 2016

A Member of Ernst & Young Global

SOLAREDGE TECHNOLOGIES, INC.

Kost Forer Gabbay & Kasierer

3 Aminadav St.

A Member of Ernst & Young Global  

We have served as the Company's auditor since 2007.

Tel-Aviv, Israel

+972-3-6232525

+972-3-5622555

February 19, 2021

F - 3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

SOLAREDGE TECHNOLOGIES, INC.

Opinion on Internal Control over Financial Reporting

We have audited SolarEdge Technologies, Inc.

and its subsidiaries (the "Company) internal control over financial reporting as of June 30, 2016, 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).

SolarEdge Technologies, Inc.'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 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.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

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 Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, SolarEdge Technologies, Inc.

and subsidiaries (the "Company") maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, 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, 2020, and 2019, the related consolidated statements of income, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 19, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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 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.

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 effective internal control over financial reporting was maintained in all material respects.

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

A company’s internal control over financial reporting is a process designed 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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

Definition and Limitations of Internal Control over Financial Reporting

(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 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 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2016, based on the COSO criteria.

SOLAREDGE TECHNOLOGIES, INC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of June 30, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity (deficiency) and cash flows for each of the three years in the period ended June 30, 2016 and our report dated August 17 , 2016 expressed an unqualified opinion thereon.

Tel-Aviv, Israel

/s/ Kost Forer Gabbay & Kasierer

August 17, 2016

A Member of Ernst & Young Global

Tel-Aviv, Israel

February 19, 2021

F - 4

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

2 unchanged sentences

Cash and cash equivalents

Restricted cash

Short-term bank deposits

Restricted bank deposits

Marketable securities

Trade receivables, net

Prepaid expenses and other accounts receivable

Trade receivables, net of allowances of $ 2,886 and $ 2,473 , respectively

Inventories, net

Prepaid expenses and other current assets

Total current assets

PROPERTY AND EQUIPMENT, NET

LONG-TERM ASSETS:

Marketable securities

Prepaid expenses and lease deposits

Deferred tax assets, net

Property, plant and equipment, net

Operating lease right-of-use assets, net

Intangible assets, net

Other long-term assets

Total long-term assets

The accompanying notes are an integral part of the consolidated financial statements.

F - 5

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Cont.)

dollars in thousands (except share and per share data)

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’

CURRENT LIABILITIES:

Trade payables

Trade payables, net

Employees and payroll accruals

Current maturities of bank loans and accrued interest

Warranty obligations

Deferred revenues

Accrued expenses and other accounts payable

Deferred revenues and customers advances

Accrued expenses and other current liabilities

Total current liabilities

LONG-TERM LIABILITIES:

Convertible senior notes, net

Warranty obligations

Deferred revenues

Lease incentive obligation

Deferred tax liabilities, net

Finance lease liabilities

Operating lease liabilities

Other long-term liabilities

Total long-term liabilities

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS’ EQUITY:

Share capital

Common stock of $0.0001 par value - Authorized:

125,000,000 shares as of

June 30, 2016 and 2015, respectively;

issued and outstanding:

40,889,922 and 39,297,539

shares as of June 30, 2016 and 2015, respectively.

STOCKHOLDERS’

Common stock of $ 0.0001 par value –

125,000,000 shares as of December 31, 2020, and 2019;

51,560,936 and 49,081,457 shares as of December 31, 2020, and 2019, respectively;

51,560,936 and 48,898,062 shares as of December 31, 2020 and 2019, respectively.

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

* Represents an amount less than $1.

Retained earnings

Total stockholders’

Total liabilities and stockholders’

The accompanying notes are an integral part of the consolidated financial statements.

F - 6

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

dollars in thousands (except share and per share data)

Year ended December 31,

Cost of revenues

Operating expenses:

Research and development, net

Research and development

Sales and marketing

General and administrative

Other operating expenses (income), net

Total operating expenses

Operating income (loss)

Other expenses

Financial income (expenses), net

Income (loss) before taxes on income

Taxes on income (tax benefit)

Net income (loss)

Net basic earnings (loss) per share of common stock

Net diluted earnings (loss) per share of common stock

Weighted average number of shares used in computing net basic earnings (loss) per share of common stock

Weighted average number of shares used in computing net diluted earnings (loss) per share of common stock

Reconciliation of net income (loss) to net income (loss) available to common stock used for net basic earnings (loss) per share calculations

Net income (loss)

Dividends accumulated for the period

Net income (loss) available to shareholders of common stock

Reconciliation of net income (loss) to net income (loss) available to common stock used for net diluted earnings (loss) per share calculations

Net income (loss)

Dividends accumulated for the period

Net income (loss) available to shareholders of common stock

Operating income

Financial expenses (income), net

Income before income taxes

Net loss attributable to Non-controlling interests

Net income attributable to SolarEdge Technologies, Inc.

Net basic earnings per share of common stock attributable to SolarEdge Technologies, Inc.

Net diluted earnings per share of common stock attributable to SolarEdge Technologies, Inc.

Weighted average number of shares used in computing net basic earnings per share of common stock

Weighted average number of shares used in computing net diluted earnings per share of common stock

The accompanying notes are an integral part of the consolidated financial statements.

F - 7

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

dollars in thousands (except share and per share data)

Net income (loss)

Other comprehensive income (loss):

Year ended December 31,

Other comprehensive income:

Available-for-sale securities:

Changes in unrealized

gains, net of tax benefit

Reclassification adjustments

for losses included

in net income

Changes in unrealized gains (losses), net of tax

Reclassification adjustments for losses included in net income

Cash flow hedges:

Changes in unrealized

gains, net of tax expense

Reclassification adjustments

for gains, net of tax expense

included in net income

Foreign currency translation

adjustments, net

Changes in unrealized gains, net of tax

Reclassification adjustments for gains, net of tax included in net income

Foreign currency translation adjustments, net

Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income

Comprehensive loss (income) attributable to Non-controlling interests

Comprehensive income attributable to SolarEdge Technologies, Inc.

The accompanying notes are an integral part of the consolidated financial statements.

F - 8

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

dollars in thousands (except share data)

Preferred stock

Receipt on account of

Convertible Preferred

Additional paid in

other comprehensive

Total stockholders’

Income (loss)

Balance as of June 30, 2013

Issuance of Common Stock upon exercise of employee stock options

Issuance of Series D-2 Convertible Preferred stock, net of issuance expenses in the amount of $17

Issuance of Series D-3 Convertible Preferred stock, net of issuance expenses in the amount of $9

Equity based compensation expenses to employees and non-employee consultants

Change in accumulated other comprehensive loss related to foreign currency translation adjustments

Balance as of June 30, 2014

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

Accumulated Other comprehensive Income (loss)

Retained earnings

Total stockholders’

Balance as of December 31, 2017

Cumulative effect of adopting ASC 606

Issuance of Common Stock upon exercise of employee and non-employees stock-based awards

Issuance of Common stock under employee stock purchase plan

Equity based compensation expenses to employees and nonemployees

Non-controlling interests related to business combination

Change in non-controlling interests

Other comprehensive income adjustments

Balance as of December 31, 2018

Issuance of Common Stock upon exercise of employee and non-employees stock-based awards

Issuance of Common stock under employee stock purchase plan

Equity based compensation expenses to employees and nonemployees

Treasury Stock

Issuance of Common stock upon business combination

Non-controlling interests related to business combination

Change in non-controlling interests

Other comprehensive loss adjustments

Balance as of December 31, 2019

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements.

F - 9

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) (Cont.)

dollars in thousands (except share data)

Preferred stock

Receipt on account of

Convertible Preferred

Additional paid in

Other comprehensive

Total stockholders’

Income (loss)

Balance as of June 30, 2014

Issuance of Common Stock upon exercise of employee and non-employees consultants stock options

Issuance of Series E Convertible Preferred stock, net of issuance expenses in the amount of $288

Equity based compensation expenses to employees and non-employee consultants

Conversion of convertible preferred stock into ordinary shares

Issuance of common stock in initial public offering, net of issuance expenses in an amount of $13,692

Exercise of warrants into common stock

Change in accumulated other comprehensive loss related to foreign currency translation adjustments

Balance as of June 30, 2015

Issuance of Common Stock upon exercise of employee and non-employees stock options

Equity based compensation expenses to employees and non-employee consultants

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (Cont.)

dollars in thousands (except share and per share data)

SolarEdge Technologies, Inc.

Stockholders’

Additional paid in Capital

Accumulated Other comprehensive Income (loss)

Retained earnings

Total stockholders’

Balance as of December 31, 2019

Issuance of Common Stock upon exercise of employee and non-employees stock-based awards

Issuance of Common stock under employee stock purchase plan

Equity based compensation expenses to employees and nonemployees

Equity component of convertible senior notes, net

Other comprehensive income adjustments

Balance as of June 30, 2016

Balance as of December 31, 2020

* Represents an amount less than $1.

The accompanying notes are an integral part of the consolidated financial statements.

F - 10

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands

Cash flows provided by (used in) operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

dollars in thousands (except share and per share data)

Year ended December 31,

Cash flows provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property, plant and equipment

Amortization of intangible assets

Amortization of premiums on available-for-sale marketable securities

Stock-based compensation

Financial expenses (income), net related to term loan

Remeasurement of warrants to purchase convertible preferred stock

Capital loss from disposal of property

Interest expenses related to short term bank loan

Amortization of debt discount and debt issuance costs

Amortization of premium and accretion of discount on available-for-sale marketable securities, net

Stock-based compensation expenses

Deferred income taxes, net

Loss from sale of business

Changes in assets and liabilities:

Prepaid expenses and other accounts receivable

Inventories, net

Prepaid expenses and other assets

Trade receivables, net

Deferred tax assets, net

Trade payables

Operating lease right-of-use assets and liabilities, net and effect of exchange rate differences

Trade payables, net

Employees and payroll accruals

Warranty obligations

Deferred revenues

Accrued expenses and other accounts payable

Lease incentive obligation

Net cash provided by (used in) operating activities

Deferred revenues and customers advances

Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of property and equipment

Purchase of intangible assets

Decrease (increase) in restricted cash

Decrease (increase) in long-term lease deposit

Investment in available-for-sale marketable securities

Maturities of available-for-sale marketable securities

Proceed from sales and maturities of available-for- sale marketable securities

Purchase of property, plant and equipment

Withdrawal from (investment in) bank deposits, net

Withdrawal from (investment in) restricted bank Deposits, net

Business combinations, net of cash acquired

Other investing activities

Net cash used in investing activities

The accompanying notes are an integral part of the consolidated financial statements.

F - 11

SOLAREDGE TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

dollars in thousands

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

dollars in thousands (except share and per share data)

Year ended December 31,

Cash flows from financing activities:

Proceeds from short term bank loan

Repayment of short term bank loan

Repayments of term loan

Proceeds from issuance of Series D-2 Convertible Preferred stock, net

Proceeds from issuance of Series D-3 Convertible Preferred stock, net

Proceeds from issuance of Series E Convertible Preferred stock, net

Proceeds from initial public offering, net

Issuance costs related to initial public offering

Proceeds from issuance of shares under stock purchase plan and upon exercise of options

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

Proceeds from issuance of convertible senior notes, net

Repayment of bank loans

Proceeds from bank loans

Proceeds from exercise of stock-based awards

Change in non-controlling interests

Other financing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

1 unchanged sentence

Cash and cash equivalents at the end of the period

Supplemental disclosure of non-cash financing activities:

Deferred issuance costs related to initial public offering

Cashless exercise of warrants to purchase common stock

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

Issuance of common stock upon business combination

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes

Cash paid for interest on bank loans

The accompanying notes are an integral part of the consolidated financial statements.

F - 12

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 1:- GENERAL

SolarEdge Technologies, Inc.

(the “Company”) and its subsidiaries design, develop, and sell an intelligent inverter solution designed to maximize power generation at the individual photovoltaic (“PV”) module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features .

In addition, the Company has a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed (the “StorEdge solution”).

The StorEdge solution is designed to provide smart energy functions such as maximizing self-consumption, Time-of-Use programming for desired hours of the day, and home energy backup solutions.

The Company and its subsidiaries sells its products worldwide directly to large solar installers and engineering, procurement and construction firms (“EPCs”), as well as through large distributors and electrical equipment wholesalers to smaller solar installers.

The Company was incorporated in Delaware in August 2006 and began commercial sale of its products in January 2010.

Initial Public Offering:

On March 31, 2015, the Company closed its initial public offering (“IPO”) whereby 8,050,000 shares of common stock were sold by the Company to the public (inclusive of 1,050,000 shares of common stock pursuant to the full exercise of an overallotment option granted to the underwriters).

The aggregate net proceeds received by the Company from the offering were approximately $131,208, net of underwriting discounts and commissions and offering expenses.

Upon the closing of the IPO, all shares of the Company’s outstanding convertible preferred stock automatically converted into 28,247,923 shares of common stock, and outstanding warrants to purchase convertible preferred stock automatically converted into warrants to purchase 187,671 shares of common stock (See Note 18).

The Company’s products consist mainly of (i) power optimizers designed to maximize energy throughput from each and every module through constant tracking of Maximum Power Point individually per module, (ii) inverters which invert direct current (DC) from the PV module to alternating current (AC), (iii) a remote cloud-based monitoring platform, that collects and processes information from the power optimizers and inverters to enable customers and system owners, to monitor and manage the solar PV system (iv) a storage and backup solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed, and (v) additional smart energy management solutions.

The Company and its subsidiaries sell products worldwide through large distributors, electrical equipment wholesalers, as well as directly to large solar installers and engineering, procurement and construction firms.

The Company has expanded its activity to other areas of smart energy technology organically and through acquisitions.

The Company now offers variety of energy solutions, which include lithium-ion cells, batteries and energy storage systems (“Energy Storage”), full powertrain kits for electric vehicles, or EVs (“e-Mobility”), uninterrupted power supply solutions (“UPS”), as well as automated machines for industrial use (“Automation Machines”).

During 2018, the Company completed the acquisitions of substantially all of the assets and activities of Gamatronic Electronic Industries Ltd and all of the outstanding shares of its wholly owned subsidiary Gamatronic (UK) Limited, respectively.

Together, this activity is referred to as Critical Power, which provides and manufactures UPS devices.

During 2018 and 2019, the Company completed the acquisition of Kokam Co., Ltd., a provider of lithium-ion cells, batteries and energy storage solutions (“Kokam”).

On January 24, 2019, the Company completed the acquisition of 56.8 % of the outstanding common stock and voting rights of SolarEdge Automation Machines, formerly known as S.M.R.E S.p.A (“SolarEdge Automation Machines”) and its subsidiaries, providers of innovative integrated powertrain technology and electronics for electric vehicles as well as automated machines for industries.

As of December 31, 2020, the Company increased its shareholdings in SolarEdge Automation Machines to 99.9 %.

F - 13

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

GENERAL (Cont.)

As of June 30, 2016 and 2015, the Company had three and one major customers that accounted for approximately 32.5% and 24.6% of the Company’s consolidated revenues, respectively (see Note 20).

The Company depends on two contract manufacturers and several limited or single source component suppliers.

Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields and costs.

Two vendors collectively account for 69% and 79% of the Company’s total trade payables as of June 30, 2016 and 2015, respectively.

The Company has the right to offset its payables to one of its contract manufacturers against vendor non-trade receivables.

As of June 30, 2016 a total of $5,874 of these receivables met the criteria for net recognition and were offset against the corresponding accounts payable balances for this contract manufacturer in the accompanying Consolidated Balance Sheets.

SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared according to United States generally accepted accounting principles (“U.S.

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared according to United States generally accepted accounting principles (“U.S.

GAAP”).

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its subsidiaries.

Intercompany transactions and balances including profit from intercompany sales not yet realized outside the Company have been eliminated upon consolidation.

Use of estimates:

The preparation of financial statements in conformity with U.S.

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

The Company evaluates on an ongoing basis its assumptions, including those related to warranty obligation, inventory valuation, contingencies, share-based compensation cost, as well as in estimates used in applying the revenue recognition policy.

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

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Actual results could differ from those estimates.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes.

The duration, scope and effects of the ongoing COVID-19 pandemic, government and other third party responses to it, and the related macroeconomic effects, including to the Company’s business and the business of the Company’s suppliers and customers are uncertain, rapidly changing and difficult to predict.

As a result, the Company’s accounting estimates and assumptions may change over time in response to this evolving situation.

Such changes could result in future impairments of goodwill, intangibles, long-lived assets, inventories, incremental credit losses on receivables and AFS debt securities, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event.

Financial statements in U.S.

The functional currency of the Company and its Israeli subsidiary is the U.S.

dollar, as the U.S.

dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future.

The Company’s and its Israeli subsidiary’s operations are currently primarily conducted in Israel and a significant portion of its expenses are currently paid in U.S.

Financing activities including loans and cash investments, are mainly made in U.S.

A major part of the Company’s operations is carried out in the United States, Israel and certain other countries.

The functional currency of these entities is the U.S.

Financing activities, including cash investments are primarily made in U.S.

Accordingly, monetary accounts maintained in currencies other than the U.S.

dollar are translated into U.S.

dollars in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 830 (“Foreign Currency Matters”).

All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The financial statements of the Company’s subsidiaries in Germany, China, Australia, Canada, Netherlands, UK, Japan, France, Italia and Bulgaria, whose functional currency is other than the U.S.

dollars in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) No.

830 “Foreign Currency Matters”.

All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of income as financial income or expenses, as appropriate.

The financial statements of other Company’s subsidiaries whose functional currency is other than the U.S.

dollar have been translated into U.S dollars.

Assets and liabilities have been translated using the exchange rates in effect on the balance sheet date.

Statements of operations amounts have been translated using the average exchange rate for the relevant periods.

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

Accumulated other comprehensive loss related to foreign currency translation adjustments, net amounted to $29 and $222 as of June 30, 2016 and 2015 , respectively.

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its subsidiaries.

Intercompany transactions and balances including profits from intercompany sales not yet realized outside the Company have been eliminated upon consolidation.

The Company’s fiscal years 2016, 2015 and 2014 ended on June 30, 2016, 2015 and 2014, respectively.

Unless otherwise stated, references to particular years and quarters, refer to the Company’s fiscal years ended in June and the associated quarters of those fiscal years.

Basic and Diluted Net Earnings (Loss) Per Share :

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

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

260, "Earnings Per Share."

The total weighted average number of shares related to the outstanding stock options, convertible preferred stock and warrants to purchase convertible preferred stock, excluded from the calculation of diluted net earnings (loss) per share due to their anti-dilutive effect was 16,208, 20,565,747 and 25,234,818, for the years ended June 30, 2016, 2015 and 2014, respectively.

Basic and diluted earnings (loss) per share is presented in conformity with the two-class method for participating securities for the periods prior to their conversion.

Under this method the earnings per share for each class of shares are calculated assuming 100% of the Company’s earnings are distributed as dividends to each class of shares based on their contractual rights.

In addition, since all classes other than common stock do not participate in losses, for the year ended June 30, 2014 these shares are not included in the computation of basic loss per share.

Assets and liabilities have been translated using the exchange rates in effect as of the balance sheet date.

Statements of income amounts have been translated using the average exchange rate for the relevant periods.

The resulting translation adjustments are reported as a component of stockholders’

equity in accumulated other comprehensive income (loss).

Accumulated other comprehensive income (loss) related to foreign currency translation adjustments, net amounted to $ 3,617 and $( 2,073 ) as of December 31, 2020 and 2019, respectively.

F - 14

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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

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

Year ended June 30,

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

Net income (loss)

Dividends accumulated for the period

Net income (loss) available to shareholders of common stock

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

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

Net income (loss)

Dividends accumulated for the period

Net income (loss) available to shareholders of common stock

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

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Cash and cash equivalents:

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

Short-term bank deposits:

Short-term bank deposits are deposits with an original maturity of more than three months and less than a year from the date of investment and which do not meet the definition of cash equivalents.

The deposits are presented according to their term deposits.

Restricted bank deposits:

Restricted bank deposits are primarily invested in short-term bank deposits, with an original maturity of more than three months and less than a year from the date of investment and which are primarily used as collateral for a letter of credit for the Company’s customers and security for the Company’s office leases and credit cards.

Marketable Securities:

2 unchanged sentences

In accordance with FASB ASC No.

320 “Investments - Debt and Equity Securities”, the Company classifies marketable securities as available-for-sale.

Available-for-sale securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, net of taxes.

320 “Investments - Debt and Equity Securities”, the Company classifies marketable securities as available-for-sale.

Available-for-sale securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’

equity, net of taxes.

Realized gains and losses on sales of marketable securities, as determined on a specific identification basis, are included in financial expenses (income), net.

The amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity, both of which, together with interest, are included in financial expenses (income), net.

The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.

Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.

On each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as the ability and intent to hold the investment until a forecasted recovery occurs, in accordance with ASC 326.

Allowance for credit losses on AFS debt securities are recognized as a charge in financial expenses (income), net, on the consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders'

The Company has not recorded credit losses for the year ended December 31, 2020.

There was no other-than-temporary-impairment charge for any unrealized losses in 2019 and 2018.

The Company determines realized gains or losses on sale of marketable securities on a specific identification method and records such gains or losses in financial expenses (income) on the consolidated statements of income.

F - 15

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Realized gains and losses on sales of marketable securities, as determined on a specific identification basis, are included in financial income (expenses), net.

The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.

Marketable debt securities with maturities of 12 months or less are classified as short-term and marketable debt securities with maturities greater than 12 months are classified as long-term.

The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the cost basis of such securities is judged to be other-than-temporary.

Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company’s intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis.

If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before it recovers in value, the Company must estimate the net present value of cash flows expected to be collected.

If the amortized cost exceeds the net present value of cash flows, such excess is considered a credit loss and an other-than-temporary impairment has occurred.

For securities that are deemed other-than-temporarily impaired (“OTTI”), the amount of impairment is recognized in the statement of operations and is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income (loss).

The Company did not recognize OTTI on its marketable securities during the year ended on June 30, 2016.

Restricted cash:

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

Inventories are stated at the lower of cost or market value.

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Trade receivables:

Trade receivables are stated net of credit losses allowance.

The Company is exposed to credit losses primarily through sales of products.

The allowance against gross trade receivables reflects the current expected credit loss inherent in the receivables portfolio determined based on the Company’s methodology.

The Company’s methodology is based on historical collection experience, customer creditworthiness, current and future economic condition and market condition.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

The Company also considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted.

Trade receivables are written off after all reasonable means to collect the full amount have been exhausted.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of trade receivables to present the net amount expected to be collected:

December 31, 2020

Balance, at beginning of period

Provision for expected credit losses

Amounts written off charged against the allowance and others

Balance, at end of period

Inventories are stated at the lower of cost or net realizable value.

Cost includes depreciation, labor, material and overhead costs.

Inventory reserves are provided to cover risks arising from slow-moving items or technological obsolescence.

The Company periodically evaluates the quantities on hand relative to historical, current, and projected sales volume.

Based on this evaluation, an impairment charge is recorded when required to write-down inventory to its market value.

Based on this evaluation, an impairment charge is recorded when required to write-down inventory to its net realizable value.

Cost of finished goods and raw materials is determined using the moving average cost method.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Property and equipment:

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following rates:

Property, plant and equipment:

Property, plant and equipment are stated at cost, net of accumulated depreciation.

Machinery and equipment in progress represent the construction or development stage of property and equipment that have not yet been placed in service for the Company's intended use.

Depreciation is calculated by the straight-line method over the estimated useful live of the assets, at the following rates:

Buildings and plants

5 (mainly 2.5 )

Computers and peripheral equipment

2 unchanged sentences

25 (mainly 7 )

Machinery & equipment

Machinery and equipment

25 (mainly 10 )

Laboratory equipment

Laboratory and testing equipment

20 (mainly 10 )

1 unchanged sentence

over the shorter of the lease term or useful economic life

F - 16

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company determines if an arrangement is a lease at inception.

Contracts containing a lease are further evaluated for classification as an operating or finance lease.

In determining the leases classification the Company assesses among other criteria:

(i) 75% or more of the remaining economic life of the underlying asset is a major part of the remaining economic life of that underlying asset;

and (ii) 90% or more of the fair value of the underlying asset comprises substantially all of the fair value of the underlying asset.

Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and long-term operating lease liabilities in the Company’s consolidated balance sheets.

Finance leases are included in property, plant and equipment, net, other current liabilities, and long-term finance lease liabilities in the Company’s consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

For leases with terms greater than 12 months, the Company records the ROU asset and liability at commencement date based on the present value of lease payments according to their term.

The Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The ROU asset also includes any lease payments made and excludes lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expenses are recognized on a straight-line basis over the lease term or the useful life of the leased asset.

In addition, the carrying amount of the ROU and lease liabilities are remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Business Combination:

The Company allocates the fair value of the purchase price to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair value.

The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.

Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology and discount rates.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, which does not exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the finalization of the measurement period, any subsequent adjustments are recorded to earnings.

Intangible Assets:

The Company evaluates the recoverability of finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.

F - 17

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Recoverability of these group of assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the group of assets is expected to generate.

If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.

The Company has not recorded any impairment charges of finite-lived intangible assets during the years ended December 31, 2020 and 2019.

Acquired identifiable finite-lived intangible assets are amortized on a straight-line basis or accelerated method over the estimated useful lives of the assets.

The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives.

The Company routinely reviews the remaining estimated useful lives of finite-lived intangible assets.

In case the Company reduces the estimated useful life for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life (see Note 9).

Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration and any non-controlling interest in the acquiree, over the assigned fair values of the identifiable net assets acquired.

Goodwill is not amortized, and is assigned to reporting units and tested for impairment at least on an annual basis, in the fourth quarter of the fiscal year.

The goodwill impairment test is performed according to the following principles:

(1) An initial qualitative assessment may be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

(2) If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative fair value test is performed.

An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized.

The Company has not recorded any impairment charges of goodwill during the years ended December 31, 2020 and 2019.

Impairment of long-lived assets:

The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360 (“Property, Plants and Equipment”), whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.

The Company’s long-lived assets, other than goodwill and intangible assets, including right-of-use assets, are reviewed for impairment in accordance with ASC 360 “Property, Plants and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group).

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value.

For the years ended June 30, 2016, 2015 and 2014, no impairment losses have been identified.

If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value.

For the years ended December 31, 2020, 2019 and 2018, no impairment losses have been identified.

F - 18

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Severance pay:

Pursuant to Israel’s Severance Pay Law, Israeli employees are entitled to severance pay equal to one month’s salary for each year of employment, or a portion thereof.

The employees of the Company’s Israeli subsidiary have elected to be included under section 14 of the Severance Pay Law, 1963, under which these employees are entitled only to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary.

The employees of the Company’s Israeli subsidiary are included under Section 14 of the Severance Pay Law, 1963, under which these employees are entitled only to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary.

These payments cause the Company to be released from any future obligation under the Israeli Severance Pay Law to make severance payments in respect of those employees;

therefore, related assets and liabilities are not presented in the balance sheet.

For the years ended June 30, 2016, 2015 and 2014, the Company recorded $1,761, $1,273, and $1,109, severance expenses, respectively.

therefore, related assets and liabilities are not presented in the consolidated balance sheets.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded $ 10,598 , $ 7,285 and $ 4,331 , in severance expenses related to its employees, respectively.

Derivatives and Hedging:

The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”).

ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value.

The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency, the New Israeli Shekels (“NIS”), during the year ended December 31, 2020, the Company instituted a foreign currency cash flow hedging program whereby portions of the anticipated payroll denominated in NIS for a period of one to six months with hedging contracts.

Accordingly, when the dollar strengthens against the NIS, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts.

Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts.

These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

The Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S.

These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of income, as a financial expense (income), net.

Revenue recognition:

Revenues are recognized in accordance with ASC 606;

revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that the Company expects in exchange for those goods or services.

The Company’s products consist mainly of (i) power optimizers, (ii) inverters, (iii) a related cloud-based monitoring platform, (iv) communication services, (v) a storage solution, (vi) UPS units, (vii) Lithium-ion cells, batteries and energy storage solutions, (viii) powertrain kits for the e-Mobility segment and (ix) automated machinery for manufacturing lines.

The Company recognizes revenue under the core principle that transfer of control to the Company’s customers should be depicted in an amount reflecting the consideration the Company expects to receive in revenue.

F - 19

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Revenue recognition:

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

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

Persuasive evidence of an arrangement exists .

The Company’s customers mainly consist of distributors and installers (the “Customers”).

The Company’s sales arrangements with Customers are pursuant to written documentation, either a written contract or purchase order.

The actual documentation used is dependent on the business practice with each Customer.

Therefore, the Company determines that persuasive evidence of an arrangement exists with respect to a Customer when it has a written contract, or a binding purchase order from the Customer.

Delivery has occurred .

Each item of written documentation relating to a sale arrangement that is agreed upon with the Customer specifically sets forth when risk of loss and title are being transferred (based on the agreed International Commercial terms, or “INCOTERMS”).

Unless a different written arrangement with the Customer exists, the Company determines that risk of loss and title are transferred to the Customer when the applicable INCOTERMS are satisfied and thus delivery of its products has occurred.

The fee is fixed or determinable .

The Company does not provide any price protection, stock rotation and/or right of return and thus the Company considers all the Customers as end-users and the fee is considered fixed and determinable upon execution of the written documentation with the Customers.

Additionally, payments that are due within the normal course of the Company’s credit terms, which are currently no more than three months from the delivery date, are deemed to be fixed and determinable.

Fees and arrangements with payment terms extending beyond customary payment terms are considered not to be fixed or determinable, in which case revenues are deferred and recognized when payments become due, provided that all other revenue recognition criteria have been met.

Collectability is reasonably assured .

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In order to achieve that core principle, the Company applies the following five-step approach:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when the performance obligation is satisfied.

(1) Identify the contract with a customer

A contract is an agreement or purchase order between two or more parties that creates enforceable rights and obligations.

In evaluating the contract, the Company analyzes the customer’s intent and ability to pay the amount of promised consideration (credit risk) and considers the probability of collecting substantially all of the consideration.

The Company determines whether collectability is reasonably assured on a customer-by-customer basis pursuant to its credit review policy.

The Company typically sells to customers with whom it has a long-term business relationship and a history of successful collection.

For a new Customer, or when an existing Customer substantially expands its commitments, the Company evaluates the Customer’s financial position, the number of years the Customer has been in business, the history of collection with the Customer and the Customer’s ability to pay and typically assigns a credit limit based on that review.

For a new customer, or when an existing customer substantially expands its commitments, the Company evaluates the customer’s financial position, the number of years the customer has been in business, the history of collection with the customer, and the customer’s ability to pay, and typically assigns a credit limit based on that review.

(2) Identify the performance obligations in the contract

At a contract’s inception, the Company assesses the goods or services promised in a contract with a customer and identifies the performance obligations.

The main performance obligations are the provisions of the following:

delivery of the Company’s products;

cloud based monitoring services;

extended warranty services and communication services.

(3) Determine the transaction price

The transaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Generally, the Company does not provide price protection, stock rotation, and/or right of return.

The Company determines the transaction price for all satisfied and unsatisfied performance obligations identified in the contract from contract inception to the beginning of the earliest period presented.

Rebates or discounts on goods or services are accounted for as variable consideration.

The rebate or discount program is applied retrospectively for future purchases.

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

Accrual for rebates for direct customers is presented net of receivables.

Accrual for sale incentives related to non-direct customers is presented under accrued expenses and other current liabilities.

The Company accrued $ 65,131 and $ 62,288 for rebates as of December 31, 2020 and 2019, respectively.

F - 20

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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

The Company increases a credit limit only after it has established a successful collection history with the Customer.

If the Company determines at any time that collectability is not reasonably assured under a particular arrangement based upon its credit review process, the Customer’s payment history or information that comes to light about a Customer’s financial position, it recognizes revenue under that arrangement as Customer payments are actually received.

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

For multiple-element arrangements, the Company allocates revenue to all deliverables based on their relative selling prices.

In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables:

(i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“ESP”).

VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable.

ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis.

The Company has allocated revenue between its deliverables based on their relative selling prices.

Because the Company has neither VSOE nor TPE for its deliverables, the allocation of revenue has been based on the Company’s ESPs.

Amounts allocated to the delivered elements are recognized at the time of sale provided the other conditions for revenue recognition have been met.

The Company’s process for determining its ESP considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable.

Key factors considered by the Company in developing the ESPs for its products include prices charged by the Company for similar offerings, the Company’s historical pricing practices and product-specific business objectives.

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

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

When a contract provides a customer with payment terms of more than a year, the Company considers whether those terms create variability in the transaction price and whether a significant financing component exists.

As of December 31, 2020, the Company has not provided payment terms of more than a year.

The performance obligations that extend for a period greater than one year are those that include a financial component:

(i) warranty extension services, (ii) cloud-based monitoring, and (iii) communication services.

The Company recognizes financing component expenses in its consolidated statement of income in relation to advance payments for performance obligations that extend for a period greater than one year.

These financing component expenses are reflected in the Company’s deferred revenues balance.

(4) Allocate the transaction price to the performance obligations in the contract

The Company performs an allocation of the transaction price to each separate performance obligation, in proportion to their relative standalone selling prices.

(5) Recognize revenue when a performance obligation is satisfied

Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer.

Control either transfers over time or at a point in time, which affects when revenue is recorded.

Revenues from sales of products are recognized when control is transferred (based on the agreed International Commercial terms, or “INCOTERMS”).

Revenues related to warranty extension services, cloud-based monitoring, and communication services are recognized over time on a straight-line basis.

Deferred revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments received from customers for the Company’s products.

Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized (see Note 14).

Cost of revenues:

Cost of revenues sold includes the following:

product costs consisting of purchases from contract manufacturers and other suppliers, indirect manufacturing, support, warranty expenses, provision for losses related to slow moving and dead inventory and personnel and logistics costs.

Cost of revenues includes the following:

product costs consisting of purchases from contract manufacturers and other suppliers, direct and indirect manufacturing costs, shipping and handling, support, warranty expenses and changes in warranty provision, provision for losses related to slow moving and dead inventory, personnel and logistics costs.

Shipping and handling costs, which amounted to $ 101,597 , $ 113,635 and $ 45,821 , for the years ended December 31, 2020, 2019 and 2018, respectively, are included in the cost of revenues in the consolidated statements of income.

Shipping and handling costs include custom tariff charges and all other costs associated with the distribution of finished goods from the Company’s point of sale directly to its customers.

F - 21

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Shipping and handling costs:

Shipping and handling costs, which amounted to $21,922, $26,931 and $14,066 for the years ended June 30, 2016, 2015 and 2014, respectively, are included in cost of revenues in the consolidated statements of operations.

Shipping and handling costs include all costs associated with the distribution of finished products from the Company’s point of selling directly to its Customers.

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Warranty obligations:

The Company’s products include 10 years limited warranty for StorEdge products, a minimum 12-year limited warranty for inverters and a 25-year limited warranty for power optimizers.

In certain cases, the Company provides extended warranties for inverters that bring the warranty period up to 25 years.

The Company maintains reserves to cover the expected costs that could result from these warranties.

The potential liability is generally in the form of product replacement and associated costs.

Warranty reserves are based on the Company’s best estimate of such costs and are included in cost of revenues.

The reserve for the related warranty expenses is based on various factors including assumptions about the frequency of warranty claims on product failures, derived from results of accelerated lab testing, field monitoring, analysis of the history of product failures and the Company’s reliability estimates.

The Company has established a reliability measurement system based on the units’ estimated mean time between failure, or MTBF, a metric that equates to a steady-state failure rate per year for current generation products.

The MTBF represents the predicted mean elapsed time to each product unit failure during system operation.

The Company provides a product warranty for its solar related products as follows:

a 10-year limited warranty for StorEdge products, a standard 12 -year limited warranty for inverters, and a 25 -year limited warranty for power optimizers.

In certain cases, the Company provides an extended warranty for inverters that increases the warranty period for up to 25 years.

The Company maintains reserves to cover the expected costs that could result from the standard warranty.

The warranty liability is in the form of product replacement and associated costs.

Warranty reserves are based on the Company’s best estimate of such costs and are included in cost of revenues.

The Company has established a reliability measurement system based on the units’

estimated mean time between failure, or MTBF, a metric that equates to a steady-state failure rate per year for each product generation.

The MTBF predicts the expected failure rate of each product within the Company's products installed base during the expected product warranted lifetime.

The Company performs accelerated life cycle testing, which simulates the service life of the product in a short period of time.

The accelerated life cycle tests incorporate test methodologies derived from standard tests used by solar module vendors to evaluate the period over which solar modules wear out.

Corresponding replacement costs are updated periodically to reflect changes in the Company’s actual and estimated production costs for its products.

Corresponding replacement costs are updated periodically to reflect changes in the Company’s actual and estimated production costs for its products, rate of usage of refurbished units as a replacement of faulty units, and other costs related to logistic and subcontractors’

services associated with the replacement products.

In addition, through the collection of actual field failure statistics, the Company has identified several additional failure causes that are not included in the MTBF model.

Such causes, which mostly consist of design errors, workmanship errors caused during the manufacturing process and, to a lesser extent, replacement of non-faulty units by installers, result in generating additional replacement costs to the replacement costs projected under the MTBF model.

For other products, the Company accrues for warranty costs based on the Company’s best estimate of product and associated costs.

The Company’s other products are sold with a standard limited warranty that typically range in duration from one to ten years.

Warranty obligations are classified as short-term and long-term obligations based on the period in which the warranty is expected to be claimed.

Convertible senior notes:

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

The Company separately accounts for the liability and equity components of convertible debt instruments.

The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument that does not have a conversion feature.

F - 22

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In addition, through the collection of actual failure statistics, the Company has identified several additional failure causes that are not included in the MTBF calculations.

Such causes, which mostly consist of design, workmanship errors caused during the manufacturing process and, to a lesser extent, replacement of non-faulty units by installers, are in addition to the replacement costs projected under the MTBF model.

The Company identified each of those causes, its failure pattern and the relative ratio compared to the pattern of malfunctions identified under the MTBF and accrued additional provisions for the occurrence of such malfunctioning.

The Company evaluates the continuation of these occurrences and the appearance of potential additional malfunctioning cases beyond the MTBF pattern and accrues additional expenses accordingly.

Warranty obligations are classified as short-term and long-term warranty obligations based on the period in which the warranty is expected to be claimed.

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

Royalty-bearing grants from the Binational Industrial Research and Development Foundation (“BIRD-F”) for funding of approved research and development projects are recognized, as a deduction from research and development expenses, at the time the Company is entitled to such grants (see Note 14c).

No grants were recorded in the years ended June 30, 2016, 2015 and 2014.

Government grants:

Government grants received by the Company’s Israeli subsidiary relating to categories of operating expenditures are credited to the consolidated statements of operations during the period in which the expenditure to which they relate is charged.

Royalty bearing grants from the Israeli Office of the Chief Scientist (“OCS”) for funding certain approved research and development projects are recognized at the time when the Company’s Israeli subsidiary is entitled to such grants, on the basis of the related costs incurred, and are included as a deduction from research and development expenses.

The Company recorded grants in the amount of $763 and $275 for the year ended June 30, 2015 and 2014, respectively, which was deducted from research and development expenses.

No grants were recorded for the year ended June 30, 2016.

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The equity component is based on the excess of the principal amount of the debentures over the fair value of the liability component, after adjusting for an allocation of debt issuance costs and deferred taxes, and is recorded in additional paid-in capital.

Debt discount is amortized as additional non-cash interest expense over the expected life of the debt using the effective interest rate method.

In accounting for the issuance costs related to the Notes, the issuance costs incurred were allocated between the liability and equity components based on their relative values.

The Company’s convertible senior notes are included in the calculation of diluted Earnings Per Share (“EPS”) if the assumed conversion into common shares is dilutive, using the “if-converted”

This involves adding back the periodic non-cash interest expense net of tax associated with the Notes to the numerator and by adding the shares that would be issued in an assumed conversion (regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS, unless the Notes are antidilutive (See Note 20).

Research and development costs:

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

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Research and development costs, are charged to the consolidated statement of income as incurred.

Concentrations of credit risks:

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

Cash and cash equivalents are mainly invested in major banks in the U.S., Israel and in Germany.

Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.

The Company’s marketable securities consist of corporate and governmental bonds.

The Company's marketable securities include investments in highly rated debentures (mainly of U.S., Canada and other Europan countries) corporations and governmental bonds.

The financial institutions that hold the Company's marketable securities are major U.S.

financial institutions, located in the United States.

Management believes that the Company's marketable securities portfolio is a diverse portfolio of highly-rated securities and the Company's investment policy limits the amount the Company may invest in each issuer, and accordingly, management believes that minimal credit risk exists from geographic or credit concentration with respect to these securities.

As of June 30, 2016, the amortized cost of the Company’s marketable securities was $111,514, and their stated market value was $111,609, representing a net unrealized gain of $95.

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

The Company generally does not require collateral however, in certain circumstances, the Company may require letters of credit, other collateral or additional guarantees.

An allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection.

The Company accrued $235 and $13 as allowance for doubtful accounts as of June 30, 2016 and 2015, respectively.

As of June 30, 2014 the Company did not accrue any allowance for doubtful accounts.

As of June 30, 2016 and 2015, the Company had two and one major customers (customers with a balance that represents more than 10% of total trade receivables) which accounted in the aggregate for approximately 34% and 30%, respectively, of the Company’s consolidated trade receivables.

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term bank deposits, restricted bank deposits, marketable securities, trade receivables and other accounts receivable.

Cash and cash equivalents, short-term bank deposits and restricted bank deposits are mainly invested in major banks in the U.S., Israel and Korea.

Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.

The Company's debt marketable securities include investments in highly-rated corporate debentures (located mainly in U.S., UK, France, South Korea, Netherlands and other countries) and governmental bonds.

The financial institutions that hold the Company's debt marketable securities are major financial institutions located in the United States.

The Company believes that the its debt marketable securities portfolio is a diverse portfolio of highly-rated securities and the Company's investment policy limits the amount the Company may invest in an issuer (see Note 2g).

The trade receivables of the Company derive from sales to customers located primarily in United States, Europe and Australia.

The Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts (see Note 2h).

The Company generally does not require collaterals, however, in certain circumstances, the Company may require letters of credit, other collateral, or additional guarantees.

From time to time, the Company may purchase trade credit insurance.

The Company had one major customer (customer with attributable revenues that represents more than 10% of total revenues) that accounted for approximately 14.8 %, 20.4 % and 19.4 % of the Company’s consolidated revenues, for the years ended December 31, 2020, 2019 and 2018, respectively.

All of the revenues from this customer were generated in the solar segment.

F - 23

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company had two major customers (customer with a balance that represents more than 10% of total trade receivables, net) as of December 31, 2020 and one major customer as of December 31, 2019 that accounted in the aggregate for approximately 34.6 % and 32.1 %, of the Company’s consolidated trade receivables, net, respectively.

Concentrations of supply risks:

The Company depends on two contract manufacturers and several limited or single source component suppliers.

Reliance on these vendors makes the Company vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.

As of December 31, 2020 and 2019, two contract manufacturers collectively accounted for 48.5 % and 42.3 % of the Company’s total trade payables, net, respectively.

During 2020, the Company started production in its manufacturing facility in the North of Israel, “Sella 1”.

Fair value of financial instruments:

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

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

Assets measured at fair value on a recurring basis as of June 30, 2016 are comprised of foreign currency derivative contracts and marketable securities.

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

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

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The carrying value of cash and cash equivalents, short-term bank deposits, restricted bank deposits, trade receivables, net, long term bank loans and current maturities, prepaid expenses and other current assets, trade payables, net, employee and payroll accruals and accrued expenses and other current liabilities approximate their fair values due to the short-term maturities of such instruments.

Assets measured at fair value on a recurring basis as of December 31, 2020 and 2019 are comprised of money market funds and debt marketable securities (see Note 4).

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

Fair value is an exit price, representing the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

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

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Include other inputs that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little or no market activity.

Level 1- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2- Include other inputs that are directly or indirectly observable in the marketplace.

Level 3- Unobservable inputs which are supported by little or no market activity.

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

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Warrants to Purchase Convertible Preferred Stock:

The Company accounts for freestanding warrants to purchase shares of its convertible preferred stock as a liability on the balance sheets at fair value.

The warrants to purchase convertible preferred stock are recorded as a liability because of a provision calling for minimum proceeds upon or after an “Exit Event”, as described in Note 10.

The fair value of warrants to purchase convertible preferred stock on the issuance date and on subsequent reporting dates was determined using a hybrid method utilizing the assumptions noted below.

The fair value of the underlying preferred stock price was determined by the board of directors considering, among others, third party valuations.

The valuation of the Company was performed using the hybrid method, a hybrid between the probability-weighted estimated return method (“PWERM”) and Option Pricing Method (“OPM”) estimating the probability-weighted value across multiple scenarios but using the OPM to estimate the allocation of value within one or more of those scenarios.

The OPM was used to allocate the Company’s equity value between the preferred stock, common stock and warrants in a scenario of other liquidation events.

The expected terms of the warrants were based on the remaining contractual expiration period.

The expected share price volatility for the shares was determined by examining the historical volatilities of a group of the Company’s industry peers as there was insufficient trading history of the Company’s shares.

The risk-free interest rate was calculated using the average of the published interest rates for U.S.

Treasury zero-coupon issues with maturities that approximate the expected term.

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

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

Expected volatility

Risk-free rate

Dividend yield

Expected term (in years)

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

F - 24

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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

Balance at beginning of period

purchase preferred stock

purchase common stock (*)

Change in fair value

end of period

June 30, 2015

June 30, 2014

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

On June 18, 2015 the warrants were redeemed in a cashless exercise into 154,768 common shares.

Immediately before the cashless exercise the warrants were remeasured to fair value based on their intrinsic value which amounted to $6,115 (see Note 10).

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Accounting for stock-based compensation:

The Company accounts for stock-based compensation in accordance with ASC 718 (“Compensation-Stock Compensation”).

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option-Pricing Model (“OPM”).

The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.

In March 2016, the FASB issued Accounting Standards Update No.

2016-09, “Compensation — Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”).

ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For public entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.

Early adoption is permitted.

The Company has adopted this guidance effective June 30, 2016.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company accounts for stock-based compensation in accordance with ASC 718 “Compensation-Stock Compensation”.

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option-Pricing Model (“OPM”).

The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of income.

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Estimated forfeitures are based on actual historical pre-vesting forfeitures (pursuant to the adoption of ASU 2016-09, the Company made a policy election to estimate the number of awards that are expected to vest).

The Company selected the Black-Scholes-Merton option pricing model as the most appropriate fair value method for its stock-option awards and Employee Stock Purchase Plan.

Estimated forfeitures are based on actual historical pre-vesting forfeitures.

The Company selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its stock-option awards and Employee Stock Purchase Plan (“ESPP”).

The option-pricing model requires a number of assumptions, of which the most significant are the fair market value of the underlying common stock, expected stock price volatility, and the expected option term.

Expected volatility was calculated based upon certain peer companies that the Company considered to be comparable.

The expected option term represents the period of time that options granted are expected to be outstanding.

The expected option term is determined based on the simplified method in accordance with SAB No.

110, as adequate historical experience is not available to provide a reasonable estimate.

The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term.

Expected volatility for stock-option awards was calculated until December 31, 2017 based upon certain peer companies that the Company considered to be comparable and starting January 1, 2018 based upon the Company’s actual historical stock price movements over the most recent periods.

Expected volatility for ESPP was calculated based upon the Company’s stock prices.

The expected term of options granted is based upon historical experience and represents the period between the options’

grant date and the expected exercise or expiration date.

The risk-free interest rate is based on the yield from U.S.

treasury bonds with an equivalent term.

The Company has not declared or paid any dividends on its common stock and does not expect to pay any dividends in the foreseeable future.

The fair value of the shares of common stock underlying the stock options has historically been determined by the Company’s management and approved by the board of directors.

Because until March 31, 2015, there was no public market for the Company’s common stock, the Company’s management determined the fair value of the common stock by using, among other factors, third party valuations at the time of grant of the option by considering a number of objective and subjective factors, including data from other comparable companies, issuance of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook.

The fair value of the underlying common stock was determined by the management until such time as the Company’s common stock is listed on an established stock exchange or national market system.

The Company’s management determined the value of the shares of common stock based on valuations performed using the OPM for the years ended June 30, 2014 and 2013 and for the period from July 1, 2014 and up to March 31, 2015.

The common stock of the Company has been publicly traded since March 31, 2015

Since the distributions and participation rights to security holders until March 31, 2015 are different in a sale/liquidation scenario versus an IPO, the valuation of the Company's equity was performed using a discounted cash flow (DCF) model or a new investment round by external investors.

The allocation of the Company's equity value between the convertible preferred stock, common stock and warrants was performed using a hybrid method between the PWERM and OPM estimating the probability-weighted value across multiple scenarios for liquidation events other than an IPO.

The Company doesn't use dividend yield rate since the Company has not declared or paid any dividends on its common stock and does not expect to pay any dividends in the foreseeable future.

The Company measures a modified stock based award at fair value and recognizes the compensation cost at the beginning of the modification date over the employee’s requisite service period of the modified award.

F - 25

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Before the per share value was determined, a discount for lack of marketability and a voting right differential was applied, as applicable, to the common stock.

The fair value for options granted to employees and executive directors and Employee Stock Purchase Plan in the years ended June 30, 2016, 2015 and 2014 is estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following assumptions:

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The fair value for options granted to employees and ESPP in the years ended December 31, 2020, 2019 and 2018, are estimated at the date of grant using a Black-Scholes-Merton option-pricing model with the following assumptions:

Year ended December 31,

Employee Stock Options

Risk-free interest

Dividend yields

Expected option term in years

Estimated forfeiture rate

Risk-free interest

0.09 % - 1.63 %

3 unchanged sentences

55.95 % - 92.57 %

Expected option term

5.50-6.11 years

5.50-6.27 years

6.02-6.27 years

Estimated forfeiture rate

Employee Stock Purchase Plan

Risk-free interest

Dividend yields

Expected term

The following table set forth the parameters used in computation of the options compensation to non-employee consultants in the year ended June 30, 2016, 2015 and 2014, using a Black-Scholes-Merton option pricing model with the following assumptions:

Risk-free interest

Dividend yields

46.68 % - 55.95 %

Contractual life

6.4-10.0 years

7.2-10.0 years

6.0-10.0 years

54.13 % - 56.67 %

Expected term

The Company recognizes compensation expenses for the value of its restricted stock units (“RSU”) awards, based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures.

The fair value of each RSU is the market value of the Company’s stock as determined by the closing price of the common stock on the grant date.

Income taxes:

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

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

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company and its subsidiaries account for income taxes in accordance with ASC 740, “Income Taxes”.

ASC 740 prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent the Company believes they will not be realized.

The Company accounts for uncertain tax positions in accordance with ASC 740.

2 unchanged sentences

The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement.

The Company accrues interest and penalties related to unrecognized tax benefits under taxes on income.

Derivative financial instruments:

The Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”).

ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary and lease payments of its Israeli facilities denominated in the Israeli currency, the New Israeli Shekel (“NIS”), during the year ended June 30, 2016, the Company instituted a foreign currency cash flow hedging program.

The Company hedges portions of the anticipated payroll and lease payments denominated in NIS for a period of one to twelve months with hedging contracts.

These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges.

In accordance with ASC 815, for derivative instruments that are designated and qualify as a cash flow hedge (i.e.

hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change.

In addition to the above mentioned cash flow hedges transactions, the Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S.

These derivative instruments are not designated as cash flows hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of operations, as financial income (expenses).

F - 26

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

As of June 30, 2016, the Company entered into forward contracts and put and call options to sell U.S.

dollars for NIS and Euros for U.S.

dollars in the amount of $17,693 and €30,000, respectively.

These hedging contracts do not contain any credit-risk-related contingency features.

See Note 4 for information on the fair value of these hedging contracts.

The fair value of derivative assets and derivative liabilities as of June 30, 2016 was $504 and $23, respectively, which was recorded at net amount in other accounts receivable and prepaid expenses in the consolidated balance sheets (see Note 13).

Comprehensive income (loss):

The Company reports comprehensive income (loss) in accordance with ASC 220 (“Comprehensive Income”).

ASC 220 establishes standards for the reporting and presentation of comprehensive income and its components in a full set of general purpose financial statements.

Total comprehensive income (loss) and the components of accumulated other comprehensive income (loss) are presented in the consolidated statements of stockholders’ equity (deficiency).

Accumulated other comprehensive income (loss) consists of foreign currency translation effects, unrealized gains and losses on available-for-sale marketable securities and hedging contracts.

Intangible assets:

On March 9, 2015, the Company and Beacon Power LLC, a Delaware limited liability company (“Beacon”) entered into a patent purchase agreement pursuant towhich the Company agreed to purchase all rights in thepatents.

In July 2015, the Company completed the purchase of the patents for $800.

The patents are stated at cost, net of accumulated amortization.

Amortization is calculated by the straight-line method over 10 years, which represents the estimated useful lives of the patents (see Note 7).

The impact of recently issued accounting standards still not effective for the Company as of June 30, 2016 is as follows:

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

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

New accounting pronouncements not yet effective:

In January 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.

2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

This guidance will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The Company do not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In August 2020, the FASB issued Accounting Standards Update No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):

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 on an entity’s own equity.

This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

This guidance will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is not permitted before fiscal years beginning after December 15, 2020.

The Company do not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

Recently issued and adopted pronouncements:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020.

This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks.

For available-for-sale (“AFS”) debt securities with unrealized losses, the standard eliminates the concept of other-than-temporary impairments and requires allowances to be recorded instead of reducing the amortized cost of the investment.

This standard limits the amount of credit losses to be recognized for AFS debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.

F - 27

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The new guidance will replace most existing revenue recognition guidance in U.S.

GAAP when it becomes effective.

On July 9, 2015, the FASB agreed to delay the effective date by one year.

In accordance with the agreed upon delay, the new standard is effective for the Company beginning January 1st, 2018.

Early adoption is permitted, but not before the original effective date of the standard.

The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application.

The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures.

The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842), whereby lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis;

and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged.

A modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements must be applied.

The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented.

Companies may not apply a full retrospective transition approach.

ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018.

Early application is permitted.

The Company is evaluating the potential impact of this pronouncement.

MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities at June 30, 2016:

Gross unrealized

dollars in thousands (except share and per share data)

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company adopted Topic 326 effective January 1, 2020, based on the composition of the Company’s trade receivables, investment portfolio and other financial assets, current economic conditions and historical credit loss activity.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

The consolidated financial statements for the year ended December 31, 2020 are presented under the new standard, while comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy.

Certain prior period amounts have been reclassified to conform to the current period presentation.

NOTE 3:- MARKETABLE SECURITIES

The following is a summary of available-for-sale marketable securities at December 31, 2020:

Available-for-sale –

matures within one year:

Corporate bonds

Governmental bonds

As of June 30, 2015, the Company had no investments in marketable securities.

Available for-sale –

matures after one year:

Corporate bonds

Governmental bonds

F - 28

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

MARKETABLE SECURITIES (Cont.)

The amortized cost of available-for-sale marketable securities at June 30, 2016, by contractual maturities, is shown below:

Amortized cost

Gross unrealized gains

Gross unrealized losses

Due in one year or less

Due after one year to two years

As of June 30, 2016, management believes the impairments are not other than temporary and therefore the impairment losses were recorded in accumulated other comprehensive income (loss).

The Company has no intent to sell these securities and it is more likely than not that the Company will not be required to sell these securities prior to the recovery of the entire amortized cost basis.

Proceeds from maturity of available-for-sale marketable securities during 2016 were $6,350.

The Company had no proceeds from sales of available-for-sale marketable securities during 2016, therefore no realized gains or losses from the sale of available-for sale marketable securities were recognized during 2016.

The Company determines realized gains or losses on the sale of available-for-sale marketable securities based on a specific identification method.

FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents, foreign currency derivative contracts and marketable securities, at fair value using the market approach valuation technique.

Cash equivalents and marketable securities are classified within Level 1 or Level 2.

This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

dollars in thousands (except share and per share data)

NOTE 3:- MARKETABLE SECURITIES (Cont.)

The following is a summary of available-for-sale marketable securities at December 31, 2019:

Available-for-sale –

matures within one year:

Corporate bonds

Available for-sale –

matures after one year:

Corporate bonds

Governmental bonds

Proceeds from maturity of available-for-sale marketable securities during the years ended December 31, 2020, 2019 and 2018, were $ 141,839 , $ 120,834 and $ 84,497 , respectively.

The Company had no proceeds from sales of available-for sale, marketable securities during the year ended December 31, 2020, therefore no realized gains or losses from the sale of available for sale marketable securities were recognized.

Proceeds from sales of available-for-sale marketable securities during the year ended December 31, 2019 and 2018 were $ 21,910 and $ 44,848 , which led to realized losses of $ 91 and $ 137 , respectively.

NOTE 4:- FAIR VALUE MEASUREMENTS

In accordance with ASC 820, the Company measures its cash equivalents and marketable securities, at fair value using the market approach valuation technique.

Cash equivalents and marketable securities are classified within Level 1 and Level 2, respectively, because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

Foreign currency derivative contracts are classified within the Level 2 value hierarchy, as the valuation inputs are based on quoted prices and market observable data of similar instruments.

F - 29

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

FAIR VALUE MEASUREMENTS (Cont.)

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2016 by level within the fair value hierarchy:

Balance as of

dollars in thousands (except share and per share data)

NOTE 4:- FAIR VALUE MEASUREMENTS (Cont.)

The following table sets forth the Company’s assets that were measured at fair value as of December 31, 2020 and 2019 by level within the fair value hierarchy:

Fair value measurements

as of December 31,

Measured at fair value on a recurring basis:

Cash equivalents:

1 unchanged sentence

Derivative instruments asset:

Options and forward contracts not designated as hedging instruments  

Short-term marketable securities:

4 unchanged sentences

Governmental bonds

The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2015 by level within the fair value hierarchy:

Balance as of

Fair value measurements

Derivative instruments asset

PREPAID EXPENSES AND OTHER ACCOUNTS RECEIVABLE

Derivative instruments liability:

Options and forward contracts not designated as hedging instruments  

NOTE 5:- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As of December 31, 2020, the Company had no derivative instruments that were designated as cash flow hedges.

As of December 31, 2020, the Company entered into forward contracts and put and call options to sell Australian dollars (“AUD”) for U.S.

dollars in the amount of AUD 12 million and AUD 42 million, respectively.

As of December 31, 2020, the Company entered into forward contracts and put and call options to sell Euro (“EUR”) for U.S.

dollars in the amount of EUR 48 million and EUR 60 million, respectively.

As of December 31, 2020, the Company entered into forward contracts to sell U.S.

dollars for South Korean Won in the amount of USD 40.6 million.

The fair value of derivative assets as of December 31, 2020, was $ 3,786 , which was recorded in prepaid expenses and other current assets in the Consolidated Balance Sheets.

The fair value of derivative liabilities as of December 31, 2020, was $ 5,819 , which was recorded in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

F - 30

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 5:- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Cont.)

For the year ended December 31, 2020, the Company recorded a loss in the amount of $ 4,013 , in financial expense (income), net, related to the derivative instruments not designated as cash flow hedges.

As of December 31, 2019 and for the year then ended, the Company had no derivative instruments (see Note 4).

For the year ended December 31, 2018, the Company recorded a gain in the amount of $ 698 , in financial expense (income), net, related to the derivative instruments not designated as cash flow hedges

NOTE 6:- PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of December 31,

Vendor non-trade receivables (*)

1 unchanged sentence

Prepaid expenses and other

Foreign currency derivative contracts

(*) Vendor non-trade receivables related to contract manufacturers derive from the sale of components to manufacturing vendors who manufacture products for the Company.

The Company purchases these components directly from suppliers.

The Company does not reflect the sale of these components in revenues (see also Note 14e).

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

The Company purchases these components directly from other suppliers.

The Company does not reflect the sale of these components to the contract manufacturers in its revenues (see also Note 18b).

NOTE 7:- INVENTORIES, NET

As of December 31,

Raw materials

Work in process

Finished goods

The Company recorded inventory write-downs of $2,539, $992 and $1,131 for the years ended on June 30, 2016, 2015 and 2014, respectively.

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

The Company recorded inventory write-downs of $ 8,864 , $ 4,528 and $ 943 for the years ended December 31, 2020, 2019 and 2018, respectively.

F - 31

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 8:- PROPERTY, PLANT AND EQUIPMENT, NET

As of December 31,

Buildings and plants

Computers and peripheral equipment

3 unchanged sentences

Leasehold improvements

Assets under construction and payments on account

Gross property, plant and equipment

Less - accumulated depreciation

Depreciated cost

Depreciation expenses for the years ended June 30, 2016, 2015 and 2014 were $3,763, $2,253 and $1,978 , respectively.

Intangible assets include an acquired patent with an original cost of $800 and accumulated amortization of $84 as of June 30, 2016.

The patent is amortized over a 10 years period.

Amortization expenses for year ended June 30, 2016 were $84.

Total property, plant and equipment, net

Depreciation expenses for the years ended December 31, 2020, 2019 and 2018, were $ 22,355 , $ 17,261 and $ 11,426 , respectively.

NOTE 9:- INTANGIBLE ASSETS AND GOODWILL, NET

Intangible assets:

Acquired intangible assets consisted of the following as of December 31, 2020, and 2019:

As of December 31,

Finite-lived intangible assets:

Current Technology

Customer relationships

Gross intangible assets

Less - accumulated amortization

Total intangible assets, net

Amortization expenses for the years ended December 31, 2020, 2019 and 2018, were $ 9,479 , $ 9,634 and $ 1,193 , respectively.

F - 32

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE

dollars in thousands (except share and per share data)

NOTE 9:- INTANGIBLE ASSETS AND GOODWILL (Cont.)

Expected future amortization expenses of intangible assets as of December 31, 2020 are as follows:

The following summarizes the goodwill activity for the year ended December 31, 2020, and 2019:

Goodwill at January 1, 2019

Changes during the year:

Business combinations

Other changes related to measurement period and disposals

Foreign currency adjustments

Goodwill at December 31, 2019

Changes during the year:

Foreign currency adjustments

Goodwill at December 31, 2020

NOTE 10:- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of December 31,

Accrued expenses

Government authorities

Provision for contractual inventory purchase obligations *

See also Note 14e.

WARRANTY OBLIGATIONS

Changes in the Company’s product warranty liability for the years ended on June 30, 2016 and 2015 were as follows:

Balance, at beginning of year

Additions and adjustments to cost of revenues

Usage and current warranty expenses

Balance, at end of year

Less current portion

Long term portion

TERM LOAN AND WARRANTS TO PURCHASE CONVERTIBLE PREFERRED STOCK

On December 28, 2012 (the “Agreement Date”), the Company entered into a loan facility agreement (the “Loan Agreement”) with a lender (the “Lender”), pursuant to which the Lender agreed to loan the Company up to $10,000.

On the Agreement Date, the Company received a total of $10,000, less a $100 loan transaction fee paid to the Lender (the “Loan”).

The Loan is for a period of 42 months and bears annual interest of 11.90%, which is to be paid monthly.

Operating lease liabilities

Derivative liabilities

F - 33

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

TERM LOAN AND WARRANTS TO PURCHASE CONVERTIBLE PREFERRED STOCK (Cont.)

The principal of the loan is to be paid in 33 monthly payments, beginning in September 2013, except for the last loan payment which was paid in advance on the Agreement Date.

Repayment of the Loan and payment of all other amounts owed to the Lender is paid in Euro.

Borrowings pursuant to the Loan Agreement are secured by a first priority security interest in all existing and future assets of the Company, ranking junior to the Bank Lender’s security interest as to the Company’s trade receivables, inventory and cash and ranking pari passu with the Bank Lender’s security interest as to all other collateral, including all equipment, intellectual property and all outstanding share capital of SolarEdge Technologies GmbH, SolarEdge Technologies Inc.

and SolarEdge Technologies (China) Co., Ltd.

(see Note 11).

In connection with the Loan Agreement, the Company granted the Lender 563,014 warrants to purchase Series D-1 convertible preferred stock at an exercise price of $2.309 (the “Warrants”).

The Warrants were exercisable in whole or in part prior to earliest of (i) the tenth anniversary of the Agreement Date or (ii) 12 months after a qualified initial public offering or (iii) immediately prior to the consumption of a merger or sale of all or substantially all of the Company’s assets (“M&A Transaction”, and together with a qualified initial public offering, an “Exit Event”).

If (i) the Lender exercised all Warrants in full upon or after an Exit Event, and (ii) the intrinsic value of the Warrants upon such exercise is lower than $750, the Company should pay to the Lender, in addition to any other amounts due to the Lender under the Loan Agreement, an amount equal to the difference between $750 and the Warrants’ intrinsic value.

On the Agreement Date, the Company recorded its freestanding Warrants to purchase its convertible preferred stock in the amount of $778 as a liability at their fair value upon issuance, by utilizing an option pricing method.

The fair value of the Warrants was subject to remeasurement at each balance sheet date with any change in value being reflected as financial expenses, net.

Upon exercise or expiration, the Warrants will be reclassified to stockholders’ equity (deficiency), at which time the Warrant liability will no longer be subject to fair value accounting.

The fair value of the Warrants liability on the Agreement Date in the amount of $778 represented a loan discount which was amortized to financial expenses over the period of the Loan by using the effective interest method.

The residual amount of $9,122 (net of the $100 loan transaction fee) was allocated to the Loan.

Issuance expenses in the amount of $75 were allocated to the warrants to purchase convertible preferred stock liability and to the Loan, according to the above recorded values ratio.

Issuance expenses in the amount of $6 related to the Warrants liability were immediately expensed and recorded as financial expenses, net.

Issuance expenses in the amount of $69 related to the Loan were recorded as deferred charge assets (classified to short-term and long-term assets).

The deferred charge assets were amortized over the period of the Loan by using the effective interest method.

dollars in thousands (except share and per share data)

NOTE 11:- CONVERTIBLE SENIOR NOTES

On September 25, 2020, the Company sold $ 632,500 aggregate principal amount of its 0.00 % convertible senior notes due 2025 (the “Notes”).

The Notes were sold pursuant to an indenture, dated September 25, 2020 (the “Indenture”), between the Company and U.S.

Bank National Association, as trustee (the “Trustee”).

The Notes do not bear regular interest and mature on September 15, 2025 , unless earlier repurchased or converted in accordance with their terms.

The Notes are general senior unsecured obligations of the Company.

Holders may convert their Notes prior to the close of business on the business day immediately preceding June 15, 2025 in multiples of $ 1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(2) during the five-business-day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

or (3) upon the occurrence of specified corporate events as described in the Indenture.

In addition, holders may convert their Notes, in multiples of $1,000 principal amount, at their option at any time beginning on or after June 15, 2025, and prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of the Notes, without regard to the foregoing circumstances.

The initial conversion rate for the Notes was 3.5997 shares of common stock per $ 1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $ 277.80 per share of common stock, subject to adjustment upon the occurrence of certain specified events as set forth in the Indenture.

Upon conversion, the Company may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock.

In addition, upon the occurrence of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes, in multiples of $1,000 principal amount, at a repurchase price of 100% of the principal amount of the Notes, plus any accrued and unpaid special interest, if any, to, but excluding, the repurchase date.

If certain fundamental changes referred to as make-whole fundamental changes occur, the conversion rate for the Notes may be increased.

The Convertible Senior Notes consisted of the following as of December 31, 2020:

December 31, 2020

Unamortized debt discount

Unamortized issuance costs

Net carrying amount

Equity component:

Amount allocated to conversion option

Deferred taxes liability, net

Allocated issuance costs

Equity component, net

As of December 31, 2020, the debt discount and debt issuance costs of the Notes will be amortized over the remaining term of approximately 4.7 years.

F - 34

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

TERM LOAN AND WARRANTS TO PURCHASE CONVERTIBLE PREFERRED STOCK (Cont.)

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

As of June 30, 2014, the Warrants liability has been measured at fair value in the amount of $765.

In January 2015, the Company fully settled the amount borrowed from the Lender under the Term Loan.

On June 18, 2015 the Lender elected to exercise its cashless exercise rights under which the Company issued 154,768 shares of common stock.

The fair value of the Warrants liability as of the exercise date in the amount of $6,115 was reclassified to stockholders’ equity (deficiency).

REVOLVING CREDIT LINE

In June 2011, the Company entered into an agreement for a revolving line of credit from a Bank Lender (the "Bank Lender"), which, as amended to date, permits aggregate borrowings of up to $20,000 in an amount not to exceed 80% of the eligible trade receivables plus 65% of inventories in transit to customers and bears interest, payable monthly, at the Bank Lender’s prime rate plus a margin of 0.75% to 2.75%.

The average interest rate on the Company’s outstanding borrowings as of June 30, 2014 was 4.9%.

On February 17, 2015, the Company amended and restated the agreement with the Bank Lender for a revolving line of credit, which permits aggregate borrowings of up to $40,000 in an amount not to exceed 80% of the eligible accounts receivable and bears interest, payable monthly, at the Bank Lender’s prime rate plus a margin of 0.5% to 2.0%.

The amended and restated revolving line of credit will terminate, and outstanding borrowings will be payable, on December 31, 2016.

In connection with the amended and restated revolving line of credit, the Company granted the Bank Lender security interests in substantially all of the Company’s assets, including a first‑priority security interest in the Company’s trade receivables, cash and cash equivalents.

Financial covenants contained in the agreement require the Company to maintain EBITDA and liquidity at specified levels.

Specifically, the Company is required to maintain negative Adjusted EBITDA (defined in accordance with US GAAP as (a) net income, plus (b) the extent deducted in the calculation of net income, interest, taxes, depreciation and amortization, plus (c) to the extent deducted in the calculation of net income, non‑cash stock‑based compensation) of no greater than ($1,500) as of March 31, 2015, and positive Adjusted EBITDA of at least (i) $1,500 as of June 30, 2015, (ii) $3,500 as of September 30, 2015 and December 31, 2015, (iii) $1,500 as of March 31, 2016 and (iv) $3,500 for the fiscal year ended June 30, 2016 and for each calendar quarter thereafter.

dollars in thousands (except share and per share data)

NOTE 11:- CONVERTIBLE SENIOR NOTES (Cont.)

The annual effective interest rate of the liability component is 2.10 % for the Notes which remains unchanged from the Notes issuance date.

The following table presents the total amount of interest expenses recognized related to the Notes for the year ended December 31, 2020:

December 31, 2020

Amortization of debt discount

Amortization of debt issuance costs

Total interest expenses

Total initial issuance costs of $ 14,631 related to the Notes were allocated between the liability and equity components in the same proportion as the allocation of the total proceeds to the liability and equity components.

Issuance costs attributable to the liability component are being amortized to interest expense over the respective term of the Notes using the effective interest rate method.

The issuance costs attributable to the equity component were netted against the respective equity component in additional paid-in capital.

The Company initially allocated issuance costs of $ 13,502 and $ 1,130 to the liability and equity components, respectively.

As of December 31, 2020, the estimated fair value of the Notes, which the Company has classified as Level 2 financial instruments, is $ 871,117 .

The estimated fair value was determined based on the quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of December 31, 2020, the if-converted value of the Notes exceeded the principal amount by $ 238,617 .

NOTE 12:- BANK LOANS

The following table summarizes the Company’s bank loans:

As of December 31, 2020

Effective interest rate on bank loans

Maturities calendar year:

Current maturities of bank loans and accrued interest

1.54 % - 2.5 %

Long-term bank loans

The Company has two bank loans that are denominated in KRW and one loan, which is denominated in NIS in the amount of $ 1,523 .

The bank loans bear interest at a fix rate and are payable monthly.

The bank loans do not contain financial covenants.

During the years ended December 31, 2020 and 2019, the Company recognized $ 302 and $ 1,116 as interest expenses related to the bank loans in the consolidated statement of income in financial expenses (income), net.

As of December 31, 2020, the Company secured certain bank loans with an aggregate principal amount of $ 18,373 against bank guarantees.

F - 35

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

REVOLVING CREDIT LINE (Cont.)

The Company is required to maintain liquidity (defined as unrestricted and unencumbered cash, plus availability under the amended and restated revolving line of credit) of $6,750.

The amended and restated revolving line of credit also contains covenants that restrict the Company’s ability to dispose of assets, engage in business combinations (or permit a subsidiary to engage in business combinations), grant liens, borrow money, or pay dividends.

As of June 30, 2016 and 2015, the Company met all its Bank Lender covenants.

As of June 30, 2016 and 2015, the Company had no outstanding borrowings related to this revolving line of credit.

dollars in thousands (except share and per share data)

NOTE 13:- WARRANTY OBLIGATIONS

Changes in the Company’s product warranty obligations for the years ended December 31, 2020 and 2019, were as follows:

Balance, at the beginning of the year

Additions and adjustments to cost of revenues

Usage and current warranty expenses

Balance, at the end of the year

Less current portion

Long term portion

NOTE 14:- DEFERRED REVENUES

Deferred revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments received from customers for the Company’s products.

Deferred revenues are classified as short-term and long-term deferred revenues based on the period in which revenues are expected to be recognized.

Significant changes in the balances of deferred revenues during the period are as follows:

Balance, at the beginning of the year

Revenue recognized

Increase in deferred revenues and customer advances

Balance, at the end of the year

Less current portion

Long term portion

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2020:

Total deferred revenues

F - 36

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 15:- OTHER LONG TERM LIABILITIES

As of December 31,

Tax liabilities

Accrued severance pay, net

NOTE 16:- ACCUMULATED OTHER COMPREHENSIVE (INCOME) LOSS

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes, for the year ended June 30, 2016:

Unrealized gains (losses) on available-for-sale marketable securities

Unrealized gains (losses) on cash flow hedges

Unrealized gains (losses) on foreign currency translation

The following table summarizes the changes in accumulated balances of other comprehensive income, net of taxes, for the year ended December 31, 2020:

gains (losses)

on available-

Beginning balance

Other comprehensive income (loss) before reclassifications

Losses (gains) reclassified from accumulated other comprehensive income (loss)

Losses reclassified from accumulated other comprehensive income

Net current period other comprehensive income (loss)

Ending balance

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

NOTE 12:- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Cont.)

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of taxes, for the year ended June 30, 2015:

Unrealized gains (losses) on available-for-sale marketable securities

Unrealized gains (losses) on cash flow hedges

Unrealized gains (losses) on foreign currency translation

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of taxes, for the year ended December 31, 2019:

gains (losses)

on available-

Beginning balance

Other comprehensive income (loss) before reclassifications

Losses (gains) reclassified from accumulated other comprehensive income (loss)

Losses reclassified from accumulated other comprehensive income

Net current period other comprehensive income (loss)

Ending balance

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

NOTE 12:- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Cont.)

The following table provides details about reclassifications out of accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive

Income (Loss) Components

Amount Reclassified from

Accumulated Other

Comprehensive Income (Loss)

Affected Line Item in the Statements of Operations

June 30, 2016

Unrealized gains (losses) on cash flow hedges

Cost of revenues

Research and development

Sales and marketing

General and administrative

Total, before income taxes

Income tax expense (benefit)

Total, net of income taxes

Unrealized gains (losses) on available-for-sale marketable securities

Financial income, net

Income tax expense (benefit)

Total, net of income taxes

No amounts were reclassified from accumulated other comprehensive income for the years ended June 30, 2015 and 2014.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

NOTE 13:- DERIVATIVE INSTRUMENTS

The fair value of the Company’s outstanding derivative instruments is as follows:

Year ended June 30,

Derivative assets:

Derivatives not designated as cash flow hedging instruments:

Foreign exchange option contracts

Derivatives designated as cash flow hedging instruments:

Foreign exchange forward contracts

Derivative liabilities :

Derivatives not designated as cash flow hedging instruments:

Foreign exchange option contracts

The Company recorded the fair value of derivative assets and liabilities, net in “prepaid expenses and other accounts receivable” on the Company’s consolidated balance sheets.

The increase (decrease) in unrealized gains (losses) recognized in “accumulated other comprehensive income (loss)” on derivatives, net of tax effect, is as follows:

Year ended June 30,

Derivatives designated as cash flow hedging instruments:

Foreign exchange forward contracts

The following table summarizes the changes in accumulated balances of other comprehensive, net of taxes, for the year ended December 31, 2018:

(losses) on foreign

Beginning balance

Other comprehensive income (loss) before reclassifications

Losses (gains) reclassified from accumulated other comprehensive income

Net current period other comprehensive income (loss)

Ending balance

F - 37

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

NOTE 13:- DERIVATIVE INSTRUMENTS (Cont.)

The net (gains) losses reclassified from “accumulated other comprehensive income (loss)” into income (loss), are as follows:

Year ended June 30,

Derivatives designated as cash flow hedging instruments:

Foreign exchange forward contracts

The Company recorded in the financial income (expenses), a net gain (loss) of $(136), $1,721 and $(189) during the years ended June 30, 2016, 2015 and 2014, respectively related to derivatives not qualified as hedging instruments.

COMMITMENTS AND CONTINGENT LIABILITIES

Lease commitments:

The Company and its subsidiaries lease their operating facilities under non-cancelable operating lease agreements, which expire over the next nine years, with the last ending in December 2024.

The future minimum lease commitments of the Company and its subsidiaries under various non-cancelable operating lease agreements in respect of premises, that are in effect as of June 30, 2016, are as follows:

2022 and thereafter

Rent expenses for the years ended June 30, 2016, 2015 and 2014 were approximately $2,238, $1,714 and $1,200 , respectively.

As of June 30, 2016, contingent liabilities exist regarding guarantees in the amount of $618, $52 and $83 in respect of office rent lease agreements, customs transactions and credit card limits, respectively.

dollars in thousands (except share and per share data)

NOTE 17:- LEASES

The Company leases offices, plants and vehicles under operating and finance leases.

During the year ended December 31, 2020, due to a change in the expected lease term of the Company’s offices and laboratories in Modiin, Israel, the Company reassessed the lease classification of the leased building, which resulted in a change in classification of this lease from an operating lease to a finance lease.

As a result, the ROU assets and lease liabilities under operating leases decreased by $ 4,144 and $ 4,910 million, respectively, and the ROU assets and lease liabilities under finance leases increased by $ 24,471 and $ 25,237 , respectively.

During the year ended December 31, 2020, due to a change in the expected lease term of the Company’s manufacturing facility, “Sella 1”, the ROU assets and lease liabilities under operating leases increased by $ 10,203 .

The following table summarizes the Company’s lease-related assets and liabilities recorded on the condensed consolidated balance sheet:

Classification on the condensed consolidated Balance Sheet

Operating lease assets, net of lease incentive obligation

Operating lease right-of use assets, net

Finance lease assets

Property, plant and equipment, net

Total lease assets

Operating leases short term

Accrued expenses and other current liabilities

Finance leases short term

Accrued expenses and other current liabilities

Operating leases long term

Operating lease liabilities

Finance leases long term

Finance lease liabilities

Total lease liabilities

F - 38

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

Royalty commitments:

On April 12, 2009, the Company received approval for a grant in a total amount of $703, from the BIRD-F in conjunction with a mutual development project with an American corporation.

Under the Company’s research and development agreements with the BIRD-F, and pursuant to applicable law, the Company is required to pay royalties at the rate of 5% of gross sales of products developed with funds provided by the BIRD-F, up to an amount equal to 150% of the research and development grants (dollar-linked) received from the BIRD-F.

The obligation to pay these royalties is contingent on actual sales of the products and, in the absence of such sales, no payment is required.

Royalties payable with respect to grants received from the BIRD-F are linked to the Consumer Price Index in the U.S.

At the end of 2011, the American corporation that had partnered with the Company announced the discontinuation of its solar business, resulting in the termination of the mutual development agreements.

As a result, the development has not advanced into a commercial product.

The Company does not expect any revenues from such project or the utilization of the technology mutually developed.

As of June 30, 2016, the aggregate contingent liability to the BIRD-F amounted to approximately $1,146 which would be payable by the Company if the project were to generate revenues.

Governmental commitments:

The Company has received royalty-bearing grants sponsored by the Israeli government for the support of research and development activities.

Through June 30, 2015, the Company had obtained grants from the OCS for certain of the Company’s research and development projects.

The Company is obligated to pay royalties to the OCS, amounting to 4% in the first three years, and 4.5% thereafter, of the sales of the products and other related revenues (based on the dollar equivalent amount of the grant) generated from such projects, up to 100% of the grants received.

The royalty payment obligations also bear interest at the LIBOR rate.

The obligation to pay these royalties is contingent on actual sales of the applicable products and in the absence of such sales, no payment is required.

As of June 30, 2016 and 2015, there have been no sales or revenues on which royalties are payables.

As of June 30, 2016, the aggregate contingent liability to the OCS amounted to $968.

The Israeli Research and Development Law provides that know-how developed under an approved research and development program may not be transferred to third parties without the approval of the OCS.

Such approval is not required for the sale or export of any products resulting from such research or development.

dollars in thousands (except share and per share data)

NOTE 17:- LEASES (Cont.)

The following table presents certain information related to the operating and finance leases:

Year ended December 31,

Finance leases:

Finance lease cost

Weighted average remaining lease term in years

Weighted average annual discount rate

Operating leases:

Operating lease cost

Weighted average remaining lease term in years

Weighted average annual discount rate

The following table presents supplemental cash flows information related to the lease costs for operating and finance leases:

Year ended December 31,

Cash paid for amounts included in measurement of lease liabilities:

Operating cash flows for operating and finance leases

Financing cash flows for finance leases

The following table reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years of the operating and finance lease liabilities recorded on the consolidated balance sheets:

Operating Leases

Finance Leases

Total lease payments

Less amount of lease payments

representing interest

Present value of future lease payments

Less current lease liabilities

Long-term lease liabilities

F - 39

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

The OCS, under special circumstances, may approve the transfer of OCS-funded know-how outside Israel, in the following cases:

(a) the grant recipient pays to the OCS a portion of the sale price paid in consideration for such OCS-funded know-how or in consideration for the sale of the grant recipient itself, as the case may be, which portion will not exceed six times the amount of the grants received plus interest (or three times the amount of the grant received plus interest, in the event that the recipient of the know-how has committed to retain the R&D activities of the grant recipient in Israel after the transfer);

(b) the grant recipient receives know-how from a third party in exchange for its OCS-funded know-how;

(c) such transfer of OCS-funded know-how arises in connection with certain types of cooperation in research and development activities;

or (d) if such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient.

dollars in thousands (except share and per share data)

NOTE 18:- COMMITMENTS AND CONTINGENT LIABILITIES

As of December 31, 2020, contingent liabilities exist regarding guarantees in the amounts of $ 18,373 , $ 2,813 and $ 675 in respect of bank loans, office rent lease agreements and other transactions, respectively.

Contractual purchase obligations:

2 unchanged sentences

The Company utilizes third parties to manufacture its products.

In addition, it acquires raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on its projected demand and manufacturing needs.

As of June 30, 2016, the Company had non-cancelable purchase obligations totaling approximately $83,142 out of which the Company already recorded a provision for loss in the amount of $2,834 (see also Note 8).

In addition, the Company acquires raw materials or other goods and services, including product components, by issuing authorizations to its suppliers to purchase materials based on its projected demand and manufacturing needs.

As of December 31, 2020, the Company had non-cancelable purchase obligations totaling approximately $ 380,100 , out of which the Company recorded a provision for loss in the amount of $ 3,545 .

As of December 31, 2020, the Company had contractual obligations for capital expenditures totaling approximately $ 79,447 .

These commitments reflect purchases of automated assembly lines and other machinery related to the Company’s manufacturing process as well as capital expenditures associated with the construction of Sella 2, the Company’s planned second lithium-ion cell and battery factory in Korea.

Legal claims:

3 unchanged sentences

These accruals are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

LEASE INCENTIVE OBLIGATION

The Company has an operating lease agreement for building in Herzilia, Israel.

In connection with this lease, the Company and its third party lessor (the "Lessor"), agreed that the Lessor would pay approximately $2,938 for certain leasehold improvements on behalf of the Company.

As of June 30, 2016, the Company received in cash $2,938 from the Lessor in connection with such leasehold improvements.

These leasehold improvements are accounted for as a lease incentive obligation, which is recorded under long-term liabilities, net of the current portion recorded in accrued expenses and other accounts payable under current liabilities.

The lease incentive obligation is being amortized over the life of the lease and as a reduction to rent expense.

As of June 30, 2016, the long-term net amortized amount of lease incentive obligation recorded under long-term liabilities is $2,297.

CONVERTIBLE PREFERRED STOCK

Composition of convertible preferred stock of the Company:

Issued and outstanding

Number of shares

Stock of $0.0001 par value:

Preferred stock

The Company issued Series A through E Preferred stock between the years 2006 and 2015.

The Company classified the convertible preferred stock outside of stockholders’ equity (deficiency) as required by ASC 480-10-S99-3A and ASR 268, since the shares possessed deemed liquidation features that could trigger a distribution of cash or assets not solely within the Company’s control.

Prior to the consummation of the Company’s IPO on March 31, 2015, the Company had the following convertible preferred stock outstanding, all of which was converted into common stock following with the IPO on March 31, 2015 (see Note 1b) which resulted in classification of convertible preferred stock temporary equity in the amount of $140,915 into stockholders’ equity (deficiency):

In September 2018, the Company’s German subsidiary, SolarEdge Technologies GmbH received a complaint filed by competitor SMA Solar Technology AG (“SMA”).

The complaint, filed in the District Court Düsseldorf, Germany, alleges that SolarEdge's 12.5kW - 27.6kW inverters infringe two of the plaintiff’s patents.

SMA asserted a value in dispute of EUR 5.5 million (approximately $ 6,747 ) for both patents.

The Company challenged the validity of both patents.

In December 2019 the District Court of Düsseldorf found one of the two patents to be infringed and the Company appealed this decision to the Appeals Court Düsseldorf.

In the parallel nullity proceedings regarding this patent, in October 2020, the German Patent Court rendered the SMA patent invalid.

This invalidity decision has been appealed by SMA.

Due to the invalidity proceedings, the infringement proceedings regarding this patent have been stayed.

With respect to the other patent, in November 2019, the first instance court stayed the infringement proceedings since it considered it to be highly likely that the second SMA patent would also be rendered invalid.

The Company believes that it has meritorious defenses to the claims asserted and intends to vigorously defend against the remaining lawsuit.

F - 40

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

CONVERTIBLE PREFERRED STOCK (Cont.)

Shares Outstanding

Number of Shares of Common Stock issued upon conversion

Series A Preferred stock

Series B Preferred stock

Series C Preferred stock

Series D Preferred stock

Series D-1 Preferred stock

Series D-2 Preferred stock

Series D-3 Preferred stock

Series E Preferred stock

STOCK CAPITAL

Composition of common stock capital of the Company:

Issued and outstanding

Number of shares

Stock of $0.0001 par value:

dollars in thousands (except share and per share data)

NOTE 18:- COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

In May 2019, the Company’s two Chinese subsidiaries and its equipment manufacturer in China were served with three lawsuits by Huawei Technologies Co., Ltd., a Chinese entity (“Huawei”).

The lawsuits, filed in the Guangzhou intellectual property court, alleged infringement of three patents and asked for an injunction of manufacture, use, sale and offer for sale, and damage awards.

A first-instance judgment was issued on August 7, 2020 ordering the three defendants to collectively pay damages in the amount of approximately Chinese Yuan (“CNY”) 10.5 million (approximately $ 1,609 ), including court fees, with respect of one of the patents.

The Company has filed an appeal with the Supreme People’s Court of China.

The first instance court’s judgement is not effective or enforceable pending the appeal.

In addition, in January 2021, Huawei filed a motion to increase its claimed monetary damages to CNY 50 million (approximately $ 7,660 ) and for a preliminary injunction with respect to the second lawsuit.

In February 2021, a preliminary injunction was rendered by the Guangzhou intellectual property court with respect to such second lawsuit and applying to seven inverter models.

In line with the court’s mandate, the Company took immediate action to make software changes to meet the court order and also appealed the decision.

The Company believes that it has meritorious defenses to the claims asserted by Huawei.

In December 2019, the Company received a lawsuit filed by a former consultant of the Company and its Israeli subsidiary in the amount of 25.5 million NIS (approximately $ 7,932 ) claiming damages caused relating to a terminated consulting agreement and stock options therein.

The Company believes it has meritorious defenses to the claims asserted and intends to vigorously defend against this lawsuit.

As of December 31, 2020, accrued amounts for legal claims of $ 5,866 , were recorded in accrued expenses and other current liabilities.

NOTE 19:- STOCK CAPITAL

Common stock rights:

2 unchanged sentences

and to participate in the distribution of the surplus assets of the Company in the event of liquidation of the Company.

On March 23, 2015, the Company's board of directors and the requisite holders of the Company's capital stock consented to a 1-for-3 reverse stock split of the Company's common stock.

F - 41

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

As a result of the reverse stock split, (i) every 3 shares of authorized, issued and outstanding common stock was decreased to one share of authorized, issued and outstanding common stock, (ii) the number of shares of common stock into which each outstanding warrant or option to purchase common stock is exercisable was proportionally decreased on a 1-for-3 basis, (iii) all share prices and exercise prices were proportionately increased.

All of the share numbers, share prices, and exercise prices have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect this 1-for-3 reverse stock split.

dollars in thousands (except share and per share data)

NOTE 19:- STOCK CAPITAL (Cont.)

Stock option plans:

The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007.

The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder.

All outstanding awards will continue to be governed by their existing terms and 379,358 available options for future grant were transferred to the Company’s 2015 Global Incentive Plan (the “2015 Plan”) and are reserved for future issuances under the 2015 plan.

The Company’s 2007 Global Incentive Plan (the “2007 Plan”) was adopted by the board of directors on August 30, 2007.

The 2007 Plan terminated upon the Company’s IPO on March 31, 2015 and no further awards may be granted thereunder.

The 2015 Plan became effective upon the consummation of the IPO.

The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers and consultants of the Company and its Subsidiaries.

As of June 30, 2016, a total of 3,827,117 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”).

The 2015 Plan provides for the grant of options, RSUs and other share-based awards to directors, employees, officers and nonemployees of the Company and its subsidiaries.

As of December 31, 2020, a total of 12,828,270 shares of common stock were reserved for issuance pursuant to stock awards under the 2015 Plan (the “Share Reserve”).

The Share Reserve will automatically increase on January 1st of each year during the term of the 2015 Plan, commencing on January 1st of the year following the year in which the 2015 Plan becomes effective, in an amount equal to 5 % of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year;

provided, however, that the Company’s board of directors may determine that there will not be a January 1st increase in the Share Reserve in a given year or that the increase will be less than 5% of the shares of capital stock outstanding on the preceding December 31st.

The aggregate maximum number of shares of common stock that may be issued on the exercise of incentive stock options is 10,000,000 .

As of June 30, 2016, an aggregate of 2,557,691 options are still available for future grant under the 2015 Plan.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

A summary of the activity in the share options granted to employees and members of the board of directors for the year ended June 30, 2016 and related information

Outstanding as of July 1, 2015

Forfeited or expired

Outstanding as of June 30, 2016

Vested and expected to vest as of June 30, 2016

Exercisable as of June 30, 2016

A summary of the activity in the share options granted to employees and members of the board of directors for the year ended June 30, 2015 and related information follows:

Outstanding as of July 1, 2014

As of December 31, 2020, an aggregate of 8,627,031 options are still available for future grant under the 2015 Plan.

A summary of the activity in the stock options granted to employees and members of the board of directors for the year ended December 31, 2020 and related information are as follows:

Outstanding as of December 31, 2019

Forfeited or expired

Outstanding as of June 30, 2015

Vested and expected to vest as of June 30, 2015

Exercisable as of June 30, 2015

The aggregate intrinsic value in the tables above represents the total intrinsic value (the difference between the fair value of the Company’s common stock as of the last day of each period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last day of each period.

The total intrinsic value of options exercised during the year ended June 30, 2016 and 2015 was $30,670 and $484, respectively.

SOLAREDGE TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

The weighted average grant date fair values of options granted to employees and executive directors during the years ended June 30, 2016, 2015 and 2014 were $24.93, $7.57 and $0.66, respectively.

The options outstanding as of June 30, 2016, have been separated into exercise price ranges as follows:

Life in years

$0.87 - $1.50

$1.68 - $2.46

$3.03 - $3.96

The options outstanding as of June 30, 2015, have been separated into exercise price ranges as follows:

Life in years

$1.50 - $1.68

$2.01 - $2.46

$3.03 - $3.96

$5.01 - $5.04

Outstanding as of December 31, 2020

Vested and expected to vest as of December 31, 2020

Exercisable as of December 31, 2020

F - 42

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

A summary of the activity in the RSUs granted to employees and members of the board of directors for the year ended June 30, 2016, is as follows:

Weighted average

Unvested as of July 1, 2015

Unvested as of June 30, 2016

A summary of the activity in the RSUs granted to employees and members of the board of directors for the year ended June 30, 2015, is as follows:

Weighted average

Unvested as of July 1, 2014

Unvested as of June 30, 2015

Options and RSUs issued to non-employee consultants:

The Company has granted options to purchase common shares to non-employee consultants as of June 30, 2016 as follows:

July 31, 2008

July 31, 2018

October 24, 2012

October 24, 2022

January 23, 2013

January 23, 2023

January 27, 2014

January 27, 2024

September 17, 2014

September 17, 2024

October 29, 2014

October 29, 2024

August 19, 2015

November 8, 2015

April 18, 2016

dollars in thousands (except share and per share data)

NOTE 19:- STOCK CAPITAL (Cont.)

The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 251,564 , $ 37,509 , and $ 58,601 , respectively.

The weighted average grant date fair value of options granted to employees and directors during the years ended December 31, 2020, 2019, and 2018, was $ 62.11 , $ 19.83 and $ 20.83 , respectively.

A summary of the activity in the RSUs granted to employees and directors for the year ended December 31, 2020, is as follows:

Weighted average grant date

Unvested as of January 1, 2020

Unvested as of December 31, 2020

The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2020, 2019 and 2018, was $ 202.10 , $ 71.46 and $ 41.45 , respectively.

Employee Stock Purchase Plan:

The Company adopted an ESPP effective upon the consummation of the IPO.

As of December 31, 2020, total of 2,687,451 shares were reserved for issuance under this plan.

The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1 % of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.

However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.

The ESPP is implemented through an offering every six months.

According to the ESPP, eligible employees may use up to 10 % of their salaries to purchase common stock up to an aggregate limit of $ 10 per participant for every six months plan.

The price of an ordinary share purchased under the ESPP is equal to 85 % of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.

As of December 31, 2020, 612,229 shares of common stock had been purchased under the ESPP.

As of December 31, 2020, 2,075,222 shares of common stock were available for future issuance under the ESPP.

In accordance with ASC No.

718, the ESPP is compensatory and, as such, results in recognition of compensation cost.

F - 43

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

The Company has granted options to purchase common shares to non-employee consultants as of June 30, 2015 as follows:

July 31, 2008

July 31, 2018

January 26, 2011

January 26, 2021

January 26, 2012

January 26, 2022

October 24, 2012

October 24, 2022

January 23, 2013

January 23, 2023

January 27, 2014

January 27, 2024

September 17, 2014

September 17, 2024

October 29, 2014

October 29, 2024

The Company accounts for its options granted to non-employee consultants under the fair value method of ASC 505-50 (“Equity-Based Payments to Non-Employees”).

In connection with the grant of stock options to non-employee consultants, the Company recorded stock compensation expenses in the years ended June 30, 2016, 2015 and 2014 in the amounts of $524, $563 and $55, respectively.

Stock-based compensation expense for employees and non-employee consultants:

The Company recognized stock-based compensation expenses related to stock options granted to employees and non-employee consultants in the consolidated statement of operations for the years ended June 30, 2016, 2015 and 2014, as follows:

dollars in thousands (except share and per share data)

NOTE 19:- STOCK CAPITAL (Cont.)

Stock-based compensation expenses for employees and non-employees:

The Company recognized stock-based compensation expenses related to stock options and RSUs granted to employees and nonemployees and ESPP in the consolidated statement of income for the years ended December 31, 2020, 2019 and 2018, as follows:

Year ended December 31,

Cost of revenues

Research and development, net

Research and development

Selling and marketing

General and administrative

Total stock-based compensation expense

Other operating expenses

Total stock-based compensation expenses

As of December 31, 2020, there were total unrecognized compensation expenses in the amount of $ 230,503 related to non-vested equity-based compensation arrangements granted under the Company’s Plans.

These expenses are expected to be recognized during the period from January 1, 2021 through November 30, 2025.

NOTE 20:- EARNINGS PER SHARE

Basic net EPS is computed by dividing the net earnings attributable to SolarEdge Technologies, Inc.

by the weighted-average number of shares of common stock outstanding during the period.

Diluted net EPS is computed by giving effect to all potential shares of common stock, to the extent dilutive, including stock options, RSUs, PSUs, shares to be purchased under the Company’s ESPP, and the Notes due 2025, all in accordance with ASC No.

260, "Earnings Per Share."

2,276,818 and 312,128 shares of common stock were excluded from the calculation of diluted net EPS due to their anti-dilutive effect for the year ended December 31, 2020 and 2019, respectively.

No shares were excluded from the calculation for the year ended December 31, 2018.

F - 44

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

STOCK CAPITAL (Cont.)

As of June 30, 2016, there was a total unrecognized compensation expense of $28,224 related to non-vested equity-based compensation arrangements granted under the Company’s Plan.

These expenses are expected to be recognized during the period from July 1, 2016 through May 31, 2020.

Employee Stock Purchase Plan (“ESPP”):

The Company adopted an Employee Stock Purchase Plan (the “ESPP”) effective upon the consummation of the IPO.

As of June 30, 2016, a total of 888,569 shares were reserved for issuance under this plan.

The number of shares of common stock reserved for issuance under the ESPP will increase automatically on January 1st of each year, for ten years, by the lesser of 1% of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or 487,643 shares.

However, the Company’s board of directors may reduce the amount of the increase in any particular year at their discretion, including a reduction to zero.

The ESPP is implemented through an offering every six months.

According to the ESPP, eligible employees may use up to 10% of their salaries to purchase common stock shares up to an aggregate limit of $10 per participant for every six months plan.

The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the subscription date of each offering period or on the purchase date.

As of June 30, 2016, no common stock shares had yet been purchased under the ESPP.

As of June 30, 2016, 888,569 common stock shares were available for future issuance under the ESPP.

In accordance with ASC No.

718, the ESPP is compensatory and as such results in recognition of compensation cost.

For the year ended June 30, 2016, the Company recognized $45, of compensation expense in connection with the ESPP.

For the years ended June 30, 2015 and 2014, no compensation expense was recognized in connection with the ESPP.

dollars in thousands (except share and per share data)

NOTE 20:- EARNINGS PER SHARE (Cont.)

The following table presents the computation of basic and diluted EPS attributable to SolarEdge Technologies, Inc.:

Year ended December 31,

Net loss attributable to Non-controlling interests

Net income attributable to SolarEdge Technologies, Inc.

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

Net loss attributable to Non-controlling interests

Undistributed earnings reallocated to non-vested stockholders

Net income attributable to SolarEdge Technologies, Inc.

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

Weighted average effect of dilutive securities:

Non-vested PSUs

Effect of stock-based awards

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

F - 45

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 21:- OTHER OPERATING EXPENSES (INCOME)

Year ended December 31,

A settlement of pre-acquisition legal claim against Kokam (1)

Write-off of intangible assets (2)

Compensation package related to the passing of the former Founder, CEO and Chairman (3)

Termination of SolarEdge Automation Machines’s former executive (4)

Sale of SolarEdge Automation Machines’s subsidiary (5)

Total other operating expenses (income)

(1) At the time of the acquisition of Kokam, Kokam had an outstanding claim against it for damages.

The claim was settled for an amount of $ 4,900 , which was recognized as an expense in the year ended December 31, 2019.

In March 2020, the Company was indemnified for the full amount by a major selling shareholder of Kokam, which was recognized as an income in the year ended December 31, 2020.

(2) The Company ceased to use intangible assets of one of SolarEdge Automation Machines’s subsidiaries.

(3) On August 25, 2019, the Company announced the untimely death of Mr.

Guy Sella, Founder, who had served as CEO and Chairman of the Board of Directors until shortly before his passing.

The amount is related to payroll, bonus and acceleration of stock-based compensation award.

(4) As part of SolarEdge Automation Machines acquisition, the Company issued to a shareholder who had served as an executive of SolarEdge Automation Machines 334,095 PSUs, which were subject to certain performance goals and a vesting period.

In December 2019, in connection with a separation agreement between the parties, the Company and the shareholder amended the original agreement, which resulted in a modification to the terms of 150,000 of the original PSUs, such as, the fair value of the PSU, the service period and the performance goals.

The Company exercised a call option with respect to the remaining 183,395 PSUs, for a price per share equal to €

(5) On December 31, 2019, the Company completed the sale of a SolarEdge Automation Machines subsidiary.

F - 46

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES

1 unchanged sentence

The Company is subject to U.S.

federal tax at the rate of 34%, and the Company’s German subsidiary is subject to German tax at the rate of 33%.

federal tax at the rate of 21 %.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was signed into law making significant changes to U.S.

income tax law.

These changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years 2018 onwards and created new taxes on certain foreign-sourced earnings and certain related-party payments.

The Tax Act required the Company to pay U.S.

income taxes on accumulated foreign subsidiaries earnings not previously subject to U.S.

income tax at a rate of 15.5 % to the extent of foreign cash and certain other net current assets and 8 % on the remaining earnings.

The total tax liability was calculated to approximately $ 8,500 .

The Company has elected to pay its transition tax over the eight-year period provided in the Tax Act.

Kokam is subject to Korean tax on progressive tax rates of up to 22 %.

SolarEdge Automation Machines is subject to Italian corporate tax rate of 24 %.

Corporate tax in Israel:

Taxable income of Israeli companies is subject to corporate tax at the rate of 26.5% in the year ended June 30, 2014 and 2015, and 25% in the year ended June 30, 2016 onwards (see also Note 18i).

Taxable income of Israeli companies is subject to corporate tax at the rate of 23 %.

In December 2016, the Israeli Parliament approved the Economic Efficiency Law 2016 (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), which reduces the corporate income tax rate to 23 % effective from January 1, 2018 onwards.

The Israeli subsidiary is also eligible for tax benefits as further described in note 22l.

Carryforward tax losses:

As of June 30, 2016, the Israeli subsidiary has approximately $20,500 of Israeli net carryforward tax losses, which are expected to be utilized in 2017.

As of June 30, 2016, the Company has no federal or state carryforward tax losses.

Deferred income taxes:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax liabilities and assets are as follows:

Assets in respect of:

As of December 31, 2020, Kokam has carryforward tax losses of $ 28,520 .

As of December 31, 2020, SolarEdge Automation Machines has carryforward tax losses of approximately $ 59,140 .

Deferred taxes:

Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F - 47

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

The Company’s Israeli subsidiary’s tax-exempt profit from Benefited Enterprises (as defined in note 22l) is permanently reinvested, as the Company’s management and the Board of Directors has determined that the Company does not currently intend to distribute dividends.

Therefore, deferred taxes have not been provided for such tax-exempt income.

The Company intends to continue to reinvest these profits and does not currently foresee a need to distribute dividends out of such tax-exempt income.

Therefore, no deferred taxes have been provided in respect of such tax-exempt income as the undistributed tax-exempt income is essentially permanent in duration.

The Company may incur additional tax liability in the event of intercompany dividend distributions by some of its subsidiaries.

Such additional tax liability in respect of these subsidiaries has not been provided for in the Financial Statements as the Company’s management and the Board of Directors has determined that the Company intends to reinvest earnings of its subsidiaries indefinitely.

Taxes that would apply in the event of disposal of investments in subsidiaries have not been taken into account in computing deferred income taxes, as the Company’s management and the Board of Directors has determined that the Company’s intention to hold, and not to realize, these investments.

Significant components of the Company’s deferred tax liabilities and assets are as follows:

Deferred tax assets, net:

Research and Development carryforward expenses

Carryforward tax losses

Research and Development carryforward expenses- temporary differences

Other reserves

Valuation allowance (1)

Stock based compensation expenses

Deferred revenue

Inventory Impairment

Allowance and other reserves

Total Gross deferred tax assets, net

Less, Valuation Allowance

Total deferred tax assets, net

Deferred tax liabilities, net:

Convertible Note

Purchase price allocation

Total deferred tax liabilities, net

Deferred tax assets, net

(1) ASC 740 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company evaluated the net deferred tax assets for each separate tax entity.

As of June 30, 2015, the Company concluded that it is not more likely than not that the net deferred tax assets will be realized and a full valuation allowance has been recorded against these assets.

The Company's estimate of future book-taxable income considers available evidence, both positive and negative, about its operating businesses and investments, including an aggregation of individual projections for each significant operating business and investment, estimated apportionment factors for state and local taxing jurisdictions and includes all future years that the Company estimated it would have available net operating loss carryforwards.

During the second fiscal quarter of 2016, the Company determined that the positive evidence outweighs the negative evidence for deferred tax assets and concluded that these deferred tax assets are realizable on a "more likely than not" basis.

This determination was mainly due to expected future results of positive operations and earnings history.

Deferred tax liabilities, net

Net deferred tax assets

(1) Related to deferred tax assets that would only be realizable upon the generation of net income in certain foreign jurisdictions.

F - 48

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

Income before taxes is comprised as follows:

Taxes on income (tax benefit) are comprised as follows:

Domestic taxes:

Foreign taxes:

Uncertain tax positions:

Balance at January 1,

Increases related to current year tax positions

Increase for tax positions related to prior years

Decreases related to prior year tax positions

Balance at December 31,

The total amount of gross unrecognized tax benefits was $ 10,564 , $ 9,532 and $ 8,499 as of December 31, 2020, 2019 and 2018, respectively, and if recognized, would affect our effective tax rate.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes.

The total amount of penalties and interest were $ 127 as of December 31, 2020 and not material as of December 31, 2019 and 2018.

Income before income taxes are comprised as follows:

Year ended December 31,

Income before income taxes

Income taxes (tax benefit) are comprised as follows:

Year ended December 31,

Current taxes:

Federal and State

Total current taxes

Deferred taxes:

Federal and State

Total deferred taxes

Income taxes, net

F - 49

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

Reconciliation of theoretical tax expense to actual tax expense:

The differences between the statutory tax rate of the Company and the effective tax rate are primarily accounted for by the non-recognition of tax benefits from accumulated net carryforward tax losses among the Company and various subsidiaries due to uncertainty of the realization of such tax benefits.

A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company, and the actual tax expense (benefit) as reported in the consolidated statements of operations is as follows:

Income (loss) before taxes, as reported in the consolidated statements of operations

The differences between the statutory tax rate of the Company and the effective tax rate are result of a variety of factors, including different effective tax rates applicable to non-US subsidiaries that have tax rates different than the Company tax rate, tax benefits relating to stock-based compensation and adjustments to valuation allowances on deferred tax assets on such subsidiaries.

Year ended December 31,

Statutory tax rate

Theoretical tax benefits on the above amount at the US statutory tax rate

Income tax at rate other than the U.S.

statutory tax rate

Impact of Israel corporate tax rate change from 25% to 26.5%

Non-deductible expenses

Operating losses and other temporary differences for which valuation allowance was provided

Effects of valuation allowances on deferred tax assets

Other individually immaterial income tax items

Actual tax expense (tax benefit)

Losses and timing differences for which valuation allowance was provided  

Tax Cuts and Jobs Act of 2017

Disallowable and allowable deductions

Other individually immaterial income tax items, net

Effective tax rate

Tax assessments:

As of June 30, 2016, the Company and certain of its subsidiaries filed U.S.

As of December 31, 2020, the Company and certain of its subsidiaries filed U.S.

federal and various state and foreign income tax returns.

1 unchanged sentence

federal income tax return is closed for all tax years up to and including 2016.

The statute of limitations related to tax returns of the Company’s Israeli subsidiary is closed for all tax years up to and including 2010.

With respect to the Company’s German, Chinese, Australian, Canadian, Dutch, Japanese, UK, French, Italian and Bulgarian subsidiaries, the statute of limitations related to its tax returns is open for all tax years since incorporation.

Net operating losses generated in years prior to 2016 and carried forward are available to adjustment and subject to the statute of limitation provisions of such year when the net operating losses were utilized.

The statute of limitations related to tax returns of the Company’s Israeli subsidiary for all tax years up to and including 2014 has lapsed.

The statute of limitations related to tax returns of the Company’s other subsidiaries has lapsed for part of the tax years, which differs between the different subsidiaries.

The Company believes that it has adequately provided for reasonably foreseeable outcomes related to tax audits and settlements.

The final tax outcome of any company tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals.

Such differences could have a material effect on the Company’s income tax provision and net income in the period in which such determination is made.

The Israeli tax authorities issued a tax assessment for 2018 against the Company’s Israeli subsidiary in the total amount of $ 11.5 million.

The Israeli subsidiary has challenged the tax assessment.

The Company believes it has adequately provided for this tax assessment such that any adverse results would have an immaterial impact on the Company’s financial statements.

F - 50

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

The Company believes that it has adequately provided for reasonably foreseeable outcomes related to tax audits and settlements.

The final tax outcome of any Company tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals.

Such differences could have a material effect on the Company’s income tax provision and net income (loss) in the period in which such determination is made.

Tax benefits for Israeli companies under the Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):

The Israeli subsidiary elected tax year 2012 as a "Year of Election" for “Beneficiary Enterprise” status under the Investment Law, which provides certain benefits, including tax exemptions and reduced tax rates.

Income not eligible for Beneficiary Enterprise benefits is taxed at a regular corporate tax rate.

Upon meeting the requirements under the Investment Law, income derived from Beneficiary Enterprise from productive activity will be exempt from tax for two years from the year in which the Israeli subsidiary first has taxable income, provided that 12 years have not passed from the beginning of the year of election.

If dividends are distributed out of tax exempt profits, the Israeli subsidiary will then become liable for tax at the rate applicable to its profits from the Beneficiary Enterprise in the year in which the income was earned, as if it had not chosen the alternative track of benefits.

The dividend recipient is subject to withholding tax at the rate of 15% applicable to dividends from Beneficiary enterprises, if the dividend is distributed during the tax benefits period or within twelve years thereafter.

This limitation does not apply to a foreign investors' company.

The Israeli subsidiary currently has no plans to distribute dividends and intends to retain future earnings to finance the development of its business.

Through June 30, 2016, the Israeli subsidiary had not generated income under the provision of the Investment Law.

Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 71):

On August 5, 2013, the Israeli Parliament issued the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which consists of Amendment 71 to the Law for the Encouragement of Capital Investments ("the Amendment").

According to the Amendment, the tax rate on preferred income form a preferred enterprise in 2014 and thereafter will be 16% (in development area A - 9%).

The Amendment also prescribes that any dividends distributed to individuals or foreign residents from the preferred enterprise's earnings as above will be subject to tax at a rate of 20%.

Tax benefits for Israeli companies under the Law for the Encouragement of Capital Investments, 1959 (the “Investments Law”):

The Israeli subsidiary elected tax year 2012 as a "Year of Election"

for “Benefited Enterprise”

status under the Investments Law.

According to the Investments Law, the Israeli subsidiary elected to participate in the alternative benefits program which provides certain benefits, including tax exemptions and reduced tax rates (which depend on, inter alia, the geographic location in Israel).

Income not eligible for Benefited Enterprise benefits is taxed at a regular corporate tax rate.

Upon meeting the requirements under the Investments Law, undistributed income derived from Benefited Enterprise from productive activity will be exempt from tax for two years from the year in which the Israeli subsidiary first has taxable income (“exempt period”), provided that 12 years have not passed from the beginning of the year of election.

By December 31, 2016, the Israeli subsidiary utilized all of its operating loss carryforwards in Israel and became profitable for tax purposes.

On October 24, 2018, the Company’s Israeli subsidiary received an approval from the Israeli Tax Authorities confirming the applicability of the two-year tax exemption as provided in the Investments Law until December 31, 2018.

As of December 31, 2018, approximately $ 289,900 was derived from tax exempt profits earned by the Israeli subsidiary “Benefited Enterprises”

in the two tax years exempt period, years 2017 - 2018.

The Company has determined that such tax-exempt income will not be distributed as dividends and intends to reinvest the amount of its tax-exempt income earned by the Israeli subsidiary.

Accordingly, no provision for deferred income taxes has been provided on income attributable to the Israeli subsidiary “Benefited Enterprises”

as such income is essentially permanently reinvested.

If the Israeli subsidiary’s retained tax-exempt income is distributed, the income would be taxed at the applicable corporate tax rate which depends on the foreign ownership in each tax year, and the tax rate can range between 10% (when foreign ownership exceeds 90%) to 25% (when foreign ownership is below 49%).

The dividend recipient is subject to withholding tax at the rate of 15 %, applicable to dividends from Benefited enterprises, or such lower rate as may be provided in an applicable tax treaty, which would generally be withheld at source by the distributing company.

Through December 31, 2020, the Israeli subsidiary had generated income under the provision of the Investments Law.

Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 73) - In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Investments Law (the “2017 Amendment") was published.

According to the 2017 Amendment, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).

The 2017 Amendment also prescribes special tax tracks for preferred technological enterprises (“PTE”), which are subject to rules that were issued by the Ministry of Finance.

F - 51

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

The Law for Encouragement of Industry (Taxation), 1969:

The Israeli entity has the status of an "industrial company", as defined by this law.

According to this status and by virtue of regulations published thereunder, The Israeli entity is entitled to claim a deduction of accelerated depreciation on equipment used in industrial activities, as determined in the regulations issued under the Inflationary Law.

The Israeli entity is also entitled to amortize a patent or rights to use a patent or intellectual property that are used in the enterprise's development or advancement, to deduct issuance expenses for shares listed for trading, and to file consolidated financial statements under certain conditions.

Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.

There can be no assurance that the Company will continue to qualify as an Industrial Company or that the benefits described above will be available in the future.

On June 14, 2017, the Encouragement of Capital Investments Regulations (Preferred Technological Income and Capital Gain for Technological Enterprise), 2017 (the “Regulations”) were published.

The Regulations applied Action 5 under the Action Plan on Base Erosion and Profit Shifting (BEPS).

The Regulations describe, inter alia, the mechanism used to determine the calculation of the benefits under the PTE regime and determine certain requirements relating to documentation of intellectual property for the purpose of the PTE.

According to these provisions, a company that complies with the terms under the PTE regime may be entitled to certain tax benefits with respect to income generated during the company’s regular course of business and derived from the preferred intangible asset (as determined in the Investment Law), excluding income derived from intangible assets used for marketing and income attributed to production activity.

In the event that intangible assets used for marketing purposes generate over 10% of the PTE’s income, the relevant portion, calculated using a transfer pricing study, would be subject to regular corporate income tax.

If such income does not exceed 10%, the PTE will not be required to exclude the marketing income from the PTE’s total income.

The Regulations establish a presumption of direct production expenses plus 10% with respect to income related to production, which can be countered by the results of a supporting transfer pricing study.

Tax rates applicable to such production income will be similar to the tax rates under the Preferred Enterprise regime to the extent such income would be considered as eligible.

In order to calculate the preferred income, the PTE is required to take into account the income and the research and development expenses that are attributed to each single preferred intangible asset.

Nevertheless, it should be noted that the transitional provisions allow companies to take into account the income and research and development expenses attributed to all of the preferred intangible assets they have.

A PTE, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development Zone A - a tax rate of 7.5%).

The Israeli subsidiary’s PTE facilities in Israel are not located in Development Zone A.

The Israeli subsidiary has developed its own solar products manufacturing facilities in Israel, located in a Development Zone A.

The Israeli subsidiary notified the ITA of its election to implement the PTE with effect from January 1, 2019.

A Preferred Company distributing dividends from Preferred Income or income derived from its PTE, would subject the recipient to a tax at the rate of 20% (or lower, if so provided under an applicable tax treaty).

In certain circumstances, a dividend distributed to a corporate shareholder who is not an Israeli resident for tax purposes, would be subject to a tax at the rate of 4%.

Such taxes would generally be withheld at source by the distributing company.

To benefit from any lower tax rates under an applicable tax treaty, a non-resident of Israel would need to receive in advance a valid certificate from the ITA allowing for a reduced tax rate, or to file an appropriate tax return with the ITA claiming a refund based on the lower rate under the applicable tax treaty.

F - 52

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 22:- INCOME TAXES (Cont.)

Tax Benefits for Research and Development:

Israeli tax law (section 20A to the Israeli Tax Ordinance (New Version), 1961) allows, a tax deduction for research and development expenses, including capital expenses, for the year in which they are paid.

Such expenses must relate to scientific research in industry, agriculture, transportation or energy, and must be approved by the relevant Israeli government ministry, determined by the field of research.

Furthermore, the research and development must be for the promotion of the company’s business and carried out by or on behalf of the company seeking such tax deduction.

However, the amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects.

As for expenses incurred in scientific research that is not approved by the relevant Israeli government ministry, they will be deductible over a three-year period starting from the tax year in which they are paid.

The Company’s Israeli subsidiary intends to submit a formal request to the relevant Israeli government ministry in order to obtain such approval for 2019 - 2020.

Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969:

The Company’s Israeli subsidiary claims currently to be qualified as ‘industrial company’

as defined by this law and as such, is entitled to certain tax benefits, consisting mainly of accelerated depreciation and amortization of patents and certain other intangible property.

NOTE 23:- FINANCIAL EXPENSES (INCOME), NET

Year ended December 31,

Exchange rate loss (income), net

Interest income on marketable securities

Interest expenses

Hedging activity, net

Amortization of debt discount and debt issuance costs

Other financial expenses (income), net

Financial expenses (income), net

Remeasurement of warrants to purchase convertible preferred stock

Interest on term loan

Other financial expenses related to term loan

Expenses (income) related to hedging transaction

Interest on short- term loan

Interest on marketable securities

Amortization of marketable securities premium and accretion of discount, net

Exchange rate loss (income), net, bank charges and other finance expenses

F - 53

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA

Summary information about geographic areas:

ASC 280 (“Segment Reporting”) establishes standards for reporting information about operating segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company manages its business on the basis of one reportable segment, and derives revenues from selling its products (see Note 1a for a brief description of the Company’s business).

The following is a summary of revenues within geographic areas:

Revenues based on Customers’ location:

dollars in thousands (except share and per share data)

NOTE 24:- SEGMENT, GEOGRAPHIC, MAJOR CUSTOMER AND PRODUCT INFORMATION

Segment Information:

Following the completion of three acquisitions during 2018 and 2019, the Company has changed its segments measurement, beginning in 2019.

The purpose of the new measurement is to provide the Company’s chief operating decision maker (“CODM”) better information to asses’

segment performance and to make resource allocation decisions.

The Company now operates in five different operating segments:

Solar, Critical Power (formerly known as UPS), Energy Storage, e-Mobility and Automation Machines.

The Company's Chief Executive Officer, who is the CODM, makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the operating segments.

Segment profit is comprised of gross profit for the segment less operating expenses that do not include amortization, stock based compensation expenses and certain other items.

The Company manages its assets on a group basis, not by segments, as many of its assets are shared or commingled.

The Company’s CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment.

The Company identified one operating segment as reportable –

the Solar segment.

The other operating segments are insignificant individually and therefore their results are presented together under “All other”.

The Solar segment includes the design, development, manufacturing, and sales of an intelligent inverter solution designed to maximize power generation at the individual PV module level.

The solution consists mainly of the Company’s power optimizers, inverters and cloud-based monitoring platform.

The “All other”

category includes the design, development, manufacturing and sales of UPS products, energy storage products, e-Mobility products and automated machines.

Intersegment sales are a source of revenue for one of the operating segments included in the “All other”

The Company accounts for intersegment sales as if the sales were to third parties, that is, at current market prices.

The following table presents information on reportable segments profit (loss) for the period presented:

Year ended December 31,

Cost of revenues

Research and development

Sales and marketing

General and administrative

Segments profit (loss)

F - 54

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands (except share and per share data)

NOTE 24:- SEGMENT, GEOGRAPHIC, MAJOR CUSTOMER AND PRODUCT INFORMATION (Cont.)

The following table presents information on reportable segments reconciliation to consolidated revenues for the periods presented:

Year ended December 31,

Solar segment revenues

All other segment revenues

Adjustment of intersegment revenues

Consolidated revenues

The following table presents information on reportable segments reconciliation to consolidated operating income for the periods presented:

Year ended December 31,

Solar segment profit

All other segment loss

Segments operating profit

Amounts not allocated to segments:

Stock based compensation expenses

Amortization related to business combinations

Sale of SolarEdge Automation Machines’

Legal settlement (see Note 21)

Cost of products adjustments

Other unallocated expenses

Intersegment profit

Consolidated operating income

The All other segment results were immaterial for the year ended December 31, 2018.

Revenues by geographic, based on Customers’

Year ended December 31,

United States

1 unchanged sentence

Total revenues

(*) Except for Germany

Major Customers data as a percentage of total revenues:

The following is a summary of revenues by product family :

Total revenues

(*) Except for Netherlands

F - 55

SOLAREDGE TECHNOLOGIES, INC.

AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dollars in thousands, except share data

GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA (Cont.)

Long-lived assets by geographic region:

dollars in thousands (except share and per share data)

NOTE 24:- SEGMENT, GEOGRAPHIC, MAJOR CUSTOMER AND PRODUCT INFORMATION (Cont.)

Revenues by product:

Year ended December 31,

Total revenues

Long-lived assets by geographic location:

As of December 31,

Total long-lived assets (*)

Long-lived assets are comprised of property and equipment, net (long term lease deposits and severance pay fund are not included).

(*) Long-lived assets are comprised of property and equipment, net and Operating lease right-of-use assets, net.

- - - - - - - - - - - - - - - - - - - - -

F - 56

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SOLAREDGE TECHNOLOGIES, INC.

/s/ Guy Sella

Chief Executive Officer and Chairman

Chief Executive Officer

February 19, 2021

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Zvi Lando, Ronen Faier, and Rachel Prishkolnik, or any of them, as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person’s name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K/A, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated below.

Chief Executive Officer and Director

( Principal Executive Officer )

 February 19, 2021

/s/Ronen Faier

Chief Financial Officer

( Principal Financial and Accounting Officer )

 February 19, 2021

/s/Nadav Zafrir

Chairman of the Board

February 19, 2021

E XHIBIT INDEX

Incorporation by Reference

Amended and Restated Certificate of Incorporation

Incorporated by reference to Exhibit 4.1 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Amended and Restated By‑Laws

Incorporated by reference to Exhibit 4.2 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Specimen Common Stock Certificate of the Registrant

Incorporated by reference to Exhibit 4.1 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Fifth Amended and Restated Investors’ Rights Agreement, dated as of September 17, 2014, among SolarEdge Technologies, Inc.

and the investors party thereto

Incorporated by reference to Exhibit 4.2 to Form S-1 (Registration No.

333-202159) filed with the SEC on February 18, 2015

Warrant to Purchase Shares of SolarEdge Technologies, Inc., dated December 28, 2012

Incorporated by reference to Exhibit 4.3 to Form S-1 (Registration No.

333-202159) filed with the SEC on February 18, 2015

Second Amended and Restated Loan and Security Agreement, dated as of February 17, 2015, among Silicon Valley Bank, SolarEdge Technologies Ltd., SolarEdge Technologies, Inc.

and SolarEdge Technologies GmbH

Incorporated by reference to Exhibit 10.1 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Employment Agreement, dated August 26, 2007, between SolarEdge Technologies, Inc.

and Guy Sella

Incorporated by reference to Exhibit 10.2 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Employment Agreement, dated December 1, 2010, between

SolarEdge Technologies, Inc.

and Ronen Faier

Incorporated by reference to Exhibit 10.3 of

Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

Employment Agreement, dated May 17, 2009, between SolarEdge Technologies, Inc.

and Zvi Lando

Incorporated by reference to Exhibit 10.3 of Amendment No.

1 to Form S-1 (Registration No.

333-202159) filed with the SEC on March 11, 2015

SolarEdge Technologies, Inc.

2007 Global Incentive Plan.

Incorporated by reference to Exhibit 99.3 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

SolarEdge Technologies, Inc.

2015 Global Incentive Plan

Incorporated by reference to Exhibit 99.1 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

SolarEdge Technologies, Inc.

2015 Employee Stock Purchase Plan

Incorporated by reference to Exhibit 99.2 to Form S-8 (Registration No.

333-203193) filed with the SEC on April 2, 2015

Manufacturing Services Agreement, dated February 14, 2010 between Flextronics (Israel) Ltd.

and SolarEdge Technologies Ltd.

(previously filed as Exhibit 10.10 to the Company's Registration Statement on Form S-1, filed with the Commission on February 18, 2015

Incorporated by reference to Exhibit 10.10 to Form S-1 (Registration No.

333-202159) filed with the SEC on February 18, 2015

Interim Agreement, dated April 7, 2013 among Flextronics Industrial Ltd.

between Flextronics (Israel) Ltd.

and SolarEdge Technologies Ltd.

(previously filed as Exhibit 10.11 to the Company's Registration Statement on Form S-1, filed with the Commission on February 18, 2015)

Incorporated by reference to Exhibit 10.11 to Form S-1 (Registration No.

333-202159) filed with the SEC on February 18, 2015

Manufacturing Services Agreement, dated June 9, 2011 between Jabil Circuit Inc.

and SolarEdge Technologies Inc.

(previously filed as Exhibit 10.11 to the Company's Registration Statement on Form S-1, filed with the Commission on February 18, 2015)

Incorporated by reference to Exhibit 10.12 to Form S-1 (Registration No.

333-202159) filed with the SEC on February 18, 2015

Form of Non-Employee Director RSU Award Agreement

Incorporated by reference to Exhibit 10.11 to Form 10-K filed with the SEC on August 20, 2015

Form of Non-Employee Director Stock Option Award Agreement

Incorporated by reference to Exhibit 10.12 to Form 10-K filed with the SEC on August 20, 2015

Form of Employee RSU Award Agreement

Incorporated by reference to Exhibit 10.13 to Form 10-K filed with the SEC on August 20, 2015

Form of Employee Stock Option Award Agreement

Incorporated by reference to Exhibit 10.14 to Form 10-K filed with the SEC on August 20, 2015

List of Subsidiaries of the Registrant

Incorporated by reference to Exhibit 21.1 to Form 10-K filed with the SEC on August 17, 2016

Consent of Kost Forer Gabbay & Kasierer, independent registered public accounting firm

Incorporated by reference to Exhibit 23.1 to Form 10-K filed with the SEC on August 17, 2016

Power of Attorney (included in signature page)

Incorporated by reference to Exhibit 24.1 to Form 10-K filed with the SEC on August 17, 2016

Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended

Filed with this report.

Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended

Filed with this report.

Certification of Chief Executive Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed with this report

Certification of Chief Financial Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed with this report.

XBRL Instance Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

XBRL Taxonomy Extension Schema Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

XBRL Taxonomy Extension Calculation Linkbase Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

XBRL Taxonomy Extension Definition Linkbase Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

XBRL Taxonomy Extension Label Linkbase Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

XBRL Taxonomy Extension Presentation Linkbase Document

Incorporated by reference to Form 10-K filed with the SEC on August 17, 2016

† Management contract or compensatory plan or arrangement.

# Confidential treatment has been requested with respect to certain portions of this exhibit.

Omitted portions have been filed separately with the Securities and Exchange Commission.

/s/Yoni Cheifetz

Yoni Cheifetz

February 19, 2021

/s/Marcel Gani

February 19, 2021

/s/Doron Inbar

February 19, 2021

/s/Avery More

February 19, 2021

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/A

Item 9A. Controls and Procedures