REWALK ROBOTICS LTD. AND SUBSIDIARIES
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.
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 8:- | SHAREHOLDERS’ EQUITY |
On March 27, 2019, the Company’s shareholders approved (i) a reverse share split within a range of 1:8 to 1:32, to be effective at the ratio and on a date to be determined by the Board of Directors, and (ii) amendments to the Company’s Articles of Association authorizing an increase in the Company’s authorized share capital (and corresponding authorized number of ordinary shares, proportionally adjusting such number for the reverse share split) by up to NIS 17.5 million. Following the shareholder approval, an authorized committee of the Board of Directors of the Company approved a one-for-twenty-five reverse share split of the Company’s ordinary shares, and the Company filed the Third Amended and Restated Articles of Association of the Company with the Registrar of Companies of the State of Israel to effect the reverse share split and to increase the Company’s authorized share capital after the effect of the reverse share split. The reverse share split became effective on April 1, 2019. Additionally, effective at the same time, the total number of ordinary shares the Company is authorized to issue changed from 250,000,000 shares to 60,000,000 shares, the par value per share of the ordinary shares changed to NIS 0.25 and the authorized share capital of the Company changed from NIS 2,500,000 to NIS 15,000,000. All share and per share data included in these condensed consolidated financial statements, for periods before the three months ended June 30, 2019, give retroactive effect to the reverse stock split.
Upon the effectiveness of the reverse share split, every twenty-five shares were automatically combined and converted into one ordinary share. Appropriate adjustments were also made to all outstanding derivative securities of the Company, including all outstanding equity awards and warrants.
No fractional shares were issued in connection with the reverse share split. Instead, all fractional shares (including shares underlying outstanding equity awards and warrants) were rounded down to the nearest whole number.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7: SHAREHOLDERS’ EQUITY
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.
The fair value for options granted during the six months ended June 30, 2019 was estimated at the date of the grant using a Black-Scholes-Merton option pricing model with the following assumptions:
| | 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 weighted average grant date fair value of options granted during the six months ended June 30, 2019 was $2.98. The weighted average grant date fair value of RSUs granted during the sixthree months ended June 30,March 31, 2020 and 2019 was $2.23 and $4.69 respectively.
$1.32. The Company did not grant RSUs during the three months ended March 31, 2020.
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. |
| c. | 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)
| d.c. | 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 $7.5$7.500 per share, which were granted on December 31, 2015 to Kreos Capital V (Expert) Fund Limited, or Kreos, in connection with a loan made by Kreos to us and are currently exercisable (in whole or in part) until the earlier of (i) December 30, 2025 or (ii) immediately prior to the consummation of a merger, consolidation, or reorganization of us with or into, or the sale or license of all or substantially all the assets or shares of us to, any other entity or person, other than a wholly-owned subsidiary of us, excluding any transaction in which ourthe Company’s shareholders prior to the transaction will hold more than 50% of the voting and economic rights of the surviving entity after the transaction. None of these warrants had been exercised as of June 30, 2020.March 31, 2021. |
| (2) | Represents warrants issued as part of ourthe Company’s follow-on offering in November 2016. At any time, the Company’s board of directors may reduce the exercise price of the warrants to any amount and for any period of time it deems appropriate. |
(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)
| (3)(4) | Represents common warrants that were issued as part of the $8.0 million drawdown under the Loan Agreement which occurred on December 28, 2016. See footnote 1 for exercisability terms. |
| (4) | Represents common warrants that were issued as part of ourCompany’s follow-on offering in November 2018.
|
| (5) | Represents common warrants that were issued to the underwriters as compensation for their role in ourthe Company’s follow-on offering in November 2018. |
| (6) | Represents warrants that were issued to the exclusive placement agent as compensation for its role in ourthe Company’s follow-on offering in February 2019. |
| (7) | Represents warrants that were issued to certain institutional purchasers in a private placement in ourthe Company’s registered direct offering of ordinary shares in April 2019. |
| (8) | Represents warrants that were issued to the placement agent as compensation for its role in ourthe Company’s April 2019 registered direct offering. |
| (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 ourthe Company’s June 2019 warrant exercise agreement and concurrent private placement of warrants. |
| (11) | Represents warrants that were issued to certain institutional purchasersinvestors in a private placement in the Company’s registered direct offering of ordinary shareswarrant exercise agreement in June 2019. |
| (12) | Represents warrants that were issued to the placement agent as compensation for its role in ourthe Company’s June 2019 registered direct offering and concurrent private placement of warrants. |
| (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. |
| e.(15) | Share-based compensation expenseRepresents warrants that were issued to certain institutional purchasers in a private placement in our registered direct offering of ordinary shares in July 2020. During the three months ended March 31, 2021 2,020,441 warrants were exercised for employees and non-employees:total consideration of $3,555,976.
|
(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. |
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 | |
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)1. Follow-on offerings and warrants exercise:
In November 2018,On February 19, 2021, the Company entered into an underwritinga purchase agreement with H.C. Wainwright & Co., LLC (“H.C. Wainwright”), in connection with the Company’s follow-on public offering of 496,040 units, each consisting of one ordinary share and one common warrant to purchase one ordinary share with an exercise price of $7.5 per warrant. Each unit was sold to the public at a price of $7.50 per unit. On November 18, 2018, H.C. Wainwright exercised in full its option to purchase 231,964 ordinary shares for $7.25 per share and/or common warrants to purchase up to an additional 231,964 ordinary shares for $0.25 per warrant.
Additionally, the Company issued and sold 1,050,372 pre-funded units at a price to the public 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 with an exercise price of $7.50 per warrant. The total gross proceeds received from the November 2018 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 three months ended June 30, 2019, additional pre-funded warrants and warrants to purchase an aggregate 584,087 ordinary shares had been exercised, for additional proceeds of $107,303. 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 became immediately exercisable starting on November 20, 2018 until November 15, 2023 at $9.375 per share.
In February 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 February 2019 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.
In April 2019, the Company entered into securities purchase agreements with certain institutional purchasers wherebyand other accredited investors for the Company issued 816,914issuance and sale of 10,921,502 ordinary shares, par value NIS 0.25 per share at $5.2025$3.6625 per ordinary share and warrants to purchase up to 408,457an aggregate of 5,460,751 ordinary shares with an exercise price of $5.14$3.6 per share, exercisable from April 5, 2019February 19, 2021 until October 7, 2024, in a private placement that took place concurrently with the Company’s registered direct offering of ordinary shares in April 2019.August 26, 2026. Additionally, the Company issued warrants to purchase up to 49,015655,290 ordinary shares, with an exercise price of $6.503125$4.578125 per share, exercisable from April 5, 2019February 19, 2021 until April 3, 2024,August 26, 2026, to certain representatives of H.C. Wainwright & Co., LLC (“H.C. Wainwright”) as compensation for its role as the placement agent in our April 2019 registered direct offering and concurrentFebruary 2021 private placement of warrants.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)During the three months ended March 31, 2021, we received a total of 9,814,754 outstanding warrants with exercise prices ranging from $1.25 to $1.79 were exercised, for total gross proceeds of approximately $13.8 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.
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. 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.
On March 6, 2018, the Company 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 the Company agreed to issue to Timwell, in three different tranches, an aggregate of 640,000 ordinary shares in return for aggregate gross proceeds of $20 million. The closing of each tranche is subject to certain closing conditions. The closing of the first tranche (the “First Tranche Closing”) took place on May 15, 2018, upon which Timwell received 160,000 ordinary shares for an aggregate purchase price of $5,000,000, and Timwell and the Company signed a registration rights agreement in the form attached to the Investment Agreement. The net aggregate proceeds of the First Tranche Closing after deducting fees and other related expenses in the amount of approximately $705 thousands were approximately $4.3 million. The remaining investment is to occur in two tranches, including $10 million for the issuance to Timwell of 320,000 ordinary shares (the “Second Tranche”) and $5 million for the issuance to Timwell of 160,000 ordinary shares (the “Third Tranch”). The closing of the second and third tranches is subject to specified closing conditions, including, with respect to the second tranche, the signing of a license agreement and a supply agreement and the formation of the China JV (the “China JV”) based on the JV Framework Agreement, and, with respect to the third tranche, the successful production of certain ReWalk products by the China JV. The second tranche closing was initially expected to occur by July 1, 2018 and the third tranche closing was initially expected to occur by December 31, 2018 and no later than April 1, 2019.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In May 2018, the Company entered into a fee and release agreement with Canaccord Genuity LLC (“Canaccord Genuity”) requiring the Company to pay to Canaccord Genuity, in connection with a settlement, in addition to certain cash amounts, (i) $125 thousand in ordinary shares of the Company after the First Tranche Closing of the Timwell transaction and (ii) $225 thousand in ordinary shares of the Company after the closing of the Second Tranche of the Timwell transaction (or such lower amount if the Second Tranche Closing is less than $10.0 million). The price per share used for calculation of the number of ordinary shares issued by the Company to Canaccord Genuity is based on the volume weighted average price of the Company’s ordinary shares as reported on the Nasdaq Capital Market for the five consecutive trading days prior to the date of issuance. The Company is also obligated to pay $100 thousand in cash following the closing of the Third Tranche of $5.0 million (or such lower amount if the Third Tranche Closing is less than $5.0 million). Following the First Tranche Closing in May 15, 2018, the Company issued 4,715 ordinary shares to Canaccord Genuity.
In late March 2020, Timwell notified the Company that it would not invest the second and third tranches under the Investment Agreement. In response, in early April 2020, the Company’s 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. As the Company continues to view China as a market with key opportunities for products designed for stroke patients, the Company continues to evaluate potential relationships with other groups to penetrate the Chinese market.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9:- | FINANCIAL EXPENSES, NET |
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 10:- | GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA |
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 | |
| (*) | Long-lived assets are comprised of property and equipment, net. |
| | Six Months Ended June 30, | |
| | 2020 | | | 2019 | |
Major customer data as a percentage of total revenues: | | | | | | |
Customer A | | | 10.3 | % | | | * | ) |
Customer B | | | * | ) | | | 17.1 | % |
NOTE 11:- | SUBSEQUENT EVENTS |
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.
| | 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; |
• | 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.
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.
Second First Quarter 20202021 and Subsequent Period Business Highlights
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;
| ● | Total revenue for the second quarter of 2020 was $1.7 million compared to $0.9 million in the prior year quarter;The Company’s gross margin was 54% in Q1 of 2021, compared to 49% in Q1 of 2020; |
| ● | Record Gross Margin of approx. 61.3% compared to 49.6% in the prior year quarter;The Company’s operating expenses were $3.7 million in Q1 of 2021, compared to $4 million in Q1 2020; |
| ● | Raised total of $10.6 million in gross proceeds from warrants exercise during the second quarter and a subsequent registered direct offering in July; and
|
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.
| ● | The Centers for Medicare and Medicaid Services ("CMS") issued Healthcare Common Procedure Coding System ("HCPCS") Level II Code K1007 in response to the Company's application. This decision, which will be effective on October 1, 2020, establishes the first such code for exoskeletons. |
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.”
OurIn 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.
To align our expenses withDuring the current business environment,pandemic, we took measures to adjust our cost structure and anticipated cash usage that have taken effect in the second quarter and beyond, which included reducing our personnel costs and deferring our subcontractors costs mainly within the research and development segment as well as short term reduction in employee’s hours of work in specific areas, eliminating or reducing non-critical consultants, implementingimplemented remote working procedures in the United States, and Germany, and Israel and are establishing in-office measures to contain the spread of COVID-19. TheseCOVID-19 according to local regulations. We have also taken several cost actions are designed to retain talent and preserve cash returns, while at the same time continuing to invest in strategic goals. These cost actions are intended to lastreduction efforts that lasted throughout 2020 as needed, but theneeded. The Company will continue to monitor the environment and extend or modify these actions, if necessary.cost reduction measures as the market condition develops. Despite this current situation and the challenges it imposes, we have developed methods to continue to regularly engage with our current and prospective customers through video conferencing, virtual training events, and online education demos to offer our support and showcase the value of our products.
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 | | | | | |
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 | ) |
Taxes on incomeIncome taxes increased $69$53 thousand for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. Taxes on income increased $54 thousand for the six months ended June 30,March 31, 2020 compared to the six months ended June 30, 2019. The increase ismainly due to higherincreased tax provisionexpenses in our U.S subsidiary.the United States.
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.
The Company intends to finance operating costs over the next twelve months with existingthrough cash on hand, reducing operating spend, and future issuancesadditional private and/or public offerings of debt or equity and debt securities, cash exercises of outstanding warrants or through a combination of the foregoing. However, the Company will need toIn addition, we may seek additional capital through arrangements with strategic partners or from other sources of financing if the Company requires moreand we will continue to address our cost structure. Notwithstanding, there can be no assurance that we will be able to raise additional funds than anticipated during the next 12 months or in later periods.achieve or sustain profitability or positive cash flows from operations.
We previously considered the Investment Agreement with Timwell as a potential source of ongoing liquidity. However, Timwell notified us that it would not invest the second and third tranches under the Investment Agreement. For more information, see “Timwell Private Placement” below.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The condensed consolidated financial statements for the three and six months ended June 30, 2020 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
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.
InPursuant to the terms of the warrant, in connection with the $12.0$20.0 million drawdown under the Loan Agreement on January 4, 2016, we issued to Kreos the warrant to purchase up to 4,771 of our ordinary shares at an exercise price of $241.0 per share, which represented the average of the closing prices of ourincreased to 6,679 ordinary shares for the 30-day calendar period prior to the date of the issuance of the warrant, subject to adjustment as set forth in the warrant. In connection with the $8.0 million drawdown under the Loan Agreement on December 28, 2016, we increased the amount of the warrant from $1.15 million to $1.61 million, or by $460 thousand, such that the warrant represents the right to purchase up to 6,679 of our ordinary shares. The increase was based on the terms of the warrant, which provide that the amount of the warrant will be increased by 5.75% of any additional drawdowns.2016. Subject to the terms of the warrant, the warrant is exercisable, in whole or in part, at any time prior to the earlier of (i) December 30, 2025, or (ii) immediately prior to the consummation of a merger, consolidation, or reorganization of us with or into, or the sale or license of all or substantially all our assets or shares to, any other entity or person, other than a wholly- ownedwholly-owned subsidiary of us, excluding any transaction in which our shareholders prior to the transaction will hold more than 50% of the voting and economic rights of the surviving entity after the transaction.
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.
Kreos may convert the then-outstanding principal and “end of loan payments” under the Kreos Convertible Note, in whole or in part, on one or more occasions, into up to 100,946 ordinary shares, at a conversion price per share equal to $31.7 per share (subject to customary anti-dilution adjustments) at any time until the earlier of (i) the maturity date of June 9, 2020 or (ii) a “Change of Control,” as defined in the Loan Agreement.
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.
AsOn 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.
Equity Raises
Use of Form S-3 Limitations
Since we filed
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.
Because of these limitations, to raise capital in securities offerings above the limitation applicable to us for sales under Form S-3 and our ongoing liquidity needs, we may be required to seek and are currently actively exploring other methods of completing primary offerings, including, a registration statement on Form S-1 (which has no such size limitations), the preparation of which is more time-consuming and costly, including due to potential SEC review. We may also conduct such offerings in the form of private placements, potentially with registration rights or priced at a discount to the market value of our ordinary shares, which could require shareholder approval under the rules of the NASDAQ. Any such transactions, including the perception that we will conduct a transaction, could result in substantial dilution of shareholders’ interests.
Initial Public Offering and Follow-on Offerings
Our initial public offering in September 2014 generated $36.3 million in net proceeds. Additionally, on May 9, 2016, the SEC declared effective our Form S-3, pursuant to which we registered up to $100 million of ordinary shares warrants and/or debt securities and up to 175,525 ordinary shares offered by selling shareholders named therein. On May 10, 2016, we entered into our Equity Distribution Agreementcertain other outstanding securities with Piper Jaffray, 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. The ordinary shares issued underregistration rights on the Equity Distribution Agreement may be registered under the Securities Act using our Form S-3.
Equity Offerings and Subsequent Warrant Exercises
Additionally, on November 1, 2016, we closed our follow-on public offering of 130,000 units, each consisting of one ordinary share and 0.75 of a warrant to purchase one ordinary share. The ordinary shares and the warrants underlying the units and the ordinary shares issuable upon exercise of the warrants are registered under the Securities Act on our Form S-3. The warrants became exercisable during the period commencing from the date of original issuance and ending on November 1, 2021, the expiration date of the warrants, at an initial exercise price of $118.75 per ordinary share. Our net aggregate proceeds, after deducting underwriting discounts and commissions and estimated expenses, were $11.1 million. We also granted Oppenheimer & Co. (“Oppenheimer”), as underwriter under the underwriting agreement, an option to purchase up to 19,500 additional units at the public offering price, less the underwriting discount, for 30 days after October 27, 2016, which Oppenheimer did not exercise.
On November 21, 2017, we closed the base portion of our follow-on offering of 274,280 ordinary shares. Each ordinary share was sold to the public at a price of $26.25. On November 22, 2017, National Securities Corporation, as underwriter, exercised in full its option to purchase 41,142 additional ordinary shares at the public offering price of $26.25 per unit, less the underwriting discount. The Company’s net aggregate proceeds of the base offering and over-allotment exercise, after deducting underwriting discounts and commissions and expenses, were $7.2 million.
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.
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.
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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.
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.
In connectionfunds, although we are currently subject to restrictions on using the ATM Offering Program with Piper Jaffray. Under our JulyDecember 2020 share purchase agreement the Companywith certain investors, we agreed for a period of 35 daysone year following the closing of the Offering not to issue, enter into an agreement to issue or announce the issuance or proposed issuance of the Ordinary Shares or any other securities convertible into, or exercisable or exchangeable for, Ordinary Shares. The Purchase Agreement does not apply to, in addition to certain customary exceptions, certain limited securities issuances, the issuance by the Company of equity or debt securities pursuant to acquisitions or strategic transactions approved by a majority of the Company’s disinterested directors, where not for the purpose of raising capital, or certain other compensatory issuances. The Company has also agreed for a period of twelve months following the closing date of the OfferingDecember 3, 2020 not to (i) issue or agree to issue equity or debt securities convertible into, or exercisable or exchangeable for, ordinary shares at a conversion price, exercise price or exchange price which floats with the trading price of the Ordinary Sharesordinary shares or which may be adjusted after issuance upon the occurrence of certain events or (ii) enter into any agreement, including an equity line of credit, whereby the Company may issue securities at a future-determined price, other than an at–the-market facility with the Placement Agent ninety (90) days after the closing date of the Offering.placement agent, H.C. Wainwright, beginning on February 1, 2021. Such limitations may inhibit our ability to access capital efficiently.
Subject to the limitations under Form S-3 due to our public float, we intend to continue using the at-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 | | | $ | — | |
March 31, 2021.
| | 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. |