UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission File Number: 001-36612
ReWalk Robotics Ltd.
(Exact name of registrant as specified in charter)
| Israel | Not applicable | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. | ||
| 3 Hatnufa Street, Floor 6, Yokneam Ilit, Israel | 2069203 | ||
| (Address of principal executive offices) | (Zip Code) | ||
+972.4.959.0123 Registrant's telephone number, including area code Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act | |||
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Ordinary shares, par value NIS 0.25 | RWLK | Nasdaq Capital Market |
Indicate by a check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of August 6, 2020,May 10, 2021, the Registrantregistrant had outstanding 19,158,96346,118,197 ordinary shares, par value NIS 0.25 per share.
REWALK ROBOTICS LTD.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2020MARCH 31, 2021
TABLE OF CONTENTS
| Page No. | ||
As used in this quarterly report on Form 10-Q (this “quarterly report”), the terms “ReWalk,” the “Company,” “RRL,” “we,” “us” and “our” refer to ReWalk Robotics Ltd. and its subsidiaries, unless the context clearly indicates otherwise. Our website is www.rewalk.com. Information contained, or that can be accessed through, our website does not constitute a part of this quarterly report on Form 10-Q and is not incorporated by reference herein. We have included our website address in this quarterly report solely for informational purposes. Information that we furnish to or file with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are available for download, free of charge, on our website as soon as reasonably practicable after such materials are filed with or furnished to the SEC. Our SEC filings, including exhibits filed or furnished therewith, are also available on the SEC’s website at http://www.sec.gov.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
(In thousands, except share and per share data)
| March 31, | December 31, | |||||||||||||||
| June 30, | December 31, | 2021 | 2020 | |||||||||||||
| 2020 | 2019 | (unaudited) | ||||||||||||||
| ASSETS | ||||||||||||||||
| CURRENT ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 14,064 | $ | 16,253 | $ | 67,411 | $ | 20,350 | ||||||||
| Trade receivable, net | 1,054 | 794 | 498 | 684 | ||||||||||||
| Prepaid expenses and other current assets | 1,123 | 903 | 517 | 672 | ||||||||||||
| Inventories | 3,455 | 3,123 | 3,493 | 3,542 | ||||||||||||
| Total current assets | 19,696 | 21,073 | 71,919 | 25,248 | ||||||||||||
| LONG-TERM ASSETS | ||||||||||||||||
| Restricted cash and other long term assets | 1,037 | 1,061 | ||||||||||||||
Restricted cash and other long-term assets | 1,021 | 1,033 | ||||||||||||||
| Operating lease right-of-use assets | 1,526 | 1,737 | 1,229 | 1,349 | ||||||||||||
| Property and equipment, net | 447 | 501 | 392 | 437 | ||||||||||||
| Total long-term assets | 3,010 | 3,299 | 2,642 | 2,819 | ||||||||||||
| Total assets | $ | 22,706 | $ | 24,372 | $ | 74,561 | $ | 28,067 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| March 31, | December 31, | |||||||||||||||
| June 30, | December 31, | 2021 | 2020 | |||||||||||||
| 2020 | 2019 | (unaudited) | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||||
| Current maturities of long term loans | $ | 4,548 | $ | 5,438 | ||||||||||||
| Current maturities of operating leases | 620 | 637 | 633 | 660 | ||||||||||||
| Trade payables | 2,117 | 2,698 | 1,981 | 2,268 | ||||||||||||
| Employees and payroll accruals | 796 | 670 | 577 | 867 | ||||||||||||
| Deferred revenues | 279 | 323 | 388 | 441 | ||||||||||||
| Other current liabilities | 487 | 402 | 443 | 432 | ||||||||||||
| Total current liabilities | 8,847 | 10,168 | 4,022 | 4,668 | ||||||||||||
| LONG-TERM LIABILITIES | ||||||||||||||||
| Long term loan, net of current maturities | 218 | 1,527 | ||||||||||||||
| Deferred revenues | 594 | 521 | 706 | 667 | ||||||||||||
| Non-current operating leases | 1,098 | 1,315 | 782 | 923 | ||||||||||||
| Other long-term liabilities | 50 | 61 | 32 | 35 | ||||||||||||
| Total long-term liabilities | 1,960 | 3,424 | 1,520 | 1,625 | ||||||||||||
| Total liabilities | 10,807 | 13,592 | 5,542 | 6,293 | ||||||||||||
| COMMITMENTS AND CONTINGENT LIABILITIES | ||||||||||||||||
| Shareholders’ equity: | ||||||||||||||||
| Share capital | ||||||||||||||||
| Ordinary share of NIS 0.25 par value-Authorized: 60,000,000 shares at June 30, 2020 and December 31, 2019; Issued and outstanding: 14,190,685 and 7,319,560 shares at June 30, 2020 and December 31, 2019, respectively | 993 | 504 | ||||||||||||||
| Ordinary share of NIS 0.25 par value-Authorized: 60,000,000 shares at March 31, 2021 and December 31, 2020; Issued and outstanding: 46,092,577 and 25,332,225 shares at March 31, 2021 and December 31, 2020, respectively | 3,385 | 1,827 | ||||||||||||||
| Additional paid-in capital | 186,070 | 178,745 | 250,141 | 201,392 | ||||||||||||
| Accumulated deficit | (175,164 | ) | (168,469 | ) | (184,507 | ) | (181,445 | ) | ||||||||
| Total shareholders’ equity | 11,899 | 10,780 | 69,019 | 21,774 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 22,706 | $ | 24,372 | $ | 74,561 | $ | 28,067 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
(Unaudited)
(In thousands, except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
| Revenues | $ | 1,668 | $ | 877 | $ | 2,428 | $ | 2,458 | $ | 1,316 | $ | 760 | ||||||||||||
| Cost of revenues | 646 | 442 | 1,033 | 1,097 | 609 | 387 | ||||||||||||||||||
| Gross profit | 1,022 | 435 | 1,395 | 1,361 | 707 | 373 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development, net | 954 | 1,860 | 1,939 | 3,274 | 795 | 985 | ||||||||||||||||||
| Sales and marketing | 1,353 | 1,531 | 3,034 | 3,118 | 1,671 | 1,681 | ||||||||||||||||||
| General and administrative | 1,267 | 1,279 | 2,576 | 2,779 | 1,262 | 1,309 | ||||||||||||||||||
| Total operating expenses | 3,574 | 4,670 | 7,549 | 9,171 | 3,728 | 3,975 | ||||||||||||||||||
| Operating loss | (2,552 | ) | (4,235 | ) | (6,154 | ) | (7,810 | ) | (3,021 | ) | (3,602 | ) | ||||||||||||
| Financial expenses, net | 235 | 353 | 481 | 771 | ||||||||||||||||||||
| Financial expenses (income), net | (4 | ) | 246 | |||||||||||||||||||||
| Loss before income taxes | (2,787 | ) | (4,588 | ) | (6,635 | ) | (8,581 | ) | (3,017 | ) | (3,848 | ) | ||||||||||||
| Taxes on income (tax benefit) | 68 | (1 | ) | 60 | 6 | 45 | (8 | ) | ||||||||||||||||
| Net loss | $ | (2,855 | ) | $ | (4,587 | ) | $ | (6,695 | ) | $ | (8,587 | ) | $ | (3,062 | ) | $ | (3,840 | ) | ||||||
| Net loss per ordinary share, basic and diluted | $ | (0.22 | ) | $ | (0.88 | ) | $ | (0.57 | ) | $ | (2.03 | ) | $ | (0.08 | ) | $ | (0.37 | ) | ||||||
| Weighted average number of shares used in computing net loss per ordinary share, basic and diluted | 13,101,275 | 5,213,446 | 11,744,275 | 4,236,788 | 36,187,789 | 10,374,116 | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
(Unaudited)
(In thousands, except share data)
| Ordinary Share | Additional paid-in | Accumulated | Total shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | equity | ||||||||||||||||
| Balance as of April 1, 2019 | 3,695,174 | 253 | 158,720 | (156,918 | ) | 2,055 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 314 | — | 314 | |||||||||||||||
| Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees | 14,817 | 1 | — | — | 1 | |||||||||||||||
| Issuance of ordinary shares in a “Registered Direct” offerings , net of issuance expenses in the amount of $1,125 (1) | 1,650,248 | 115 | 8,010 | — | 8,125 | |||||||||||||||
| Issuance of ordinary shares in a “Warrant exercise” agreement, net of issuance expenses in the amount of $1,019 (1) | 1,464,665 | 102 | 9,864 | — | 9,966 | |||||||||||||||
| Exercise of pre-funded warrants and warrants (1) (2) | 464,206 | 32 | 1,362 | — | 1,394 | |||||||||||||||
| Net loss | — | — | — | (4,587 | ) | (4,587 | ) | |||||||||||||
| Balance as of June 30, 2019 | 7,289,110 | 503 | 178,270 | (161,505 | ) | 17,268 | ||||||||||||||
| Balance as of April 1, 2020 | 12,930,155 | 903 | 184,489 | (172,309 | ) | 13,083 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 113 | — | 113 | |||||||||||||||
| Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees | 14,030 | * | ) | — | — | — | ||||||||||||||
| Exercise of warrants (1) (2) | 1,246,500 | 90 | 1,468 | — | 1,558 | |||||||||||||||
| Net loss | — | — | — | (2,855 | ) | (2,855 | ) | |||||||||||||
| Balance as of June 30, 2020 | 14,190,685 | 993 | 186,070 | (175,164 | ) | 11,899 | ||||||||||||||
| Ordinary Share | Additional paid-in capital | Total shareholders’ equity (deficiency) | ||||||||||||||||||
| Number | Amount | Accumulated deficit | ||||||||||||||||||
| Balance as of December 31, 2019 | 7,319,560 | 504 | 178,745 | (168,469 | ) | 10,780 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 199 | — | 199 | |||||||||||||||
| Issuance of ordinary shares upon exercise of options to purchase ordinary shares and restricted stock units (“RSUs”) by employees and non-employees | 10,595 | * | ) | — | — | — | ||||||||||||||
| Issuance of ordinary shares in “best efforts” offering, net of issuance expenses in the amount of $1,056 (1) | 4,053,172 | 290 | 3,720 | — | 4,010 | |||||||||||||||
| Exercise of pre-funded warrants (1) | 1,546,828 | 109 | 1,825 | — | 1,934 | |||||||||||||||
| Net loss | — | — | — | (3,840 | ) | (3,840 | ) | |||||||||||||
| Balance as of March 31, 2020 | 12,930,155 | 903 | 184,489 | (172,309 | ) | 13,083 | ||||||||||||||
| Balance as of December 31, 2020 | 25,332,225 | 1,827 | 201,392 | (181,445 | ) | 21,774 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 168 | — | 168 | |||||||||||||||
| Issuance of ordinary shares upon vesting of RSUs by employees and non-employees | 24,096 | 2 | (2 | ) | — | — | ||||||||||||||
| Issuance of ordinary shares in a private placement, net of issuance expenses in the amount of $ 3,679 (1) | 10,921,502 | 832 | 35,489 | — | 36,321 | |||||||||||||||
Exercises of warrants (2) | 9,814,754 | 724 | 13,094 | — | 13,818 | |||||||||||||||
| Net loss | — | — | — | (3,062 | ) | (3,062 | ) | |||||||||||||
| Balance as of March 31, 2021 | 46,092,577 | 3,385 | 250,141 | (184,507 | ) | 69,019 | ||||||||||||||
Represents an amount lower than $1. |
| (1) | See Note |
| (2) | See Note |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| Ordinary Share | Additional paid-in | Accumulated | Total shareholders’ | |||||||||||||||||
| Number | Amount | capital | deficit | equity | ||||||||||||||||
| Balance as of January 1, 2019 | 2,813,087 | 193 | 154,670 | (152,918 | ) | 1,945 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 633 | — | 633 | |||||||||||||||
| Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees | 17,023 | 1 | — | — | 1 | |||||||||||||||
| Issuance of ordinary shares in a “best efforts” offering, net of issuance expenses in the amount of $686 (1) | 760,000 | 52 | 3,632 | — | 3,684 | |||||||||||||||
| Exercise of pre-funded warrants and warrants (1) (2) | 584,087 | 40 | 1,461 | — | 1,501 | |||||||||||||||
| Issuance of ordinary shares in a “Registered Direct” offerings , net of issuance expenses in the amount of $1,125 (1) | 1,650,248 | 115 | 8,010 | — | 8,125 | |||||||||||||||
| Issuance of ordinary shares in a “Warrant exercise” agreement, net of issuance expenses in the amount of $1,019 (1) | 1,464,665 | 102 | 9,864 | — | 9,966 | |||||||||||||||
| Net loss | — | — | — | (8,587 | ) | (8,587 | ) | |||||||||||||
| Balance as of June 30, 2019 | 7,289,110 | 503 | 178,270 | (161,505 | ) | 17,268 | ||||||||||||||
| Balance as of January 1, 2020 | 7,319,560 | 504 | 178,745 | (168,469 | ) | 10,780 | ||||||||||||||
| Share-based compensation to employees and non-employees | — | — | 312 | — | 312 | |||||||||||||||
| Issuance of ordinary shares upon vesting of RSUs by employees and non-employees | 24,625 | * | ) | — | — | — | ||||||||||||||
| Issuance of ordinary shares in “best efforts” offering, net of issuance expenses in the amount of $1,056 (2) | 4,053,172 | 290 | 3,720 | — | 4,010 | |||||||||||||||
| Exercise of pre-funded warrants and warrants (1) (2) | 2,793,328 | 199 | 3,293 | — | 3,492 | |||||||||||||||
| Net loss | — | — | — | (6,695 | ) | (6,695 | ) | |||||||||||||
| Balance as of June 30, 2020 | 14,190,685 | 993 | 186,070 | (175,164 | ) | 11,899 | ||||||||||||||
REWALK ROBOTICS LTD. AND SUBSIDIARIES
(Unaudited)
(In thousands)
| Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
Cash flows used in operating activities: | ||||||||||||||||
| Net loss | $ | (6,695 | ) | $ | (8,587 | ) | $ | (3,062 | ) | $ | (3,840 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation | 151 | 173 | 70 | 75 | ||||||||||||
| Share-based compensation to employees and non-employees | 312 | 633 | 168 | 199 | ||||||||||||
| Deferred taxes | (50 | ) | (51 | ) | — | (4 | ) | |||||||||
| Changes in assets and liabilities: | ||||||||||||||||
| Trade receivables, net | (260 | ) | 341 | 186 | 68 | |||||||||||
| Prepaid expenses, operating lease right-of-use assets and other assets | (240 | ) | (632 | ) | 264 | (448 | ) | |||||||||
| Inventories | (382 | ) | (421 | ) | 49 | (267 | ) | |||||||||
| Trade payables | (581 | ) | 399 | (384 | ) | 79 | ||||||||||
| Employees and payroll accruals | 126 | (12 | ) | (290 | ) | (143 | ) | |||||||||
| Deferred revenues and advances from customers | 29 | 202 | ||||||||||||||
| Deferred revenues | (14 | ) | (64 | ) | ||||||||||||
| Operating lease liabilities and other liabilities | 57 | (1 | ) | (160 | ) | 4 | ||||||||||
| Net cash used in operating activities | (7,533 | ) | (7,956 | ) | (3,173 | ) | (4,341 | ) | ||||||||
Cash flows used in investing activities: | ||||||||||||||||
| Purchase of property and equipment | (15 | ) | — | (9 | ) | (9 | ) | |||||||||
| Net cash used in investing activities | (15 | ) | — | (9 | ) | (9 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
| Repayment of long-term loan | (2,591 | ) | (821 | ) | ||||||||||||
| Proceeds from issuance of long-term debt | 392 | — | ||||||||||||||
| Issuance of ordinary shares in a “best efforts” offerings, net of issuance expenses paid in the amount of $ 1,056 (1) | 4,010 | — | ||||||||||||||
| Issuance of ordinary shares in a “best efforts” offering, net of issuance expenses in the amount of $ 686 (1) | — | 3,684 | ||||||||||||||
| Issuance of ordinary shares in a “registered direct” offerings, net of issuance expenses in the amount of $1,035 (1) | — | 8,215 | ||||||||||||||
| Issuance of ordinary shares in a “warrant exercise” agreement, net of issuance expenses in the amount of $ 1,019 (1) | — | 9,966 | ||||||||||||||
| Exercise of pre-funded warrants and warrants (1) (2) | 3,492 | 1,429 | ||||||||||||||
| Repayment of long term loan | — | (1,266 | ) | |||||||||||||
| Issuance of ordinary shares in a “best efforts” offerings, net of issuance expenses paid in the amount of $ 1,044 (1) | — | 4,022 | ||||||||||||||
| Issuance of ordinary shares in a private placement, net of issuance expenses paid in the amount of $ 3,582 (1) | 36,418 | — | ||||||||||||||
| Exercise of pre-funded warrants and warrants (1)(2) | 13,818 | 1,934 | ||||||||||||||
| Net cash provided by financing activities | 5,303 | 22,473 | 50,236 | 4,690 | ||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | (2,245 | ) | 14,517 | |||||||||||||
| Increase in cash, cash equivalents, and restricted cash | 47,054 | 340 | ||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 16,992 | 10,347 | 21,054 | 16,992 | ||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 14,747 | $ | 24,864 | $ | 68,108 | $ | 17,332 | ||||||||
Supplemental disclosures of non-cash flow information | ||||||||||||||||
| “Registered direct” offerings issuance cost not yet paid (1) | $ | — | $ | 90 | ||||||||||||
| “Best efforts” offering issuance cost not yet paid (1) | $ | — | $ | 12 | ||||||||||||
| Classification of inventory to property and equipment, net | $ | — | $ | 50 | ||||||||||||
| Expenses related to offerings not yet paid (1) | $ | 97 | $ | — | ||||||||||||
| Classification of other current assets to property and equipment, net | $ | 32 | $ | — | $ | 16 | $ | — | ||||||||
| Classification of inventory to property and equipment, net | $ | 50 | $ | — | ||||||||||||
| Cashless exercise of pre-funded warrants (1) (2) | $ | — | $ | 72 | ||||||||||||
| Initial recognition of operating lease right-of-use assets | $ | — | $ | 2,099 | ||||||||||||
| Initial recognition of operating lease liabilities | $ | — | $ | (2,249 | ) | |||||||||||
Supplemental cash flow information: | ||||||||||||||||
| Cash and cash equivalents | $ | 14,064 | $ | 24,054 | $ | 67,411 | $ | 16,602 | ||||||||
| Restricted cash included in other long-term assets | 683 | 810 | 697 | 730 | ||||||||||||
| Total Cash, cash equivalents, and restricted cash | $ | 14,747 | $ | 24,864 | $ | 68,108 | $ | 17,332 | ||||||||
| (1) | See Note |
| (2) | See Note |
The accompanying notes are an integral part of these consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTE 1: GENERAL
| a. | ReWalk Robotics Ltd. (“RRL”, and together with its subsidiaries, the “Company”) was incorporated under the laws of the State of Israel on June 20, 2001 and commenced operations on the same date. |
| b. | RRL has two wholly-owned subsidiaries: (i) ReWalk Robotics Inc. (“RRI”) incorporated under the laws of Delaware on February 15, 2012 and (ii) ReWalk Robotics GMBH. (“RRG”) incorporated under the laws of Germany on January 14, 2013. |
The Company is designing, developing, and commercializing robotic exoskeletons that allow individuals with mobility impairments or other medical conditions the ability to stand and walk once again. The Company has developed and is continuing to commercialize the ReWalk, an exoskeleton designed for individuals with paraplegia that uses its patented tilt-sensor technology and an on-board computer and motion sensors to drive motorized legs that power movement. The ReWalk system consists of a light wearable brace support suit which integrates motors at the joints, rechargeable batteries, an array of sensors and a computer-based control system to power knee and hip movement. Additionally, the Company developed and, in June 2019, started to commercialize the ReStore following receipt of European Union CE mark and United States Food and Drug Administration (“FDA”). The ReStore is a powered, lightweight soft exo-suit intended for use in the rehabilitation of individuals with lower limb disability due to stroke. The Company markets and sells its products directly to institutions and individuals and through third-party distributors. The Company sells its products directly primarily in Germany and the United States, and primarily through distributors in other markets. In its direct markets, the Company has established relationships with rehabilitation centers and the spinal cord injury community, and in its indirect markets, the Company’s distributors maintain these relationships. RRI markets and sells products mainly in the United States. RRG sell the Company’s products mainly in Germany and Europe.
During the second quarter of 2020, we finalized two separate agreements to distribute additional product lines in the U.S. market. The Company will be the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States and will also have distribution rights for the MYOLYN MyoCycle FES cycles to U.S. rehabilitation clinics and personal sales through the U.S. Department of Veterans Affairs (“VA”) hospitals. These new products will improve our product offering to clinics as well as patients within the VA as they both have similar clinician and patient profiles.
| c. |
| The worldwide spread of |
| d. | As of March 31, 2021, the Company incurred a consolidated net loss of $3.1 million and has an accumulated deficit in the total amount of $184.5 million. The Company’s cash and cash equivalent as of March 31, 2021 totaled $67.4 million and the Company’s negative operating cash flow for the three months ended March 31, 2021 was $3.2 million. The Company has sufficient funds to support its operations for more than 12 months following the issuance date of our condensed consolidated unaudited financial statements for the three months ended March 31, 2021. The Company expects to incur future net losses and our transition to profitability is dependent upon, among other things, the successful development and commercialization of our products and product candidates, the achievement of a level of revenues adequate to support our cost structure. Until we achieve profitability or generate positive cash flows, we will continue to need to raise additional cash. We intend to fund future operations through cash on hand, additional private and/or public offerings of debt or equity securities, cash exercises of outstanding warrants or a combination of the foregoing. In addition, we may seek additional capital through arrangements with strategic partners or from other sources and we will continue to address our cost structure. Notwithstanding, there can be no assurance that we will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations. |
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and standards of the Public Company Accounting Oversight Board for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’sCompany's (i) condensed consolidated financial position as of June 30, 2020,March 31, 2021, (ii) condensed consolidated results of operations for the three and six months ended June 30, 2020,March 31, 2021, (iii) condensed consolidated statements of changes in shareholders’ equity as of June 30, 2020 and (iv) condensed consolidated cash flows for the sixthree months ended June 30, 2020.March 31, 2021. The results for the three and six months periods ended June 30, 2020,March 31, 2021, as applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
2021.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
| a. | Revenue Recognition |
The Company generates revenues from sales of products. The Company sells its products directly to end customers and through distributors. The Company sells its products to private individuals (who finance the purchases by themselves, through fundraising or reimbursement coverage from insurance companies), rehabilitation facilities and distributors.
Disaggregation of Revenues (in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Units placed | $ | 1,428 | $ | 772 | $ | 2,061 | $ | 2,246 | ||||||||
| Spare parts and warranties | 240 | 105 | 367 | 212 | ||||||||||||
| Total Revenues | $ | 1,668 | $ | 877 | $ | 2,428 | $ | 2,458 | ||||||||
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Units placed | $ | 1,142 | $ | 633 | ||||
| Spare parts and warranties | 174 | 127 | ||||||
| Total Revenues | $ | 1,316 | $ | 760 | ||||
Units placed
The Company currently offer threeoffers five products: (1) ReWalk Personal; (2) ReWalk Rehabilitation; (3) ReStore; (4) MyoCycle; and (5) MediTouch.
ReWalk Personal and ReWalk Rehabilitation (both of which are units for spinal cord injuryinjuries (“SCI Products”)) and ReStore soft suit exoskeleton for rehabilitation of individuals suffering from stroke.. SCI Products are currently designed for everyday use by paraplegic individuals at home and in their communities, and isare custom fitted for each user, as well as for use by paraplegia patients in the clinical rehabilitation environment, where they provide individuals access to valuable exercise and therapy. The
ReStore is a powered, lightweight soft exo-suit intended for use in the rehabilitation of individuals with lower limb disability due to stroke in the clinical rehabilitation environment.
The MyoCycle device uses Functional Electrical Stimulation (“FES”) technology to facilitate therapeutic exercise for persons with muscle weakness or paralysis caused by disorders like spinal cord injury, multiple sclerosis, and stroke.
The MediTouch Tutor movement biofeedback product line includes the Arm, Hand, 3D and Leg Tutor devices. These devices are used by physical and occupational therapists to evaluate functional tasks during rehabilitation of neurologic disorders and can also be used by patients remotely at home.
Pursuant to two separate distribution agreements entered into during the second quarter of 2020, the Company now markets both the MediTouch and MyoCyle products (together the “Distributed Products”) in the United States for use at home or in the clinic.
Units placed includes revenue from sales or rental of SCI Products, ReStore and ReStore.the Distributed Products.
For units placed, the Company recognizes revenues when it transfers control and title has passed to the customer. Each unit placed is considered an independent, unbundled performance obligation. The Company generally does not grant a right of return for its products besides isolated cases where we than asses the likelihood of such event to occur based on our historical experience and future estimates. The Company also offers a rent-to-purchase model in which the Company recognizes revenue ratably according to the agreed rental monthly fee.
10
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Spare parts and warranties
Spare parts are sold to private individuals, rehabilitation facilities and distributors. Revenue is recognized when the Company satisfies a performance obligation by transferring control over promised goods or services to the customer. Each part sold is considered an independent, unbundled performance obligation.
Warranties are classified as either assurance type or service type warranty. A warranty is considered an assurance type warranty if it provides the consumer with assurance that the product will function as intended for a limited period of time.
In the beginning of 2018, the Company updated its service policy for SCI Products to include a five- year warranty compared to a period of two years that were included in the past for parts and services. The first two years are considered as assurance type warranty and the additional period is considered an extended service arrangement, which is a service type warranty. An assurance type warranty is not accounted for as separate performance obligations under the revenue model. A service type warranty is either sold with a unit or separately for units for which the warranty has expired. Revenue is then recognized ratably over the life of the warranty.
The ReStore device is offered with a two-year warranty which is considered as assurance type warranty.
Contract balances (in thousands)
| June 30, | December 31, | March 31, | December 31, | |||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Trade receivable, net (1) | $ | 1,054 | $ | 794 | $ | 498 | $ | 684 | ||||||||
| Deferred revenues (1) (2) | $ | 873 | $ | 844 | $ | 1,094 | $ | 1,108 | ||||||||
| (1) | Balance presented net of unrecognized revenues that were not yet collected. |
| (2) |
Deferred revenue is comprised mainly of unearned revenue related to service type warranty but also includes other offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
The Company’s unfilled performance obligations as of June 30, 2020March 31, 2021 and the estimated revenue expected to be recognized in the future related to the service type warranty amounts to $1,090$1,097 thousand, which is fulfilled over one to five years.
11
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| b. | New Accounting Pronouncements |
Recent Accounting Pronouncements Not Yet Adopted
| i. | Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity |
In June 2016,August 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial2020-06, Accounting for Convertible Instruments and subsequent amendments toContracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses onaccounting for certain financial assets,instruments with characteristics of liabilities and equity, including tradeconvertible instruments and contracts in an entity’s own equity. Among other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes, in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently,ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature and a beneficial conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires entitiesthe application of the if-converted method to write down credit losses only when losses are probable and loss reversals are not permitted. Originally,calculate the impact of convertible instruments on diluted earnings per share (“EPS”). ASU 2016-13 was2020-06 is effective for fiscal years, and for interim periods within those fiscal years beginning after December 15, 2019,2021, with early adoption permitted. An entity should apply the standard by recording a cumulative effect adjustment to retained earnings upon adoption. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This ASU defers the effective date of ASU 2016-13permitted for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023.2020 and can be adopted on either a fully retrospective or modified retrospective basis. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.
| ii. | Financial Instruments |
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. Topic 326 will be effective on the Company beginning on January 1, 2023. The Company is currently evaluating the impact of this new standard on its financial statements.
| c. | Concentrations of Credit Risks: |
Concentration of credit risk with respect to trade receivable is primarily limited to a customer to which the Company makes substantial sales. The below table reflects the concentration of credit risk for the Company’s current customers as of the quarter ended March 31, 2021, to which substantial sales were made:
| June 30, | December 31, | March 31, | December 31, | |||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Customer A | 10 | % | * | ) | 24 | % | * | ) | ||||||||
| Customer B | 10 | % | * | ) | 23 | % | * | ) | ||||||||
| Customer C | 10 | % | * | ) | 18 | % | * | ) | ||||||||
| Customer D | 10 | % | * | ) | 18 | % | 11 | % | ||||||||
| Customer E | * | ) | 14 | % | 13 | % | 12 | % | ||||||||
| Customer F | * | ) | 13 | % | * | ) | 15 | % | ||||||||
| Customer G | * | ) | 13 | % | * | ) | 15 | % | ||||||||
| Customer H | * | ) | 12 | % | * | ) | 15 | % | ||||||||
| Customer I | * | ) | 12 | % | * | ) | 14 | % | ||||||||
| Customer J | * | ) | 12 | % | ||||||||||||
| Customer K | * | ) | 12 | % | ||||||||||||
*) Less than 10% |
The Company’s trade receivables are geographically diversified and derived primarily from sales to customers in various countries, mainly in the United States and Europe. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures. The Company performs ongoing credit evaluations of its distributors based upon a specific review of all significant outstanding invoices. The Company writes off receivables when they are deemed uncollectible and having exhausted all collection efforts. As of June 30, 2020March 31, 2021 and December 31, 20192020 trade receivables are presented net of allowance for doubtful accounts in the amount of $31$101 thousand and $31$102 thousand, respectively, and net of sales return reserve $0 as of June 30, 2020 and $86 thousand as of December 31, 2019.respectively.
| US Dollars in thousands | ||||
| Balance at December 31, 2019 | $ | 227 | ||
| Provision | 46 | |||
| Usage | (87 | ) | ||
| Balance at June 30, 2020 | $ | 186 | ||
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Warranty provision The Company provided a two-year standard warranty for its products. As of 2018, our service policy for new devices sold includes five-year warranties. The Company determined that the first two years of warranty is an assurance-type warranty and records a provision for the estimated cost to repair or replace products under warranty at the time of sale. Factors that affect the Company’s warranty reserve include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair. |
| US Dollars in thousands | ||||
| Balance at December 31, 2020 | $ | 140 | ||
| Provision | 52 | |||
| Usage | (68 | ) | ||
| Balance at March 31, 2021 | $ | 124 | ||
| e. | Basic and diluted net loss per ordinary share: Basic net loss per ordinary share is computed based on the weighted average number of ordinary shares outstanding during each year. The total number of ordinary shares related to the outstanding warrants aggregated to 10,550,625, was excluded from the calculations of diluted loss per ordinary share since it would have an anti-dilutive effect. |
NOTE 4: INVENTORIES
The components of inventories are as follows (in thousands):
| June 30, | December 31, | March 31, | December 31, | |||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Finished products | $ | 2,696 | $ | 2,394 | $ | 2,777 | $ | 2,764 | ||||||||
| Raw materials | 759 | 729 | 716 | 778 | ||||||||||||
| $ | 3,455 | $ | 3,123 | $ | 3,493 | $ | 3,542 | |||||||||
In the three months ended March 31, 2021 and 2020, the Company wrote off inventory in the amount of $38 and $1 thousand, respectively. The write off inventory were recorded in cost of revenue.
13
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5: COMMITMENTS AND CONTINGENT LIABILITIES
| a. | Purchase commitments: |
The Company has contractual obligations to purchase goods from its contract manufacturer as well as raw materials from different vendors. Purchase obligations do not include contracts that may be canceled without penalty. As of June 30, 2020,March 31, 2021, non-cancelable outstanding obligations to the Company’s contract manufacturer and raw material vendors amounted to approximately $1$1.2 million.
| b. | Operating lease commitment: |
| (i) | The Company operates from leased facilities in Israel, the United States and Germany. These leases expire between |
| (ii) | RRL and RRG lease cars for their employees under cancelable operating lease agreements expiring at various dates in between |
The Company’sCompany's future lease payments for its facilities and cars, which are presented as current maturities of operating leases and non-current operating leases liabilities on the Company’sCompany's condensed consolidated balance sheets as of June 30, 2020March 31, 2021 are as follows (in thousands):
| 2020 | $ | 707 | ||||||
| 2021 | 681 | $ | 513 | |||||
| 2022 | 603 | 662 | ||||||
| 2023 | 162 | 481 | ||||||
| Total lease payments | 2,153 | 1,656 | ||||||
| Less: imputed interest | (435 | ) | (241 | ) | ||||
| Present value of future lease payments | 1,718 | 1,415 | ||||||
| Less: current maturities of operating leases | (620 | ) | (633 | ) | ||||
| Non-current operating leases | $ | 1,098 | $ | 782 | ||||
| Weighted-average remaining lease term (in years) | 3.18 | 2.47 | ||||||
| Weighted-average discount rate | 12.6 | % | 12.6 | % | ||||
Lease expense under the Company’s operating leases were $217 thousandwas $186 and $180 thousand$183 for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. For the six months ended June 30, 2020 and 2019 the lease expense were $400 thousand and $360 thousand, respectively.
| c. | Royalties: |
The Company’s research and development efforts are financed, in part, through funding from the IIAIsrael Innovation Authority (the “IIA”) and BIRD.the Israel-U.S. Binational Industrial Research and Development Foundation (“BIRD”). Since the Company’s inception through June 30, 2020,March 31, 2021, the Company received funding from the IIA and BIRD in the total amount of $1.97 million and $500 thousand, respectively. Out of the $1.97 million in funding from the IIA, a total amount of $1.57 million were royalty bearingroyalty-bearing grants (as of June 30, 2020,March 31, 2021, the Company paid royalties to the IIA in the total amount of $56$99 thousand), while a total amount of $400 thousand was received in consideration of 209 convertible preferred A shares, which were converted after the Company’s initial public offering in September 2014 into ordinary shares in a conversion ratio of 1 to 1. The Company is obligated to pay royalties to the IIA, amounting to 3%-3.5% of the sales of the products and other related revenues generated from such projects, up to 100% of the grants received.
14
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
Additionally, the Exclusive License Agreement between the Company and Harvard requires the Company to pay Harvard royalties on net sales,sales. See note 76 below for more information about the Collaboration Agreement and the License Agreement.
As of June 30, 2020,March 31, 2021, the contingent liability to the IIA amounted to $1.6 million. 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 IIA. Such approval is not required for the sale or export of any products resulting from such research or development. The IIA, under special circumstances, may approve the transfer of IIA-funded know-how outside Israel, in the following cases:
(a) the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-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 research and development 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 IIA-funded know-how; (c) such transfer of IIA-funded know-how arises in connection with certain types of cooperation in research and development activities; or (d) ifIf such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient.
| d. | Liens: |
As discussed in Note 6 topart of the Company’s audited consolidated financial statements in its annual report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”), the Company is party to a loan agreement, as amended (the “Loan Agreement”), with Kreos Capital V (Expert Fund) Limited (“Kreos”), pursuant to which Kreos extended a $20 million line of credit to the Company. In connection with the Loan Agreement, the Company granted Kreos a first priority security interest over all of its assets, including intellectual property and equity interests in its subsidiaries, subject to certain permitted security interests
| e. | Legal Claims: |
Occasionally, the Company is involved in various claims such as product liability claims, lawsuits, regulatory examinations, investigations, and other legal matters arising, for the most part, in the ordinary course of business. The outcome of litigation and other legal matters is inherently uncertain. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. Where the Company determines an unfavorable outcome is not probable or reasonably estimable, the Company does not accrue for any potential litigation loss. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of the company's defenses and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company’s current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to the Company’s consolidated results of operations, liquidity, or financial condition.
material litigation.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Period | Amount | |||
| Remainder of 2020 | $ | 41 | ||
| 2021 | 263 | |||
| 2022 | 88 | |||
| Total principal payments | $ | 392 | ||
| Current portion | $ | 174 | ||
| Long-term portion | 218 | |||
| Note payable, net | $ | 392 | ||
On May 16, 2016, the Company entered into a Research Collaboration Agreement and an Exclusive License Agreement with Harvard. The Research Collaboration Agreement was amended on May 1, 2017 and April 1, 2018 (as amended, the “Collaboration Agreement”), and the Exclusive License Agreement was amended on April 1, 2018 (as amended, the “License Agreement”), to extend the term of the Collaboration Agreement by one year to May 16, 2022 and reallocate the Company’s quarterly installment payments to Harvard through such date, and to make certain technical changes. On April 30, 2020, the Company and Harvard amended the Collaboration Agreement, which included certain adjustments to the quarterly installments and extended the term an additional three quarters until February 16, 2023, when it will expire.
Under the Collaboration Agreement, Harvard and the Company have agreed to collaborate on research regarding the development of lightweight “soft suit” exoskeleton system technologies for lower limb disabilities, which are intended to treat stroke, multiple sclerosis, mobility limitations for the elderly and other medical applications. The Company has committed to pay in quarterly installmentspaying for the funding of this research in quarterly installments, subject to a minimum funding commitment under applicable circumstances.
Under the Harvard License Agreement, Harvard has granted the Company an exclusive, worldwide, royalty-bearing license under certain patents of Harvard relating to lightweight “soft suit” exoskeleton system technologies for lower limb disabilities, a royalty-free license under certain related know-how and the option to obtain a license under certain inventions conceived under the joint research collaboration.
The Harvard License Agreement requires the Company to pay Harvard an upfront fee, reimbursements for expenses that Harvard incurred in connection with the licensed patents, royalties on net sales and several milestone payments contingent upon the achievement of certain product development and commercialization milestones. The Harvard License Agreement will continue in full force and effect until the expiration of the last-to-expire valid claim of the licensed patents. As of June 30, 2020, the company achieved the three development milestones. The Company continues to evaluate the likelihood that the other milestones will be achieved on a quarterly basis.
The Company’s total payment obligation under the Collaboration Agreement and the Harvard License Agreement iswas $7.2 million as of the initial date, some of which iswas subject to a minimum funding commitment under applicable circumstances as indicated above.above which were all completed as of March 31, 2021.
The Company has recorded expenses in the amount of $202$159 thousand and $424$222 thousand which are part of the total payment obligation indicated above, as research and development expenses related to the License Agreement and to the Collaboration Agreement for the three and six months ended June 30,March 31, 2021, and 2020, respectively. No withholding tax was deducted from the Company’s payments to Harvard in respect of the Collaboration Agreement and the License Agreement since this is not taxable income in Israel in accordance with Section 170 of the Israel Income Tax Ordinance 1961-5721.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7: SHAREHOLDERS’ EQUITY
a. Share option plans: |
As of June 30, 2020,March 31, 2021, and December 31, 2019,2020, the Company had reserved 1,559,751668,944 and 12,409604,320 ordinary shares, respectively, for issuance to the Company’s and its affiliates’ respective employees, directors, officers, and consultants pursuant to equity awards granted under the Company’sCompany's 2014 Incentive Compensation Plan (the “2014 Plan”).
Options to purchase ordinary shares generally vest over four years, with certain options to non-employee directors vesting quarterly over one year. Any option that is forfeited or canceled before expiration becomes available for future grants under the 2014 Plan.
| Six Months Ended June 30, | ||||
| 2019 | ||||
| Expected volatility | 57.5 | % | ||
| Risk-free rate | 2.22 | % | ||
| Dividend yield | — | % | ||
| Expected term (in years) | 6.11 | |||
| Share price | $ | 5.37 | ||
There were no options granted during the sixthree months ended June 30,March 31, 2021 and 2020.
The fair value of restricted share units (“RSUs”)RSUs granted is determined based on the price of the Company’sCompany's ordinary shares on the date of grant.
A summary of employee share options activity during the sixthree months ended June 30, 2020March 31, 2021 is as follows:
| Number | Average exercise price | Average remaining contractual life (in years) | Aggregate intrinsic value (in thousands) | Number | Average exercise price | Average remaining contractual life (in years) | Aggregate intrinsic value (in thousands) | |||||||||||||||||||||||||
| Options outstanding at the beginning of the period | 74,713 | $ | 41.6 | 6.34 | $ | 135 | 69,606 | $ | 37.90 | 5.59 | $ | — | ||||||||||||||||||||
| Granted | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Exercised | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Forfeited | (1,502 | ) | 129.90 | (1,860 | ) | 26.83 | — | — | ||||||||||||||||||||||||
| Options outstanding at the end of the period | 73,211 | $ | 39.8 | 5.83 | $ | 582 | 67,746 | $ | 38.20 | 5.04 | $ | — | ||||||||||||||||||||
| Options exercisable at the end of the period | 51,153 | $ | 47.99 | 4.85 | $ | — | 54,779 | $ | 43.17 | 4.47 | $ | — | ||||||||||||||||||||
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A summary of employee RSUs activity during the sixthree months ended June 30, 2020March 31, 2021 is as follows:
| Number of shares underlying outstanding RSUs | Weighted average grant date fair value | Number of shares underlying outstanding RSUs | Weighted average grant date fair value | |||||||||||||
| Unvested RSUs at the beginning of the period | 62,378 | $ | 44.61 | 1,251,311 | $ | 3.20 | ||||||||||
| Granted | 300,000 | 2.23 | 13,000 | 1.32 | ||||||||||||
| Vested | (24,625 | ) | 14.80 | (24,096 | ) | 1.60 | ||||||||||
| Forfeited | (6,992 | ) | 8.24 | (75,764 | ) | 1.60 | ||||||||||
| Unvested RSUs at the end of the period | 330,761 | $ | 6.39 | 1,164,451 | $ | 3.90 | ||||||||||
The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders that hold options with positive intrinsic value exercised their options on the last date of the exercise period. No options were exercised during the sixthree months ended June 30, 2020March 31, 2021 and June 30, 2019.March 31, 2020. As of June 30, 2020,March 31, 2021, there were $968 thousand$1.5 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company's 2014 Plan. This cost is expected to be recognized over a period of approximately 2.852.89 years.
The number of options and RSUs outstanding as of June 30, 2020March 31, 2021 is set forth below, with options separated by range of exercise price.
| Range of exercise price | Options and RSUs outstanding as of June 30, 2020 | Weighted average remaining contractual life (years) (1) | Options outstanding and exercisable as of June 30, 2020 | Weighted average remaining contractual life (years) (1) | Options and RSUs outstanding as of March 31, 2021 | Weighted average remaining contractual life (years) (1) | Options outstanding and exercisable as of March 31, 2021 | Weighted average remaining contractual life (years) (1) | ||||||||||||||||
| RSUs only | 330,761 | — | — | — | 1,164,451 | — | — | — | ||||||||||||||||
| $5.37 | 12,425 | 8.75 | 3,882 | 8.75 | 12,425 | 7.99 | 6,212 | 7.99 | ||||||||||||||||
| $20.42 - $33.75 | 36,299 | 5.76 | 24,633 | 4.78 | 34,620 | 4.71 | 28,235 | 4.18 | ||||||||||||||||
| $37.14 - $38.75 | 10,164 | 3.47 | 10,164 | 3.47 | 9,992 | 2.54 | 9,992 | 2.54 | ||||||||||||||||
| $50 - $52.5 | 11,228 | 5.17 | 9,379 | 4.82 | ||||||||||||||||||||
| $182.5 - $524.25 | 3,095 | 5.08 | 3,095 | 5.08 | ||||||||||||||||||||
| $50 - $52.50 | 8,043 | 5.21 | 7,674 | 5.16 | ||||||||||||||||||||
| $182.5 - $524 | 2,666 | 4.45 | 2,666 | 4.45 | ||||||||||||||||||||
| 403,972 | 5.83 | 51,153 | 4.85 | 1,232,197 | 5.04 | 54,779 | 4.47 | |||||||||||||||||
| (1) | Calculation of weighted average remaining contractual term does not include the RSUs that were granted, which have an indefinite contractual term. |
b. Share-based awards to non-employee consultants: |
As of June 30, 2020,March 31, 2021, there are no outstanding options or RSUs held by non-employee consultants.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Warrants to purchase ordinary shares: |
The following table summarizes information about warrants outstanding and exercisable as of June 30, 2020:March 31, 2021:
| Issuance date | Warrants outstanding | Exercise price per warrant | Warrants outstanding and exercisable | Contractual term | Warrants outstanding | Exercise price per warrant | Warrants outstanding and exercisable | Contractual term | ||||||||||||||||||
| (number) | (number) | (number) | (number) | |||||||||||||||||||||||
| December 31, 2015 (1) | 4,771 | $ | 7.500 | 4,771 | See footnote (1) | 4,771 | $ | 7.500 | 4,771 | See footnote (1) | ||||||||||||||||
| November 1, 2016 (2) | 97,496 | $ | 118.750 | 97,496 | November 1, 2021 | 97,496 | $ | 118.750 | 97,496 | November 1, 2021 | ||||||||||||||||
| December 28, 2016 (3) | 1,908 | $ | 7.500 | 1,908 | See footnote (1) | 1,908 | $ | 7.500 | 1,908 | See footnote (1) | ||||||||||||||||
| November 20, 2018 (4) | 126,839 | $ | 7.500 | 126,839 | November 20, 2023 | 126,839 | $ | 7.500 | 126,839 | November 20, 2023 | ||||||||||||||||
| November 20, 2018 (5) | 106,680 | $ | 9.375 | 106,680 | November 15, 2023 | 106,680 | $ | 9.375 | 106,680 | November 15, 2023 | ||||||||||||||||
| February 25, 2019 (6) | 45,600 | $ | 7.187 | 45,600 | February 21, 2024 | 45,600 | $ | 7.187 | 45,600 | February 21, 2024 | ||||||||||||||||
| April 5, 2019 (7) | 408,457 | $ | 5.140 | 408,457 | October 7, 2024 | 408,457 | $ | 5.140 | 408,457 | October 7, 2024 | ||||||||||||||||
| April 5, 2019 (8) | 49,015 | $ | 6.503 | 49,015 | April 3, 2024 | 49,015 | $ | 6.503 | 49,015 | April 3, 2024 | ||||||||||||||||
| June 5, 2019 and June 6, 2019 (9) | 1,464,665 | $ | 7.500 | 1,464,665 | June 5, 2024 | 1,464,665 | $ | 7.500 | 1,464,665 | June 5, 2024 | ||||||||||||||||
| June 5, 2019 (10) | 87,880 | $ | 9.375 | 87,880 | June 5, 2024 | 87,880 | $ | 9.375 | 87,880 | June 5, 2024 | ||||||||||||||||
| June 12, 2019 (11) | 416,667 | $ | 6.000 | 416,667 | December 12, 2024 | 416,667 | $ | 6.000 | 416,667 | December 12, 2024 | ||||||||||||||||
| June 10, 2019 (12) | 50,000 | $ | 7.500 | 50,000 | June 10, 2024 | 50,000 | $ | 7.500 | 50,000 | June 10, 2024 | ||||||||||||||||
| February 10, 2020 (13) | 4,353,500 | $ | 1.250 | 4,353,500 | February 10, 2025 | 28,400 | $ | 1.250 | 28,400 | February 10, 2025 | ||||||||||||||||
| February 10, 2020 (14) | 336,000 | $ | 1.5625 | 336,000 | February 10, 2025 | 105,840 | $ | 1.5625 | 105,840 | February 10, 2025 | ||||||||||||||||
| July 6, 2020 (15) | 448,698 | $ | 1.76 | 448,698 | July 2, 2025 | |||||||||||||||||||||
| July 6, 2020 (16) | 296,297 | $ | 2.2781 | 296,297 | July 2, 2025 | |||||||||||||||||||||
| December 3, 2020 (17) | 586,760 | $ | 1.34 | 586,760 | June 8, 2026 | |||||||||||||||||||||
| December 3, 2020 (18) | 108,806 | $ | 1.7922 | 108,806 | June 8, 2026 | |||||||||||||||||||||
| February 26, 2021 (19) | 5,460,751 | $ | 3.6 | 5,460,751 | August 26, 2026 | |||||||||||||||||||||
| February 26, 2021 (20) | 655,290 | $ | 4.5781 | 655,290 | August 26, 2026 | |||||||||||||||||||||
| 7,549,478 | 7,549,478 | 10,550,820 | 10,550,820 | |||||||||||||||||||||||
| (1) | Represents warrants for ordinary shares issuable upon an exercise price of |
| (2) | Represents warrants issued as part of |
| (3) | Represents common warrants that were issued as part of the $8.000 million December 28, 2016 drawdown under the Loan Agreement between the Company and Kreos, pursuant to which Kreos extended a line of credit to us in the amount of $20 million, with interest payable monthly in arrears on any amounts drawn down at a rate of 10.75% per year from the applicable drawdown date through December 29, 2020, the date on which all principal was repaid. See footnote 1 for exercisability terms of the common warrants. |
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Represents common warrants that were issued as part of the |
| (5) | Represents common warrants that were issued to the underwriters as compensation for their role in |
| (6) | Represents warrants that were issued to the exclusive placement agent as compensation for its role in |
| (7) | Represents warrants that were issued to certain institutional purchasers in a private placement in |
| (8) | Represents warrants that were issued to the placement agent as compensation for its role in |
| (9) | Represents warrants that were issued to certain institutional investors in a warrant exercise agreement on June 5, 2019 and June 6, 2019, respectively. |
| (10) | Represents warrants that were issued to the placement agent as compensation for its role in |
| (11) | Represents warrants that were issued to certain institutional |
| (12) | Represents warrants that were issued to the placement agent as compensation for its role in |
| (13) | Represents warrants that were issued to certain institutional purchasers in a private placement in the Company’s best efforts offering of ordinary shares in February 2020. During the three months ended March 31, 2021 3,740,100 warrants were exercised for total consideration of $4,675,125. |
| (14) | Represents warrants that were issued to the placement agent as compensation for its role in the Company’s February 2020 best efforts offering. During the three months ended March 31, 2021 230,160 warrants were exercised for total consideration of $359,625. |
| (16) | Represents warrants that were issued to the placement agent as compensation for its role in the Company’s July 2020 registered direct offering. |
| (17) | Represents warrants that were issued to certain institutional purchasers in a private placement in our private placement offering of ordinary shares in December 2020. During the three months ended March 31, 2021 3,598,072 warrants were exercised for total consideration of $4,821,416. |
| (18) | Represents warrants that were issued to the placement agent as compensation for its role in the Company’s December 2020 private placement. During the three months ended March 31, 2021 225,981 warrants were exercised for total consideration of $405,003. |
| (19) | Represents warrants that were issued to certain institutional purchasers in a private placement in our private placement offering of ordinary shares in February 2021. |
20
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| (20) | Represents warrants that were issued to the placement agent as compensation for its role in the Company’s February 2021 private placement. |
d. Share-based compensation expense for employees and non-employees:
The Company recognized non-cash share-based compensation expense for both employees and non-employees in the condensed consolidated statements of operations as follows (in thousands):
| Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Cost of revenues | $ | 4 | $ | 7 | $ | 2 | $ | 2 | ||||||||
| Research and development, net | 74 | 124 | (2 | ) | 42 | |||||||||||
| Sales and marketing | 48 | 126 | 45 | 29 | ||||||||||||
| General and administrative | 186 | 376 | 123 | 126 | ||||||||||||
| Total | $ | 312 | $ | 633 | $ | 168 | $ | 199 | ||||||||
On February 10, 2020, the Company closed a “best efforts” public offering whereby the Company issued an aggregate of 5,600,000 of common units and pre-funded units at a public offering price of $1.25 per common unit and $1.249 per pre-funded unit. As part of the public offering, the Company entered into a securities purchase agreement with certain institutional purchasers. Each common unit consisted of one ordinary share, par value NIS 0.25 per share, and one common warrant to purchase one ordinary share. Each pre-funded unit consisted of one pre-funded warrant to purchase one ordinary share and one common warrant. Additionally, the Company issued warrants to purchase up to 336,000 ordinary shares, with an exercise price of $1.5625 per share, to representatives of H.C. Wainwright as compensation for its role as the placement agent in the Company’s February 2020 offering. During the three months ended March 31, 2020 all pre-funded warrants to purchase ordinary shares were exercised. During the three months ended June 30, 2020, 1,246,500 warrants to purchase ordinary shares were exercised.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8: FINANCIAL EXPENSES (INCOME), NET
The components of financial expenses (income), net were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
| Foreign currency transactions and other | $ | (19 | ) | $ | (43 | ) | $ | (92 | ) | $ | (40 | ) | $ | (14 | ) | $ | (73 | ) | ||||||
| Financial expenses related to loan agreement with Kreos | 249 | 386 | 559 | 790 | — | 310 | ||||||||||||||||||
| Bank commissions | 5 | 10 | 14 | 21 | 10 | 9 | ||||||||||||||||||
| $ | 235 | $ | 353 | $ | 481 | $ | 771 | $ | (4 | ) | $ | 246 | ||||||||||||
NOTE 9: 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 unitssystems and services (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas:areas (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
| Revenues based on customer’s location: | ||||||||||||||||||||||||
| Revenues based on customer’s location : | ||||||||||||||||||||||||
| Israel | $ | — | $ | 2 | $ | — | $ | 2 | — | — | ||||||||||||||
| United States | 631 | 426 | 847 | 923 | $ | 476 | $ | 216 | ||||||||||||||||
| Europe | 1,035 | 418 | 1,577 | 1,497 | 837 | 542 | ||||||||||||||||||
| Asia-Pacific | 2 | 31 | 4 | 36 | 2 | 2 | ||||||||||||||||||
| Africa | 1 | — | ||||||||||||||||||||||
| Total revenues | $ | 1,668 | $ | 877 | $ | 2,428 | $ | 2,458 | $ | 1,316 | $ | 760 | ||||||||||||
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Long-lived assets by geographic region (*): | ||||||||
| Israel | $ | 145 | $ | 145 | ||||
| United States | 217 | 249 | ||||||
| Germany | 30 | 43 | ||||||
| $ | 392 | $ | 437 | |||||
(*) Long-lived assets are comprised of property and equipment, net.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Long-lived assets by geographic region (*): | ||||||||
| Israel | $ | 164 | $ | 179 | ||||
| United States | 213 | 244 | ||||||
| Germany | 70 | 78 | ||||||
| $ | 447 | $ | 501 | |||||
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Major customer data as a percentage of total revenues: | ||||||||
| Customer A | 10.3 | % | * | ) | ||||
| Customer B | * | ) | 17.1 | % | ||||
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Major customer data as a percentage of total revenues: | ||||||||
| Customer A | 15 | % | * | ) | ||||
| Customer B | 10 | % | — | |||||
| Customer C | 10 | % | — | |||||
| Customer D | — | 22 | % | |||||
| Customer E | — | 14 | % | |||||
| Customer F | — | 13 | % | |||||
| Customer G | — | 12 | % | |||||
| Customer H | — | 11 | % | |||||
*) Less than 10%.
ITEM 2. MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operation should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and with our audited consolidated financial statements included in our 2019 Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) as filed with the SEC.SEC on February 18, 2021. In addition to historical condensed financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. For a discussion of factors that could cause or contribute to these differences, see “Special Note Regarding Forward-Looking Statements” below.
Special Note Regarding Forward-Looking Statements
In addition to historical information, this quarterly report on Form 10-Q (this “quarterly report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements may include projections regarding our future performance and, in some cases, can be identified by words like “anticipate,” “assume,” “believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes and the negatives of those terms. These statements may be found in this section of this quarterly report titled “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this quarterly report. These statements include, but are not limited to, statements regarding:
| • | the adverse effect that the COVID-19 pandemic has had and may continue to have on our business and results of operations; |
| • | our ability to have sufficient funds to meet certain future capital requirements, which could impair our efforts to develop and commercialize existing and new products; |
| • | our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market and the risk that our ordinary shares will be delisted if we cannot do so; |
| • | our expectations regarding future growth, including our ability to increase sales in our existing geographic markets and expand to new markets; |
| • | our ability to maintain and grow our reputation and the market acceptance of our products; |
| • | our ability to achieve reimbursement from third-party payors for our products; |
| • | our limited operating history and our ability to leverage our sales, marketing and training infrastructure; |
| • | our expectations as to our clinical research program and clinical results; |
| • | our ability to obtain certain components of our products from third-party suppliers and our continued access to our product manufacturers; |
| • | our ability to improve our products and develop new products; |
| • | our compliance with medical device reporting regulations to report adverse events involving our products, which could result in voluntary corrective actions or enforcement actions such as mandatory recalls, and the potential impact of such adverse events on ReWalk’s ability to market and sell its products; |
| • | our ability to gain and maintain regulatory approvals; |
| • | our expectations as to the results of the FDA, potential regulatory developments with respect to our mandatory 522 postmarket surveillance study; |
| • | the risk of a cybersecurity attack or breach of our IT systems significantly disrupting our business operations; |
| • | our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual property rights of others; |
| • | our ability to establish a pathway to commercialize our products in China; |
| • | the impact of substantial sales of our shares by certain shareholders on the market price of our ordinary shares; |
| • | our ability to use effectively the proceeds of our offerings of securities; |
| • | the risk of substantial dilution resulting from the periodic issuances of our ordinary shares; |
24
| • | the impact of the market price of our ordinary shares on the determination of whether we are a passive foreign investment company; |
| • | market and other conditions; and |
| • | other factors discussed in “Part I. Item 1A. Risk Factors.” |
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The statements are based on our beliefs, assumptions, and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance, or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the statements. In particular, you should consider the risks provided under “Part 1, Item 1A. Risk Factors” of our 20192020 Form 10-K, and in other reports subsequently filed by us with, or furnished to, the SEC.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur.
Any forward-looking statement in this quarterly report speaks only as of the date hereof. Except as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future developments or otherwise.
Overview
We are an innovative medical device company that is designing, developing, and commercializing robotic exoskeletons that allow individuals with mobility impairments or other medical conditions the ability to stand and walk once again. We have developed and are continuing to commercialize our SCI Products, ReWalk Personal and ReWalk Rehabilitation devices, for individuals with spinal cord injury (“SCI Products”), which are exoskeletons designed for individuals with paraplegia thatspinal cord injuries,and for individuals with paraplegia. The SCI Products use our patented tilt-sensor technology and an on-board computer and motion sensors to drive motorized legs that power movement.
We have also developed and began commercializing our ReStore device, which we began commercializing in June 2019. ReStore is a powered, lightweight soft exo-suit intended for use in the rehabilitation of individuals with lower limb disability due to stroke. During the second quarter of 2020, we finalized and moved to implement two separate agreements to distribute additional product lines in the United States. The Company is the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States and will also have distribution rights for the MYOLYN MyoCycle FES cycles to U.S. rehabilitation clinics and personal sales through the U.S. Department of Veterans Affairs (“VA”) hospitals and other personal sales. These Distributed Products will improve our product offering to clinics as well as patients within the VA as they both have similar clinician and patient profile.
Our principal markets are the United States and Europe. In Europe, we have a direct sales operation in Germany and the United Kingdom and work with distribution partners in certain other major countries. We have offices in Marlborough, Massachusetts, Berlin, Germany and Yokneam, Israel, from where we operate our business from.business.
We have in the past generated and expect to generate in the future revenues from a combination of third-party payors, self-payors including(including private and government employers,employers) and institutions. While a broad uniform policy of coverage and reimbursement by third-party commercial payors currently does not exist in the United States for electronic exoskeleton technologies such as the ReWalk Personal, we are pursuing various paths of reimbursement and support fundraising efforts by institutions and clinics. InAs of March 31, 2021, we had placed 24 ReWalk Personal 6.0 units as part of a VA policy issued in December 2015 the U.S. Department of Veterans Affairs, or the VA, issued a national policy for the evaluation, training, and procurement of ReWalk Personal exoskeleton systems for all qualifying veterans suffering from spinal cord injury across the United States. The VA policy is the first national coverage policy in the United States for qualifying individuals who have suffered spinal cord injury. As of June 30, 2020, we had placed 24 units as part of the VA policy.
According to a 2017 report published by the Centers for Medicare and Medicaid Services, or CMS, approximately 55% of the spinal cord injury population which are at least five years post their injury date are covered by CMS. In July 2020, a code was issued for ReWalk Personal 6.0(effective6.0 (effective October 1, 2020), which might later be followed by coverage policy of CMS.
Additionally, to date, several private insurers in the United States and Europe have provided reimbursement for ReWalk in certain cases. In Germany, we continue to make progress toward achieving ReWalk coverage from the various government, private and worker’s compensation payors. In September 2017, each of German insurer BARMER GEK (“Barmer”) and national social accident insurance provider Deutsche Gesetzliche Unfallversicherung (“DGUV”), indicated that they will provide coverage to users who meet certain inclusion and exclusion criteria. In February 2018, the head office of German statutory health insurance, or SHI, Spitzenverband (“GKV”) confirmed their decision to list the ReWalk Personal 6.0 exoskeleton system in the German Medical Device Directory. This decision means that ReWalk will be listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis.
During the second quarter of[fiscal?] year 2020, we have finalizedannounced several new agreements with German SHIs, includingTK and moved to implement two separate agreements to distribute additional product lines in the U.S. market. The Company will be the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States, and will also have distribution rights for the MYOLYN MyoCycle Functional Electrical Stimulation (“FES”) cycles to U.S. rehabilitation clinics and personal sales through the U.S. Department of Veterans Affairs (“VA”) hospitals. These new products will improve our product offering to clinicsDAK Gesundheit, as well as patientsthe first German Private Health Insurer (“PHI”), which outline the process of obtaining our devices for eligible insured patients. We are also currently working with several additional SHIs on securing a formal operating contract that will establish the process of obtaining a ReWalk Personal 6.0 device for their beneficiaries within the VA as they both have similar clinician and patient profile.
their system.
The Company’s total revenue in the first quarter of 2021 was $1.3 million, compared to $0.8 million in the prior year’s first quarter;
The Company’s gross margin was 54% in Q1 of 2021, compared to 49% in Q1 of 2020; |
The Company’s operating expenses were $3.7 million in Q1 of 2021, compared to $4 million in Q1 2020; |
The Company entered into a contract with BKK Mobile Oil health insurance to supply ReWalk’s Personal 6.0 System to eligible persons in Germany; and
The Company has a strong balance sheet with $67.4 million in cash as of March 31, 2021.
Evolving COVID-19 Pandemic
The impact of the novel coronavirus (COVID-19)COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States and many countries in Europe, have placed significant restrictions on travel, and many businesses have announced extended closures. Although certainmany of these countries or the locales within thethese countries have begun to allow reopening of certain businesses, particularly due to the distribution of vaccinations, it is unclear how long any total or partial shutdowns maycould last, and whether additional shutdowns will be necessary to the extenthalt potential future outbreaks occur.in the future.
The COVID-19 pandemic has affected our ability to engage with our SCI Products, ReStore and ReStoreDistributed Products existing customers, conduct trials of new product candidates, deliver ordered units or repair existing systems, and provide training of our products to new patients who have largely remained at home due to local movement restrictions and to rehabilitation centers, which have temporarily shifted priorities and responses to pandemic-related medical equipment. As a result, our revenues in the first quarter offor fiscal year 2020 have beenwere adversely impacted. During the second quarter of 2020, we were able to deliver several units that we could not complete in the first quarter of 2020. The overall impact of the limitations on our sales efforts are currently difficult to determine, but weimpacted from limited market access and experiencing reduced payor attention. We believe that thethese adverse impactimpacts may continue as long as the pandemic status remains in our key markets [in the United States and Germany, especially as our ability to trialconduct trials of new patients with our SCI Products is limited and as capital budgets for rehabilitation devices such as the ReStore areremain reduced or currently on-hold in most of the clinics. Additionally, some clinics are enforcing in-clinic restrictions that effect our ability to demonstrate our devices to patients. We continue to monitor our sales pipeline on a day-to-day basis in order to assess the quarterly effect of these limitations as some have short term effects and some affects our future pipeline development. Limitations on travel and business closures recommended by federal, state, and local governments, if they will continue to occur as we have seen during the pandemic, could, among other things, impact our ability to enroll patients in clinical trials, recruit clinical site investigators and obtain timely approvals from local regulatory authorities. While our sole manufacturer, Sanmina Corporation, has not shut down its facilities during the COVID-19 pandemic, our manufacturing may also be impacted due to supply chain delays or adverse impacts on our production capacity due toas a result of government directives or health protocols that might impact our production facility, andprotocols. Moreover, the current limitations on our sales activities has made it hard for usdifficult to effectively forecast our future requirements for systems. For more information, see “Part II, Item 1A. Risk Factors-AFactors-The COVID-19 pandemic epidemic or outbreak of an infectious disease, such as COVID-19, has adversely affected and may continue to materially and adversely impact our business, our operations and our financial results” and “Part II, Item 1A. Risk Factors-We depend on a single third party to manufacture our products, and we rely on a limited number of third-party suppliers for certain components of our products.”
In addition, our future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and operational challenges faced by our customers. ContinuedThe occurrence of new outbreaks of COVID-19 could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn or a global recession that could cause significant volatility or decline in the trading price of our securities, affect our ability to execute strategic business activities, affect demand for our products and likely impact our operating results. These may further limit or restrict our ability to access capital on favorable terms, or at all, lead to consolidation that negatively impacts our business, weaken demand, increase competition, cause us to reduce our capital spend further, or otherwise disrupt our business.
Results of Operations for the Three and Six Months Ended June 30,March 31, 2021 and March 31, 2020 and June 30, 2019
Our operating results for the three and six months ended June 30, 2020,March 31, 2021, as compared to the same periodsperiod in 2019,2020, are presented below. The results set forth below are not necessarily indicative of the results to be expected in future periods.
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
| Revenues | $ | 1,668 | $ | 877 | $ | 2,428 | $ | 2,458 | $ | 1,316 | $ | 760 | ||||||||||||
| Cost of revenues | 646 | 442 | 1,033 | 1,097 | 609 | 387 | ||||||||||||||||||
| Gross profit | 1,022 | 435 | 1,395 | 1,361 | 707 | 373 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development, net | 954 | 1,860 | 1,939 | 3,274 | 795 | 985 | ||||||||||||||||||
| Sales and marketing | 1,353 | 1,531 | 3,034 | 3,118 | 1,671 | 1,681 | ||||||||||||||||||
| General and administrative | 1,267 | 1,279 | 2,576 | 2,779 | 1,262 | 1,309 | ||||||||||||||||||
| Total operating expenses | 3,574 | 4,670 | 7,549 | 9,171 | 3,728 | 3,975 | ||||||||||||||||||
| Operating loss | (2,552 | ) | (4,235 | ) | (6,154 | ) | (7,810 | ) | (3,021 | ) | (3,602 | ) | ||||||||||||
| Financial expenses, net | 235 | 353 | 481 | 771 | ||||||||||||||||||||
| Financial expenses (income), net | (4 | ) | 246 | |||||||||||||||||||||
| Loss before income taxes | (2,787 | ) | (4,588 | ) | (6,635 | ) | (8,581 | ) | (3,017 | ) | (3,848 | ) | ||||||||||||
| Taxes on income (tax benefit) | 68 | (1 | ) | 60 | 6 | 45 | (8 | ) | ||||||||||||||||
| Net loss | $ | (2,855 | ) | $ | (4,587 | ) | $ | (6,695 | ) | $ | (8,587 | ) | $ | (3,062 | ) | $ | (3,840 | ) | ||||||
| Net loss per ordinary share, basic and diluted | $ | (0.22 | ) | $ | (0.88 | ) | $ | (0.57 | ) | $ | (2.03 | ) | $ | (0.08 | ) | $ | (0.37 | ) | ||||||
| Weighted average number of shares used in computing net loss per ordinary share, basic and diluted | 13,101,275 | 5,213,446 | 11,744,275 | 4,236,788 | 36,187,789 | 10,374,116 | ||||||||||||||||||
Three and Six Months Ended June 30, 2020March 31, 2021 Compared to Three and Six Months Ended June 30, 2019March 31, 2020
Revenues
Our revenues for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
| (in thousands, except unit amounts) | (in thousands, except unit amounts) | (in thousands, except unit amounts) | ||||||||||||||||||||||
| Personal unit revenues | $ | 1,667 | $ | 851 | $ | 2,381 | $ | 2,397 | $ | 1,308 | $ | 714 | ||||||||||||
| Rehabilitation unit revenues | 1 | 26 | 47 | 61 | 8 | 46 | ||||||||||||||||||
| Revenues | $ | 1,668 | $ | 877 | $ | 2,428 | $ | 2,458 | $ | 1,316 | $ | 760 | ||||||||||||
Personal unit revenues consist of ReWalk Personal 6.0 and Distributed Products sale, rental, service and warranty revenue for home use.
Rehabilitation unit revenues consist of ReStore, Distributed Products and SCI Products sale, rental, service and warranty revenue to clinics, hospitals for treating patients with relevant medical conditions.
Revenues increased by $791$556 thousand, or 90%73%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. Revenues remained flat the six months ended June 30, 2020 compared to the six months ended June 30, 2019.March 31, 2020. The increase in revenue for three months ended June 30, 2020 was driven primarily by higher numberis due to increase of personalReWalk Personal 6.0 units sold in Europe.the United States and Germany.
In the future, we expect our growth to be driven by sales of our ReWalk Personal device to third-party payors as we continue to focus our resources on broader commercial coverage policies with third-party payors as well as sales of the ReStore and other products to rehabilitation clinics and for personal users.use.
Gross Profit
Our gross profit for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 werewas as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Gross profit | $ | 1,022 | $ | 435 | $ | 1,395 | $ | 1,361 | ||||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Gross profit | $ | 707 | $ | 373 | ||||
Gross profit was 61%54% of revenue for the three months ended June 30, 2020March 31, 2021 compared to 50%49% for the three months ended June 30, 2019. Gross profit was 57% of revenue for the six months ended June 30, 2020 compared to 55% for the six months ended June 30, 2019.March 31, 2020. The increase in gross profit for the three months ended June 30, 2020March 31, 2021 was mainly driven by the higher numbervolume of units placed as well as increase in average selling price. The gross profit has remained generally flat in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 with a slight increase due to reduced warranty expenses.sold.
We expect our gross profit to improve, assuming we increase our sales volumes, which could also decrease the product manufacturing costs. Improvements may be partially offset by the lower margins we expect upon the launch period of our new ReStore and distributed productsDistributed Products as well as due to an increase in the cost of product parts.
Research and Development Expenses
Our research and development expenses, net, for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Research and development expenses, net | $ | 954 | $ | 1,860 | $ | 1,939 | $ | 3,274 | ||||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Research and development expenses, net | $ | 795 | $ | 985 | ||||
Research and development expenses, net, decreased $906$190 thousand, or 49%19%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. Research and development expenses, net, decreased $1,335 thousand, or 41%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.March 31, 2020. The decrease is attributable to decreased costs associated with the developmentlower number of employees and clinical study costs ofemployee-related expenses offset by an increase in our ReStore soft suit exoskeleton.consulting spending.
We intend to focus our research and development expenses mainly on our current products maintenance as well as developing our “soft suit” exoskeleton for additional indications affecting the ability to walk or a home use design.
Sales and Marketing Expenses
Our sales and marketing expenses for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Sales and marketing expenses | $ | 1,353 | $ | 1,531 | $ | 3,034 | $ | 3,118 | ||||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Sales and marketing expenses | $ | 1,671 | $ | 1,681 | ||||
Sales and marketing expenses decreased $178remained generally flat with a $10 thousand, or 12%less than 1%, for the three months ended June 30, 2020decrease as compared to the three months ended June 30, 2019. Sales and marketing expenses decreased $84 thousand, or 3%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The decrease is driven mainly by lower travel expenses due to the Covid-19 restrictions.March 31, 2020.
In the near term our sales and marketing expenses are expected to be driven by our efforts to commercialize our current productsproduct offerings and to increase reimbursement coverage of the ReWalk Personal device.
General and Administrative Expenses
Our general and administrative expenses for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| General and administrative expenses | $ | 1,267 | $ | 1,279 | $ | 2,576 | $ | 2,779 | ||||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| General and administrative | $ | 1,262 | $ | 1,309 | ||||
General and administrative expenses decreased $12$47 thousand, or 1%4%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. General and administrative expenses decreased $203 thousand, or 7%, for the six months ended June 30,March 31, 2020, compared to the six months ended June 30, 2019. The expenses for the three months period remained flat whereas the decrease in the six months period wasdriven mainly driven by lower non-cash compensation expenses.
consulting spending.
Financial Expenses (Income), Net
Our financial expenses (income), net, for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Financial expenses, net | $ | 235 | $ | 353 | $ | 481 | $ | 771 | ||||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Financial expenses (income), net | $ | (4 | ) | $ | 246 | |||
Financial expenses (income), net, decreased $118by $250 thousand, or 33%101%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. Financial expenses, net, decreased $290 thousand, or 38%, for the six months ended June 30,March 31, 2020, comparedmainly due to the six months ended June 30, 2019. The decrease is attributable to decreasedlower interest expenses related to the Loan Agreement with Kreos.Kreos, which was fully repaid in December 2020.
Income Taxes (Tax Benefit)
Our income tax for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 was as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Taxes on income (tax benefit) | $ | 68 | $ | (1 | ) | $ | 60 | $ | 6 | |||||||
Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Income taxes (tax benefit) | $ | 45 | $ | (8 | ) | |||
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with United States generally accepted accounting principles.U.S. GAAP. The preparation of our condensed financial statements requires us to make estimates, judgments and assumptions that can affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates, judgments and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our condensed financial statements and related disclosures. See Note 2 to our audited consolidated financial statements included in our 20192020 Form 10-K for a description of the significant accounting policies that we used to prepare our consolidated financial statements.
There have been no material changes to our critical accounting policies or our critical judgments from the information provided in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” of our 20192020 Form 10-K, except for the updates provided in noteNote 3 of our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements” of this quarterly report.
Recent Accounting Pronouncements
See Note 3 to our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements” of this quarterly report for information regarding new accounting pronouncements.
Liquidity and Capital Resources
Sources of Liquidity and Outlook
Since inception, we have funded our operations primarily through the sale of certain of our equity securities and convertible notes to investors in private placements, the sale of our ordinary shares in public offerings and the incurrence of bank debt.
As of June 30, 2020,March 31, 2021, the Company had cashincurred a consolidated net loss of $3.1 million and cash equivalents of $14.1 million. The Company has an accumulated deficit in the total amount of approximately $175.2 million$184.5 million. Our cash and cash equivalent as of June 30, 2020March 31, 2021, totaled $67.4 million and further losses are anticipated in the development of its business. Those factors raise substantial doubt about the Company’s abilitynegative operating cash flow for the three months ended March 31, 2021, was $3.2 million. The Company has sufficient funds to continue as a going concern. The abilitysupport its operation for more than 12 months following the approval of our condensed consolidated unaudited financial statements for the three months ended March 31, 2021.
We expect to continue as a going concernincur future net losses and our transition to profitability is dependent upon, among other things, the Company obtainingsuccessful development and commercialization of our products and product candidates, the necessary financingachievement of a level of revenues adequate to meet its obligations and repay its liabilities arising from normal businesssupport our cost structure. Until we achieve profitability or generate positive cash flows, we will continue to need to raise additional cash. We intend to fund future operations when they come due.
Our anticipated primary uses of cash areare: (i) sales, marketing and reimbursement expenses related to market development activities of our ReStore device and our distributed products as well asPersonal 6.0 devices, broadening third-party payor and CMS coverage tofor our SCI Products,ReWalk Personal device and commercializing our new product lines added through distribution agreements; (ii) research and development costs related to our current products maintenance and expanding the indication of use of our lightweight “soft suit” exoskeletonexo-suit technology for potential home personal health utilization for multiple indications and future generation designs for our spinal cord injury device; (iii) routine product updates; and (iv) general corporate purposes, including working capital needs. We may also use such proceeds for potential acquisitions in complementary businesses, although we do not currently have any agreement or understanding with respect to other medical conditions as well as home therapy.an acquisition in which we plan to invest such proceeds. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending on research and development efforts and international expansion. If our current estimates of revenue, expenses or capital or liquidity requirements change or are inaccurate, we may seek to sell additional equity or debt securities, arrange for additional bank debt financing or refinance our indebtedness. There can be no assurance that we will be able to raise such funds on acceptable terms. For more information, see “Part I, Item 1A. Risk Factors-We have concluded that there are substantial doubts as to our ability to continue as a going concern.”
Loan Agreement with Kreos and Related Warrant to Purchase Ordinary Shares
On December 30, 2015, we entered into a loan agreement (the “Loan Agreement”)the Loan Agreement with Kreos Capital V (Expert Fund) Limited (“Kreos”) pursuant to which Kreos extended a line of credit to us in the amount of $20 million. On January 4, 2016, we drew down $12.0$20.0 million, under the Loan Agreement. Under the terms of the Loan Agreement we were entitled to draw down up to an additional $8.0 million until December 31, 2016, if we raised $10.0 million or more in the issuance of shares of our capital stock (including debt convertible into shares of our capital stock) by December 31, 2016. On December 28, 2016, we drew down the remaining $8.0 million available under the Loan Agreement. Interest iswith interest payable monthly in arrears on any amounts drawn down at a rate of 10.75% per year from the applicable drawdown date through the date on which all principal is repaid. As of June 30, 2017, the Company raised more than $20$20.0 million in connection with the issuance of its share capital and, therefore, in accordance with the terms of the Loan Agreement, the repayment period was extended from 24 months to 36 months. The principal was also reduced in connection with the issuance of the Kreos Convertible Note on June 9, 2017. Pursuant to the Loan Agreement, we paid Kreos a transaction fee equal to 1.0% of the total available amount of the line of credit upon the execution of the agreement and we will be required to pay Kreos an “end of loan payment” equal to 1.0% of the amount of each tranche drawn down upon the expiration of each such tranche. Pursuant to the Loan Agreement, we granted Kreos a first priority security interest over all of our assets, including certain intellectual property and equity interests in its subsidiaries, subject to certain permitted security interests.
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On June 9, 2017, the Company and Kreos entered into the First Amendment, of the Loan Agreement (the “First Amendment”). As of that date the outstanding principal amount under the Loan Agreement was $17.2 million. Under the First Amendment,which $3.0 million of the outstanding principal under the Loan Agreement isbecame subject to repayment pursuant to the senior secured Kreos Convertible Note issued on June 9, 2017, thus reducing the outstanding principal amount under the Loan Agreement to $14.2 million as of June 9, 2017. This amended outstanding principal amount remains subject to repayment in accordance with the terms and conditions of the Loan Agreement and an amended repayment schedule. Interest on the Kreos Convertible Note is payable monthly in arrears at a rate of 10.75% per year.
On November 20, 2018, the Company and Kreos entered into the Second Amendment of the Loan Agreement, (the “Second Amendment”). In the Second Amendment,in which the Company agreed to repayrepaid Kreos the $3.6 million to Kreos in satisfaction of all outstanding indebtedness under the Kreos Convertible Note and other related payments, including prepayment costs and end of loan payments, and Kreos agreed to terminateterminating the Kreos Convertible Note. The Company repaid Kreos the $3.6 millionNote, by issuing to Kreos 192,000 units and 288,000 pre-funded units as part of an underwritten public offering at the applicable public offering prices, for an aggregate price of $3.6 million (includingand the aggregate exercise price for the ordinary shares to be received upon exercise of the pre-funded warrants, assuming Kreos exercises all of the pre-funded warrants it purchased as part of the Company’s public offering). The Company and Kreos alsoparties agreed to revise the principal and the repayment schedule under the Kreos Loan Agreement. The revised repayment schedule, effectively deferred an additional $1.1 million of payments that were due in 2018 and $2.8 million that were due in 2019 under the loan’s prior repayment schedule, for total deferred payments of $3.9 million compared to the prior repayment schedule.Loan. Additionally, Kreos and the Company entered into the Kreos Warrant Amendment, which amended the exercise price of the warrant to purchase 6,679 ordinary shares currently held by Kreos from $241 to $7.5. The Second Amendment also made certain changes to the prepayment premiums under the Kreos Loan Agreement, tying them to the date of the Second Amendment.
On June 5, 2019 and June 6, 2019, the Company entered into warrant exercise agreements with certain institutional investors of warrants to purchase the Company’s ordinary shares, pursuant to which, Kreos agreed to exercise in cash their November 2018 warrants at the existingthen-effective exercise price of $7.5$7.50 per share. Under the exercise agreements, the Company also agreed to issue to Kreos new warrants to purchase up to 480,000 ordinary shares at an exercise price of $7.5$7.50 per share with an exercise period of five years.
On December 29, 2020, the Company repaid in full the remaining loan principal amount to Kreos including end of June 30,loan payments and by that discharged all of its obligation to Kreos Accordingly, as of December 31, 2020 the outstanding principal amount under the Kreos Loan Agreement was $4.4 million. Depending on our liquidity needs, we may seek to refinance up to a substantial portion of our indebtedness under our Kreos Loan Agreement, which we have considered with Kreos from time to time, including by exchanging our indebtedness with Kreos for new convertible debt from a third-party investor, or by borrowing additional funds.zero.
Paycheck Protection Program Loan Agreement
On April 21, 2020, RRI entered into a Notenote agreement (the “Note”) evidencing an unsecured loan in the amount of $392 thousand under the PPPPaycheck Protection Program (the “PPP”) as part of the CARESCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020. The Note provides for an interest rate of 1.00% per year and matures two years after the date of initial disbursement. Beginning on the seventh month following the date of initial disbursement, RRI is required to make 18 monthly payments of principal and interest. The Note may be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that were incurred before February 15, 2020. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. The terms of any forgiveness may also be subject to further requirements in any regulations and guidelines the Small Business Administration may adopt. While the Company currently believes that its use of the Note proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that the Company will obtain forgiveness of the Note in whole or in part.
On September 29, 2020, the Company submitted an application for loan forgiveness and on November 6, 2020 the Company received confirmation of its PPP Note forgiveness.
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Equity Raises
Use of Form S-3 Limitations
Beginning with the filing of our Form 10-K on February 17, 2017, we have beenwere subject to limitations under the applicable rules of Form S-3, which constrainconstrained our ability to secure capital pursuant to our ATMAt The Market (“ATM”) Offering Program or other public offerings pursuant to our effective Form S-3. These rules limit the size of primary securities offerings conducted by issuers with a public float of less than $75 million to no more than one-third of their public float in any 12-month period. PursuantAs of February 16, 2021, since our public float has reached at least $75 million in the preceding 60 days, these limitations will no longer apply to these rules, until August 25, 2020, we may not sell inour primary offerings under our Form S-3 more than approximately $11.9until the filing of our annual report on Form 10-K in 2022, when we will re-test our status under these rules. If our public float subsequently drops below $75 million in any 12-month period, unless and untilas of the filing of that or a subsequent annual report on Form 10-K, or at the time we are no longer subject to these limitations. Wefile a new Form S-3, we will cease to bebecome subject to these limitations onceagain, until the date that our public float exceedsagain reaches $75 million. As of the date of this quarterly report, we have sold approximately $9.0 million in securities under our Form S-3 during the last 12 months, when we were subject to these restrictions and, therefore, we can sell securities in the amount of $2.9 million under our Form S-3. We will also recalculate the amount of this limitation if or when we conduct another takedown under Form S-3. Additionally, theseThese limitations do not apply to secondary offerings for the resale of our ordinary shares or other securities by selling shareholders or to the issuance of ordinary shares upon conversion by holders of convertible securities, such as warrants. Our currently effective Form S-3 expires on May 23, 2022. With respect to our ATM Offering Program, because weWe have sold $15.7 million in the program since its inception, we could only raise up to a remaining $9.3 million using the program, subject to the $11.9 million limitation on use of Form S-3.
Equity Offerings and Subsequent Warrant Exercises
On November 20, 2018, the Company completed itsa follow-on underwritten public offering in which the Company issued and sold 728,019 units, each consisting of one ordinary share and one warrant to purchase one ordinary share. Each unit was sold to the public at a price of $7.5 per unit, additionally the Company issued and sold 1,050,373 pre-funded units, each unit was sold to the public at a price of $7.25 per unit. Each unit containing one pre-funded warrant with an exercise price of $0.25 per share and one warrant to purchase one ordinary share. The total gross proceeds received from the follow-on public offering, before deducting commissions, discounts, and expenses, were $13.1 million (including proceeds from the exercise of 90,691 pre-funded warrants at the closing of the offering). As of December 31, 2018, additional pre-funded warrants to purchase an aggregate 562,466 ordinary shares had been exercised, for additional proceeds of $140,617. During the yearnine months ended December 31,September 30, 2019 additional pre-funded warrants and warrants to purchase an aggregate 2,048,752 ordinary shares had been exercised, for additional proceeds of $12.4 million. As compensation for their role in the offering, the Company also issued to the underwriters warrants to purchase up to 106,680 ordinary shares, which are immediately exercisable starting on November 20, 2018 until November 15, 2023 at $9.375 per share. See Note 8b (2) in our 2019 form 10-K for more information about the Company’s follow-on public offering.
On February 15, 2019, the Company entered into an exclusive placement agent Agreement with H.C. Wainwright, on a reasonable best-efforts basis in connection with a public offering of 760,000 ordinary shares at a price of $5.75 per Share. The total gross proceeds received from the follow-on public offering, before deducting commissions, discounts, and expenses, were $4.37 million. The Company also issued to H.C. Wainwright and/or its designees warrants to purchase up to 45,600 ordinary shares, which are immediately exercisable starting on February 25, 2019 until February 21, 2024 at $7.1875 per share.
On April 3, 2019, the Company entered into an exclusive placement agent Agreement with H.C. Wainwright in connection with a registered direct offering of the Company’s ordinary shares, par value NIS 0.25 per share and a concurrent private placement of warrants to purchase ordinary shares. The ordinary shares were offered pursuant to our Form S-3. The Company signed a purchase agreement with certain institutional investors for the issuance and sale of 816,914 ordinary shares at $5.2025 per ordinary share and warrants to purchase up to 408,457 ordinary shares at an exercise price of $5.14. The warrants issued to these purchasers will be exercisable at any time and from time to time, in whole or in part, following the date of issuance and ending five and one-half years from the date of issuance, at an exercise price of $5.14. The Company also issued to H.C. Wainwright and/or its designees warrants to purchase up to 49,015 ordinary shares. The warrants issued to H.C. Wainwright will be exercisable at any time and from time to time, in whole or in part, following the date of issuance and ending five years from the date of the execution of the Purchase Agreement,purchase agreement, at a price per share equal to $6.503125. The gross proceeds from the offering, before deducting placement agent fees and offering expenses, were approximately $4.25 million.
On June 5, 2019 and June 6, 2019, the Company entered into warrant exercise agreements with certain institutional investors whereby the Company issued warrants to purchase up to 1,464,665 ordinary shares with an exercise price of $7.50 per share, exercisable from June 5, 2019 or June 6, 2019 until June 5, 2024 or June 6, 2024, respectively. Additionally, the Company issued warrants to purchase up to 87,880 ordinary shares, with an exercise price of $9.375 per share, exercisable from June 5, 2019 until June 5, 2024, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our June 2019 warrant exercise agreement and concurrent private placement of warrants.
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On June 12, 2019, the Company entered into a purchase agreement with certain institutional investors for the issuance and sale of 833,334 ordinary shares, par value NIS 0.25 per share, at $6.00 per ordinary share and warrants to purchase up to 416,667 ordinary shares with an exercise price of $6.00 per share, exercisable from June 12, 2019 until December 12, 2024, in a private placement that took place concurrently with our registered direct offering of ordinary shares in June 2019. Additionally, the Company issued warrants to purchase up to 50,000 ordinary shares, with an exercise price of $7.50 per share, exercisable from June 12, 2019 until June 10, 2024, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our June 2019 registered direct offering and concurrent private placement of warrants.
On February 10, 2020, the Company closed a “best efforts” public offering whereby the Company issued an aggregate of 5,600,000 of common units and pre-funded units at a public offering price of $1.25 per common unit and $1.249 per pre-funded unit. As part of the public offering, the Company entered into a securities purchase agreement with certain institutional purchasers. Each common unit consisted of one ordinary share, par value NIS 0.25 per share, and one common warrant to purchase one ordinary share. Each pre-funded unit consisted of one pre-funded warrant to purchase one ordinary share and one common warrant. Additionally, the Company issued warrants to purchase up to 336,000 ordinary shares, with an exercise price of $1.5625 per share, to representatives of H.C. Wainwright as compensation for its role as the placement agent in the Company’s February 2020 offering. As of December 31, 2020, all pre-funded warrants to purchase ordinary shares had been exercised and 1,831,500 common warrants to purchase ordinary shares had been exercised.
On July 6, 2020, the Company entered into a purchase agreement with certain institutional investors for the issuance and sale of 4,938,278 ordinary shares, par value NIS 0.25 per share, at $1.8225 per ordinary share and warrants to purchase up to 2,469,139 ordinary shares with an exercise price of $1.76 per share, exercisable from July 6, 2020 until January 6, 2026. Additionally, the Company issued warrants to purchase up to 296,297 ordinary shares, with an exercise price of $2.2781 per share, exercisable from July 6, 2020 until July 2, 2025, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our July 2020 registered direct offering.
On December 8, 2020, the Company entered into a private placement with certain institutional investors for the issuance and sale of 5,579,776 ordinary shares, par value NIS 0.25 per share, at $1.43375 per ordinary and warrants to purchase up to 4,184,832 ordinary shares with exercise price of $1.34 per share, exercisable from December 8, 2020 until June 8, 2026. Additionally, the Company issued warrants to purchase up to 334,787 ordinary shares, with an exercise price of $1.7922 per share, exercisable from December 8, 2020 until June 8, 2026, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our December 2020 private placement.
On February 19, 2021, the Company entered into a purchase agreement with certain institutional and other accredited investors for the issuance and sale of 10,921,502 ordinary shares, par value NIS 0.25 per share at $3.6625 per ordinary share and warrants to purchase up to an aggregate of 5,460,751 ordinary shares with exercise price of $3.6 per share, exercisable from February 19, 2021 until August 26, 2026. Additionally, the Company issued warrants to purchase up to 655,290 ordinary shares, with an exercise price of $4.578125 per share, exercisable from February 19, 2021 until August 26, 2026, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our February 2021 private placement offering.
ATM Offering Program
On May 10, 2016, we entered into our Equity Distribution Agreement with Piper Jaffray, as amended on May 9, 2019, pursuant to which we may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $25.0 million through Piper Jaffray acting as our agent. Subject to the terms and conditions of the Equity Distribution Agreement, Piper Jaffray will use its commercially reasonable efforts to sell on our behalf all of the ordinary shares requested to be sold by us, consistent with its normal trading and sales practices. Piper Jaffray may also act as principal in the sale of ordinary shares under the Equity Distribution Agreement. Such sales may be made under our Form S-3 in what may be deemed “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act, directly on or through the Nasdaq Capital Market, to or through a market maker other than on an exchange or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law, including in privately negotiated transactions.
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Piper Jaffray is entitled to compensation at a fixed commission rate of 3% of the gross sales price per share sold through it as agent under the Equity Distribution Agreement. Where Piper Jaffray acts as principal in the sale of ordinary shares under the Equity Distribution Agreement, such rate of compensation will not apply, but in no event will the total compensation of Piper Jaffray, when combined with the reimbursement of Piper Jaffray for the out-of-pocket fees and disbursements of its legal counsel, exceed 8.0% of the gross proceeds received from the sale of the ordinary shares.
We may instruct Piper Jaffray not to sell ordinary shares if the sales cannot be effected at or above the price designated by us in any instruction. We or Piper Jaffray may suspend an offering of ordinary shares under the ATM Offering Program upon proper notice and subject to other conditions, as further described in the Equity Distribution Agreement. Additionally, the ATM Offering Program will terminate on the earlier of (i) the sale of all ordinary shares subject to the Equity Distribution Agreement, or (ii) the date that is three years after a new registration statement on Form S-3 goes effective, (iii) our becoming ineligible to use Form S-3 and (iv) termination of the Equity Distribution Agreement.Agreement by the parties. The Equity Distribution Agreement may be terminated by Piper Jaffray or us at any time on the close of business on the date of receipt of written notice, and by Piper Jaffray at any time in certain circumstances, including any suspension or limitation on the trading of our ordinary shares on the Nasdaq Capital Market, as further described in the Equity Distribution Agreement. We temporarily suspended use of the ATM Offering Program on February 20, 2019 to facilitate our February 2019 “best efforts” public offering. As of June,September 30, 2020, we had sold 302,092 ordinary shares under the ATM Offering Program for net proceeds to us of $14.5 million (after commissions, fees, and expenses). Additionally, as of that date,September 30, 2020, we had paid Piper Jaffray compensation of $471 thousand and had incurred total expenses (including such commissions) of approximately $1.2 million in connection with the ATM Offering Program. Subject to the limitations under Form S-3 due to our public float, we
We intend to continue using the ATM Offering Programat-the-market offering or similar continuous offering programs opportunistically to raise additional funds.
Timwell Private Placement
On March 6, 2018, we entered into an investment agreement with Timwell Corporation Limited, a Hong Kong corporation (“Timwell”), as amended on May 15, 2018 (the “Investment Agreement”), pursuant to which we agreed, in return for aggregate gross proceeds to us of $20 million, to issue to Timwell an aggregate of 640,000 of our ordinary shares, at a price per share of $31.25.$1.25. The Investment Agreement contemplates issuances in three tranches, including $5 million for 160,000 shares in the first tranche, $10 million for 320,000 shares in the second tranche and $5 million for 160,000 shares in the third tranche.
The first tranche, consisting of $5 million for 160,000 shares, closed on May 15, 2018. The net aggregate proceeds after deducting commissions, fees and offering expenses in the amount of approximately $705 thousand were approximately $4.3 million.
The closings of the Second Tranchesecond tranche and Third Tranchethird tranche were subject to specified closing conditions, including the formation of a joint venture, the signing of a license agreement and a supply agreement, and the successful production of certain ReWalk products. The Third Tranche Closingclosing of the third tranche was to have occurred by December 31, 2018 and no later than April 1, 2019. We believe that Timwell committed various material breaches of the Investment Agreement, including failure to consummate its second and third investment tranches in the Company for a total of $15 million, failure to enter into a detailed joint venture with the Company, and failure to make payments for product-related commitments. Nevertheless, until March 2020 we continued to engage in a dialogue with Timwell (and its affiliate RealCan) on alternative pathways to allow us to commercialize our products in China through RealCan and its affiliates, and also provide for RealCan or an affiliate to invest in us.
In late March 2020, Timwell notified us that it would not invest the second and third tranches under the Investment Agreement. In response, in early April 2020, our Board of Directors also removed Timwell’s designee, who was appointed pursuant to the Investment Agreement, from the Board of Directors, due to this breach pursuant to the terms of the Investment Agreement. We continue to view China as a market with key opportunities for products designed for stroke patients, and therefore we continue to evaluate potential relationships with other groups to penetrate the Chinese market.
Cash Flows for the SixThree Months Ended June 30,March 31, 2021 and March 31, 2020 and June 30, 2019 (in thousands):
| Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| Net cash used in operating activities | $ | (7,533 | ) | $ | (7,956 | ) | $ | (3,173 | ) | $ | (4,341 | ) | ||||
| Net cash used in investing activities | (15 | ) | — | (9 | ) | (9 | ) | |||||||||
| Net cash provided by financing activities | 5,303 | 22,473 | 50,236 | 4,690 | ||||||||||||
| Net cash flow | $ | (2,245 | ) | $ | 14,517 | $ | 47,054 | $ | 340 | |||||||
Net Cash Used in Operating Activities
Net cash used in operating activities decreased to $7.5by $1.2 million for the six months ended June 30, 2020 compared to $8.0 million for the six months ended June 30, 2019 primarilyor 27% due to reductionincreased collection as a result of higher sales to customers as well as no interest payments to Kreos as we repaid our debt under the Loan Agreement in the operating costs that was larger than the offset due to changesfull in working capital.December 2020.
Net Cash Provided by Financing Activities
Net cash provided by financing activities decreased to $5.3increased by $45.5 million for the sixthree months ended June 30, 2020March 31, 2021 compared to $22.5 million provided by financing activities for the sixthree months ended June 30, 2019,March 31, 2020, primarily due to the lowerhigher proceeds from equity raise activities inreceived through our February 2021 offering and warrants exercises received during the six months ended June 30, 2020, than the proceeds we received from equity raise activities for the six months ended June 30, 2019,first quarter of 2021, as well as increasethe fact that we did not have any principal payments pursuant to the Loan Agreement with Kreos after repaying our debt in the loan repayments to Kreos.full in December 2020.
Obligations and CommercialContractual Commitments
Set forth below is a summary of our contractual obligations as of June 30, 2020.
| Payments due by period (in dollars, in thousands) | ||||||||||||||||||||
| Contractual obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| Purchase obligations (1) | $ | 1,005 | $ | 1,005 | $ | — | $ | — | $ | — | ||||||||||
| Collaboration Agreement and License Agreement obligations (2) | 2,483 | 1,083 | 1,400 | — | — | |||||||||||||||
| Operating lease obligations (3) | 2,153 | 707 | 1,284 | 162 | — | |||||||||||||||
| Long-term debt obligations (4) | 5,117 | 4,899 | 218 | — | — | |||||||||||||||
| Total | $ | 10,758 | $ | 7,694 | $ | 2,902 | $ | 162 | $ | — | ||||||||||
| Payments due by period (in dollars, in thousands) | ||||||||||||
| Contractual obligations | Total | Less than 1 year | 1-3 years | |||||||||
| Purchase obligations (1) | $ | 1,150 | $ | 1,150 | $ | — | ||||||
| Collaboration Agreement and License Agreement obligations (2) | 2,144 | 1,344 | 800 | |||||||||
| Operating lease obligations (3) | 1,656 | 681 | 975 | |||||||||
| Total | $ | 4,950 | $ | 3,175 | $ | 1,775 | ||||||
| (1) | The Company depends on one contract manufacturer, Sanmina, for both the ReStore products and the SCI Products. We place our manufacturing orders with Sanmina pursuant to purchase orders or by providing forecasts for future requirements. Additionally, we have purchase obligations to our raw material vendors related to the ReStore production, which began in the second quarter of 2019 following regulatory clearance. |
| (2) | Our Collaboration Agreement with Harvard was originally signed for a period of six years and, as of |
| (3) | Our operating leases consist of leases for our facilities in the United States and Israel and motor vehicles. |
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We calculated the payments due under our operating lease obligation for our Israeli office that are to be paid in NIS at a rate of exchange of NIS 3.466:$1.00,3.334: $1.00, and the payments due under our operating lease obligation for our German subsidiary that are to be paid in euros at a rate of exchange of 1.120 euro:€1.00:$1:00,1.174, both of which were the applicable exchange rates as of June 30, 2020. We calculated the payments due under our Loan Agreement with Kreos according to the current schedule of repayment of principal and interest.March 31, 2021
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party obligations as of June 30, 2020.March 31, 2021.
There have been no material changes to our market risk during the secondfirst quarter of 2020.2021. For a discussion of our exposure to market risk, please see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 20192020 Form 10-K.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s 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 financial disclosure.
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective such that the information required to be disclosed by us in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and 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.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2020March 31, 2021 there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
There have been no material changes to our legal proceedings as described in “Part I, Item 3. Legal Proceedings” of our 20192020 Form 10-K, except as described in Note 5 in our condensed consolidated financial statements included in “Part I, Item 1” of this quarterly report.
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There have been no material changes to our risk factors from those disclosed in “Part I, Item 1A. Risk Factors” of our 20192020 Form 10-K except as noted below:
Risks Related to an InvestmentOur Business and Our Industry
Defects in our Ordinary Shares
When an exoskeleton is used by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and operational challenges faced by our customers. Continued outbreaks of COVID-19 could result in a widespread health crisis that could adversely affectparalyzed individual to walk, the economies and financial markets of many countries, resulting in an economic downturnindividual relies completely on the exoskeleton to hold him or a global recession that could affect demand forher upright. In addition, our products and likely impact our operating results. Theseincorporate sophisticated computer software. Complex software frequently contains errors, especially when first introduced. Our software may further limitexperience errors or restrict our ability to access capital on favorable terms, or at all, lead to consolidation that negatively impacts our business, weaken demand, increase competition, cause us to reduce our capital spend further, or otherwise disrupt our business.
The medical device industry has historically been subject to extensive litigation over product liability claims. We have been and anticipate that as part of our ordinary course of business we submitted an MDR for tibial fractures that occurredmay be, subject to product liability claims alleging defects in the United States. Additional fracturesdesign, manufacture, or other adverse eventslabeling of our products. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs and high punitive damage payments. Although we maintain product liability insurance, the coverage is subject to deductibles and limitations, and may occurnot be adequate to cover future claims. Additionally, we may be unable to maintain our existing product liability insurance in the future that may require usat satisfactory rates or adequate amounts.
Risks Related to report to the FDA pursuant to the MDR regulations (or other governmental authorities pursuant to equivalent outside of the United States regulations), and/or to initiate a removal, correction, or other action. Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer letters, or in an FDA enforcement action, such as a mandatory recall, notification to healthcare professionals and users, warning letter, seizure, injunction or import alert. In addition, failure to report such adverse events to appropriate government authorities on a timely basis, or at all, could result in enforcement action against us. Any action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require financial resources and distract management, and may harm our reputation and financial results.
Government Regulation While we addressed the observations that the FDA cited in a 2015 warning letter related to our mandatory post-market surveillance study and initiated the study, we are currently experiencing enrollment issues that make our study progress inadequate and our modified protocol (intended to overcome the enrollment issues so that we may complete the study, as required) has not yet been approved by FDA. Going forward, if we cannot meet certain FDA requirements and enrollment criteria for the study or otherwise satisfy FDA requests promptly, or if our study produces unfavorable results, we could be subject to additional FDA warnings letters or more significant enforcement action, which could materially and adversely affect our commercial success.
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We are conducting an ongoing mandatory FDA postmarket surveillance study on our ReWalk Personal 6.0, which began in June 2016. Before we began the current study, the FDA sent us a warning letter on September 30, 2015 (“the September 2015 Warning Letter”), threatening potential regulatory action against us for violations of Section 522 of the U.S. Federal Food, Drug, and Cosmetic Act, based on our failure to initiate a postmarket surveillance study by the September 28, 2015 deadline, our allegedly deficient protocol for that study and the lack of progress and communication regarding the study. Between June 2014 and our receipt of the September 2015 Warning Letter, we had responded late to certain of the FDA’s requests related to our study protocol. In February 2016, the FDA sent us an additional information request, or the February 2016 Letter, requesting additional changes to our study protocol and asking that we amend the study within 30 days. This letter also discussed the FDA’s request, as further discussed in later communications with the FDA, for a new premarket notification for our ReWalk device, or a special 510(k), linked to what the FDA viewed as changes to the labeling and the device, including to a computer included with the device. In late March 2016, following multiple discussions with the FDA, including an in-person meeting, the FDA confirmed that the agency would permit the continued marketing of the ReWalk device conditioned upon our timely submitting a special 510(k) and initiating our postmarket surveillance study by June 1, 2016. The special 510(k) was timely submitted on April 8, 2016, and the FDA’s substantial equivalence determination was received by us on July 22, 2016, granting us permission to continue marketing the ReWalk device.
Additionally, we submitted a protocol to the FDA for the postmarket surveillance study that was approved by the FDA on May 5, 2016.
We began the study on June 13, 2016, with Stanford University as the lead investigational site. In August 2016, the FDA sent us a letter stating that, based on its evaluation of our corrective and preventive actions in response to the September 2015 Warning Letter, it appeared we had adequately addressed the violations cited in the September 2015 Warning Letter. As part of our study, we provided the FDA with the required periodic reports on the study’s progress, in a few cases with delay, and we intend to continue providing the FDA with periodic reports as required. Through these reports, we made the FDA aware that due to enrollment issues, we were unable to satisfy the target enrollment specified in the original study protocol. As of June 30, 2020, we had three active centers participating inMarch 6, 2021, the study (one site is closed and another site is on hold), but only two sites have successfully enrolled patients.has been closed. Twelve subjects havewere enrolled in the study, two havethree completed the study and three areone was using the device inat the community.time the study was closed. This iswas substantially below the required number of patients included in our original study protocol.
In March 2020,2021, FDA approved a modifiedaccepted another protocol supplement to the original postmarket study that we prepared to address our inability to obtain certain study information due to the COVID-19 pandemic. Our modification to the original protocol that will supplementallowed us to close all study sites. The data from the clinical study with real-world evidence and the study status was updated to progress adequate in July 2020. ReWalk is actively collecting the real-world evidence in order to fulfill theoriginal postmarket study, order requirements.along with the real world data, will be submitted to FDA. However, despite the revised study protocol there can be no assurance that we will be able to satisfy the post-market study requirements. Additionally, we are experiencing some study disruptions due to COVID-19 pandemic If we cannot meet FDA requirements for the post-market study or timely address requests from the FDA related to the study, or if the results of the study are not as favorable as we expect, the FDA may issue additional warning letters to us, impose limitations on the labeling of our device or require us to stop marketing the ReWalk Personal device in the United States. We derived 41.4%40% of our revenues in the year ended December 31, 20192020 from sales of the ReWalk device in the United States and, if we are unable to market the ReWalk device in the United States, we expect that these sales would be adversely impacted, which could materially adversely affect our business and overall results of operations.
There are no transactions that have not been previously included in a Current Report on Form 8-K.
Not applicable.
Not applicable.
Not applicable.
Exhibit Number | Description | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
__________________________
| * | Furnished herewith. |
| ^ | Portions of this exhibit (indicated by asterisks) have been omitted under rules of the |
| # | The schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ReWalk Robotics Ltd. | |||
| Date: May 11, 2021 | By: | /s/ Larry Jasinski | |
| Larry Jasinski | |||
Chief Executive Officer (Principal Executive Officer) | |||
| Date: | |||
| By: | /s/ Ori Gon | ||
| Ori Gon | |||
| Chief Financial Officer | |||
| (Principal Financial and Principal Accounting Officer) | |||
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