ITEM 2. MANAGEMENT'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 Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and amended on May 1, 2023 (the “2022 Form 10-K”). 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” above.
Overview
We are a medical device company that is designing, developing, and commercializing innovative technologies that enable mobility and wellness in rehabilitation and daily life for individuals with neurological conditions. Our initial product offerings were the SCI Products. These devices are robotic exoskeletons that are designed for individuals with paraplegia that use our patented tilt-sensor technology and an onboard computer and motion sensors to drive motorized legs that power movement. These SCI Products allow individuals with spinal cord injury the ability to stand and walk again during everyday activities at home or in the community. In March 2023, we received 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) for the ReWalk Personal 6.0 to enable the stairs functionality and add uses on stairs and curbs to the indication for use for the device in the U.S. The clearance permits U.S. customers to participate in more walking activities in their daily lives where stairs or curbs may have previously limited them. This feature has been available in Europe since initial CE Clearance, and real-world data from a cohort of 47 European users throughout a period of over seven years and consisting of over 18,000 stair steps was collected to demonstrate the safety and efficacy of this feature and support the FDA submission.
We have sought to expand our product offerings beyond the SCI Products through internal development and distribution agreements. We have developed our ReStore Exo-Suit device, which we began commercializing in June 2019. The ReStore is a powered, lightweight soft exo-suit intended for use during the rehabilitation of individuals with lower limb disabilities 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. We are the exclusive distributor of the MYOLYN MyoCycle FES Pro cycles to U.S. rehabilitation clinics and for the MyoCycle Home cycles available to US veterans through the U.S. Department of Veterans Affairs (“VA”) hospitals. In the second quarter of 2020, we also became the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States; however, due to unsatisfactory sales performance of the MediTouch product lines, we terminated this agreement as of January 31, 2023. We refer to the MediTouch and MyoCycle devices as our “Distributed Products.” We will continue to evaluate other products for distribution or acquisition that can broaden our product offerings further to help individuals with neurological injury and disability.
We are in the research stage of ReBoot, a personal soft exo-suit for home and community use by individuals post-stroke, and we are currently evaluating the reimbursement landscape and the potential clinical impact of this device. This product would be a complementary product to ReStore as it provides active assistance to the ankle during plantar flexion and dorsiflexion for gait and mobility improvement in the home environment, and it received Breakthrough Device Designation from the FDA in November 2021. Further investment in the development path of the ReBoot has been temporarily paused in 2023 pending further determination about the clinical and commercial opportunity of this device.
Our principal markets are the United States and Europe. In Europe, we have a direct sales operation in Germany 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.
We have in the past generated and expect to generate in the future revenue from a combination of third-party payors (including private and government payors) and self-pay individuals. While a broad uniform policy of coverage and reimbursement by third-party commercial payors currently does not exist in the United States for exoskeleton technologies such as the ReWalk Personal Exoskeleton, we are pursuing various paths of reimbursement and support fundraising efforts by institutions and clinics, such as the VA policy that was issued in December 2015 for the evaluation, training, and procurement of ReWalk Personal exoskeleton systems for all qualifying veterans suffering from SCI across the United States.
We have also been pursuing updates with the Centers for Medicare and Medicaid Services (“CMS”), to clarify the Medicare coverage category (i.e., benefit category) applicable for personal exoskeletons. In 2021, the National Spinal Cord Injury Statistical Center (“NSCISC”) reported the Medicare and Medicaid are the primary payors for approximately 56% of the spinal cord injury population which are at least five years post their injury date. In July 2020, following a successful submission and hearing process, a code was issued for ReWalk Personal Exoskeleton (effective October 1, 2020), which may be used for purposes of claim submission to Medicare, Medicaid, and other payors. We are currently seeking a nationwide Medicare benefit category determination from CMS to designate the relevant Medicare benefit category. CMS has stated that, until a nationwide benefit category determination is issued, coverage and payment can be adjudicated on a case-by-case basis by the Medicare Administrative contractors (“MACs”).
CMS proposed to include personal exoskeletons in the Medicare benefit category for braces. CMS issued the proposal as part of the Calendar Year 2024 Home Health Prospective Payment System Proposed Rule, CMS-1780 (Proposed Rule), released on June 30, 2023. The Proposed Rule would establish a new regulatory definition of “brace” and include exoskeletons like the ReWalk Personal Exoskeleton (i.e., exoskeletons described by Healthcare Common Procedure Coding System code K1007) in this definition. Once finalized, the Medicare benefit category for personal exoskeletons would be clear – i.e., the Medicare benefit category for “leg, arm, back, and neck braces” – and payment would be on a lump sum basis.
In Germany, we continue to make progress toward achieving coverage from the various government, private and worker’s compensation payors for our SCI products. 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 (“SHI”) Spitzenverband (“GKV”) confirmed their decision to list the ReWalk Personal Exoskeleton system in the German Medical Device Directory. This decision means that ReWalk is listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. During the year 2020 and 2021, we announced several new agreements with German SHIs, including TK and DAK Gesundheit, as well as the 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 Exoskeleton for their beneficiaries within their system. Additionally, to date, several private insurers in the United States and Europe are providing reimbursement for ReWalk in certain cases.
Second Quarter 2023 and Subsequent Period Business Highlights
• | Total revenue for the second quarter of 2023 was $1.3 million, compared to $1.6 million in the second quarter of 2022; |
• | Total revenue for the six months ended June 30, 2023 was $2.6 million, compared to $2.4 million in the six months ended June 30, 2022; |
• | Gross margin was 43.1% in Q2’23, compared to 47.5% in Q2’22, a 4.4 percentage point decrease; |
• | Operating expenses were $5.7 million in the second quarter of 2023, compared to $5.1 million in the second quarter of 2022, and $10.7 million for the six months ended June 30, 2023, compared to $9.7 million for the six months ended June 30, 2022. |
Results of Operations for the Three and Six Months Ended June 30, 2023 and June 30, 2022
Our operating results for the three and six months ended June 30, 2023, as compared to the same period in 2022, 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, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Revenues | | $ | 1,337 | | | $ | 1,570 | | | $ | 2,567 | | | $ | 2,446 | |
Cost of revenues | | | 761 | | | | 824 | | | | 1,420 | | | | 1,435 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 576 | | | | 746 | | | | 1,147 | | | | 1,011 | |
| | | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
Research and development, net | | | 816 | | | | 956 | | | | 1,568 | | | | 1,863 | |
Sales and marketing | | | 2,504 | | | | 2,347 | | | | 4,988 | | | | 4,531 | |
General and administrative | | | 2,414 | | | | 1,819 | | | | 4,124 | | | | 3,281 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 5,734 | | | | 5,122 | | | | 10,680 | | | | 9,675 | |
| | | | | | | | | | | | | | | | |
Operating loss | | | (5,158 | ) | | | (4,376 | ) | | | (9,533 | ) | | | (8,664 | ) |
Financial (expenses) income, net | | | 558 | | | | (44 | ) | | | 636 | | | | (68 | ) |
| | | | | | | | | | | | | | | | |
Loss before income taxes | | | (4,600 | ) | | | (4,420 | ) | | | (8,897 | ) | | | (8,732 | ) |
Taxes on income | | | 42 | | | | 26 | | | | 66 | | | | 64 | |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (4,642 | ) | | $ | (4,446 | ) | | $ | (8,963 | ) | | $ | (8,796 | ) |
| | | | | | | | | | | | | | | | |
Net loss per ordinary share, basic and diluted | | $ | (0.08 | ) | | $ | (0.07 | ) | | $ | (0.15 | ) | | $ | (0.14 | ) |
| | | | | | | | | | | | | | | | |
Weighted average number of shares used in computing net loss per ordinary share, basic and diluted | | | 59,515,410 | | | | 62,544,467 | | | | 59,515,289 | | | | 62,519,063 | |
Three and Six Months Ended June 30, 2023 Compared to Three and Six Months Ended June 30, 2022
Revenues
Our revenues for the three and six months ended June 30, 2023 and 2022 were as follows:
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| | (in thousands, except unit amounts) | | | (in thousands, except unit amounts) | |
Personal unit revenues | | $ | 1,007 | | | $ | 1,245 | | | $ | 2,113 | | | $ | 2,015 | |
Rehabilitation unit revenues | | | 330 | | | | 325 | | | | 454 | | | | 431 | |
Revenues | | $ | 1,337 | | | $ | 1,570 | | | $ | 2,567 | | | $ | 2,446 | |
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 or medical academic centers.
Revenues decreased by $233 thousand, or 15%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, due to a lower number of ReWalk Personal 6.0 units sold in the United States and Europe.
Revenues increased $121 thousand, or 5% for the six months ended June 30, 2023 mainly due to higher sales volume of ReWalk Personal 6.0 and MyoCycle devices in the United States.
In the future, we expect our growth to be driven by sales of our ReWalk Personal device through expansion of coverage and reimbursement by commercial and government third-party payors, as well as sales of Distributed Products and the ReStore device to rehabilitation clinics and personal users.
Gross Profit
Our gross profit for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Gross profit | | $ | 576 | | | $ | 746 | | | $ | 1,147 | | | $ | 1,011 | |
Gross profit was 43% of revenue for the three months ended June 30, 2023 compared to 48% for the three months ended June 30, 2023. Gross profit was 45% of revenue for the six months ended June 30, 2023, compared to 41% for the six months ended June 30, 2022. The decrease in gross profit for the three months ended June 30, 2023 was primarily driven by the lower volume of units sold and a decrease in our average selling price due to a change in sales mix. The increase in gross profit for the six months ended June 30, 2023, was mainly driven by a higher volume of units sold and an increase in average selling price due to a change in sales mix primarily during the first quarter of 2023 compared to the first quarter of 2022.
We expect gross profit and gross margin will increase in the future as we increase our revenue volumes and realize operating efficiencies associated with greater scale which will reduce the cost of revenue as a percentage of revenue. Improvements may be partially offset by the lower margins we currently expect from ReStore and our Distributed Products as well as due to an increase in material costs.
Research and Development Expenses, net
Our research and development expenses, net, for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Research and development expenses, net | | $ | 816 | | | $ | 956 | | | $ | 1,568 | | | $ | 1,863 | |
Research and development expenses, decreased by $140 thousand, or 15%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and a decrease of $295 thousand for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease is attributable to decreased consulting, subcontractors and other expenses from lower product development activity since we received clearance from the FDA for the stairs and curbs in the United States.
We intend to focus our research and development expenses mainly on our current products maintenance and improvement as well as in support of the FDA submission for clearance of the ReWalk 7 next generation model.
Sales and Marketing Expenses
Our sales and marketing expenses for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Sales and marketing expenses | | $ | 2,504 | | | $ | 2,347 | | | $ | 4,988 | | | $ | 4,531 | |
Sales and marketing expenses increased by $157 thousand, or 7%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and $457 thousand, or 10% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase was primarily driven by higher consulting expenses related to the CMS reimbursement process and other marketing expenses, partially offset by the Employee Retention Credit (ERC) payroll tax refund of $186 thousand we received in the United States.
In the near term our sales and marketing expenses are expected to be driven by our efforts to expand the reimbursement coverage of our ReWalk Personal device and to support our current commercial product activities.
General and Administrative Expenses
Our general and administrative expenses for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
General and administrative expenses | | $ | 2,414 | | | $ | 1,819 | | | $ | 4,124 | | | $ | 3,281 | |
General and administrative expenses increased by $595 thousand, or 33%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and $843 thousand, or 26% for the six months ended June 30, 2023 compared to the six months ended June, 2022. The increase was primarily driven by increased payroll and related expenses as well as professional services related to acquisition activity.
Financial Expenses (Income), Net
Our financial expenses (income), net, for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Financial (expenses) income, net | | $ | 558 | | | $ | (44 | ) | | $ | 636 | | | $ | (68 | ) |
Financial income, net, increased by $602 thousand for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and $704 thousand for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This increase was primarily due to interest income received from a change in cash management to cash accounts that pay a higher interest rate and exchange rate fluctuations.
Income Taxes
Our income tax for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | | | 2023 | | | 2022 | |
Taxes on income | | $ | 42 | | | $ | 26 | | | $ | 66 | | | $ | 64 | |
Income taxes increased by $16 thousand, or 62%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and increased by $2 thousand for the six months ended in June 30, 2023 , or 3% compared to the six months ended June 2022, was mainly due to deferred taxes and timing differences in our subsidiaries
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with 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 2022 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 2022 Form 10-K, except for the updates provided in Note 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.
During the six months ended June 30, 2023, we incurred a consolidated net loss of $9.0 million and have an accumulated deficit in the total amount of $222.7 million. Our cash and cash equivalent as of June 30, 2023, totaled $58.2 million and our negative operating cash flow for the six months ended June 30, 2023, was $8.7 million. We have sufficient funds to support our operations for more than 12 months following the issuance date of our condensed consolidated unaudited financial statements for the six months ended June 30, 2023.
We expect to incur future net losses and our transition to profitability is dependent upon, among other things, the successful development and commercialization of our products and product candidates, the establishment of contracts for the distribution of new product lines, or the acquisition of additional product lines, any of which, or in combination, would contribute to the achievement of a level of revenues adequate to support our cost structure. Until we achieve profitability or generate positive cash flows, we will continue to need to raise additional cash from time to time.
We intend to fund future operations through cash on hand, additional private and/or public offerings of debt or equity securities, cash exercises of outstanding warrants or a combination of the foregoing. In addition, we may seek additional capital through arrangements with strategic partners or from other sources and we will continue to address our cost structure. Notwithstanding, there can be no assurance that we will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations.
Our anticipated primary uses of cash are (i) sales, marketing and reimbursement expenses related to market development activities of our ReStore and Personal 6.0 devices, broadening third-party payor and CMS coverage for our ReWalk Personal device and commercializing our new product lines added through distribution agreements; (ii) development of future generation designs for our spinal cord injury device and development of our lightweight exo-suit technology for potential home personal health utilization for multiple indications; (iii) routine product updates; (iv) potential acquisitions of business, such as our pending Acquisition of AlterG, for a purchase price of approximately $19.0 million in cash at Closing (subject to customary adjustments for net working capital, indebtedness, cash, and transaction expenses), in addition to two potential earnout payments based on AlterG’s revenue growth during the two consecutive trailing twelve-month periods following Closing (see Note 10 to our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements”); and (v) general corporate purposes, including working capital needs. 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, the attractiveness of potential acquisition candidates, 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 at all or on acceptable terms.
Equity Raises
Beginning with the filing of our Form 10-K on February 17, 2017, we were subject to limitations under the applicable rules of Form S-3, which constrained our ability to secure capital with respect to 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. At the time of filing our 2022 Form 10-K, on February 23, 2023, we were subject to these limitations, because our public float did not reach at least $75 million in the 60 days preceding the filing of our 2022 Form 10-K. We will continue to be subject to these limitations for the remainder of the 2023 fiscal year and until the earlier of such time as our public float reaches at least $75 million or when we file our next annual report for the year ended December 31, 2023, at which time we will be required to re-test our status under these rules. If our public float is below $75 million as of the filing of our next annual report on Form 10-K, or at the time we file a new Form S-3, we will continue to be subject to these limitations, until the date that our public float again reaches $75 million. These 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. We have registered up to $100 million of ordinary shares warrants and/or debt securities and certain other outstanding securities with registration rights on our registration statement on Form S-3, which was declared effective by the SEC in May 2022.
Share Repurchase Program
In June 2022, we announced that our Board had approved a program to repurchase up to $8.0 million of our ordinary shares, par value NIS 0.25 per share, subject to receipt of Israeli court approval. In July 2022, we announced that we had received approval from an Israeli court for the share repurchase program, valid through January 20, 2023.
On December 19, 2022, our board of directors approved the extension of our on-going share repurchase program, with such extension to be in the aggregate amount of up to $5.8 million. The extension was approved by an Israeli court on February 9, 2023 for a six-month period expiring on August 9, 2023.
Under the program, share repurchases were made from time to time using a variety of methods, in accordance with all applicable securities laws and regulations, including restrictions relating to volume, price and timing under applicable law, including Rule 10b-18 under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As of June 30, 2023, we had repurchased approximately 4.0 million of our ordinary shares for an aggregate purchase price of approximately $3.5 million under the repurchase program. The repurchase program, as extended, expired on August 9, 2023. No repurchases of ordinary shares were made by us subsequent to June 30, 2023.
Cash Flows for the Six Months Ended June 30, 2023 and June 30, 2022 (in thousands):
| | Six Months Ended
June 30, | |
| | 2023 | | | 2022 | |
Net cash used in operating activities | | $ | (8,739 | ) | | $ | (9,377 | ) |
Net cash used in investing activities | | | — | | | | (18 | ) |
Net cash provided by financing activities | | | (986 | ) | | | — | |
Effect of Exchange rate changes on Cash, Cash Equivalents and Restricted Cash | | | 5 | | | | (164 | ) |
Net cash flow | | $ | (9,720 | ) | | $ | (9,559 | ) |
Net Cash Used in Operating Activities
Net cash used in operating activities decreased by $496 million or 5% primarily due to decreased insurance prepaid expenses and decreased inventory purchases partially offset by acquisition costs.
Net Cash Provided by Financing Activities
Net cash used in financing activities was $986 for the six months ended June 30, 2023 compared to $0 for the three months ended June 30, 2022. The increase is due to the repurchase of our ordinary shares under our repurchase program, which expired on August 9, 2023.
Obligations and Contractual Commitments
Set forth below is a summary of our contractual obligations as of June 30, 2023.
| | Payments due by period (in dollars, in thousands) | |
Contractual obligations | | Total | | | Less than
1 year | | | 1-3 years | |
| | | | | | | | | |
Purchase obligations (1) | | $ | 1,748 | | | $ | 1,748 | | | $ | — | |
Collaboration Agreement and License Agreement obligations (2) | | | 60 | | | | 60 | | | | — | |
Operating lease obligations (3) | | | 1,286 | | | | 654 | | | | 632 | |
Total | | $ | 3,094 | | | $ | 2,462 | | | $ | 632 | |
(1) | We depend on one contract manufacturer, Sanmina Corporation, 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. |
(2) | Under the Collaboration Agreement, we were required to pay in quarterly installments the funding of our joint research collaboration with Harvard, subject to a minimum funding commitment under applicable circumstances. Our License Agreement with Harvard consists of patent reimbursement expenses payments and a license upfront fee payment. There are also several milestone payments contingent upon the achievement of certain product development and commercialization milestones and royalty payments on net sales from certain patents licensed to Harvard. All product development milestones contemplated by the License Agreement have been met as of June 30, 2023; however, there are still outstanding commercialization milestones under the License Agreement that depend on us reaching certain sales amounts, some or all of which may not occur. Our Collaboration Agreement with Harvard was concluded on March 31, 2022. |
(3) | Our operating leases consist of leases for our facilities in the United States and Israel and motor vehicles. |
We calculated the payments due under our operating lease obligation for our Israeli office that are to be paid in NIS at a rate of exchange of NIS 3.7: $1.00, and the payments due under our operating lease obligation for our German subsidiary that are to be paid in euros at a rate of exchange of €1.00: $1.09, both of which were the applicable exchange rates as of June 30, 2023.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party obligations as of June 30, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk during the second quarter of 2023. For a discussion of our exposure to market risk, please see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2022 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective such that the information required to be disclosed by us in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2023 there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes to our legal proceedings as described in “Part I, Item 3. Legal Proceedings” of our 2022 Form 10-K, except as described in Note 5 in our condensed consolidated financial statements included in “Part I, Item 1” of this quarterly report.
ITEM 1A. RISK FACTORS
Except as set forth below, and as disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, there have been no material changes to our risk factors from those disclosed in “Part I, Item 1A. Risk Factors” of our 2022 Form 10-K:
Risks Related to Our Business and Our Industry
The announcement and pendency of our acquisition of AlterG may have an adverse effect on our business, financial condition, operating results and cash flows.
On August 8, 2023, we entered into a definitive agreement to acquire AlterG. The Acquisition is expected to close on August 11, 2023, subject to customary closing conditions. We have devoted, and will continue to devote, significant management and other internal resources towards the completion of the Acquisition and planning for integration. Completion of the Acquisition is subject to conditions beyond our control that may prevent, delay or otherwise adversely affect its completion in a material way. The failure to complete the Acquisition in a timely manner or at all could negatively impact the market price of our ordinary shares as it currently reflects an assumption that the transaction will be completed. Furthermore, if the Acquisition is significantly delayed or not completed, we may suffer other consequences that could adversely affect our business, results of operations and stock price, including the following:
| | ● | we would have incurred significant costs in connection with the Acquisition that we may be unable to recover; |
| | ● | we may be subject to negative publicity or be negatively perceived by the investment or business communities; |
| | ● | we may be subject to legal proceedings related to the Acquisition; |
| | ● | any disruptions to our business resulting from the announcement and pendency of the Acquisition, including any adverse changes in our relationships with our customers, suppliers, other business partners and employees, may continue or intensify in the event the Acquisition is not consummated; and |
| | ● | we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures. |
There can be no assurance that our business, financial condition, operating results and cash flows will not be adversely affected, as compared to prior to the announcement of the Acquisition, if the Acquisition is not consummated.
We may fail to realize the benefits expected from our acquisition of AlterG, which could adversely affect the price of our ordinary shares.
The anticipated benefits from our Acquisition of AlterG are based on projections and assumptions about the combined businesses of ReWalk and AlterG, which may not materialize as expected or which may prove to be inaccurate. The value of our ordinary shares could be adversely affected if we are unable to realize the anticipated benefits from the Acquisition on a timely basis or at all. Achieving the benefits of the Acquisition will depend, in part, on our ability to integrate the business, operations and products of AlterG successfully and efficiently with ReWalk’s business. The process of integrating the operations of ReWalk and AlterG could encounter unexpected costs and delays, which include: the loss of key personnel; the loss of key customers; the loss of key suppliers; and unanticipated issues in integrating sales, marketing and administrative functions.
In addition, our failure to identify or accurately assess the magnitude of certain liabilities we assumed in the Acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Items 2(a) and 2(b) are not applicable.
(c) Stock Repurchases.
Issuer Purchases of Equity Securities
The following table sets forth information regarding the ordinary shares repurchased under our share repurchase program during the three months ended June 30, 2023:
Period | | Total Number of Shares Purchased | | | Average Price Paid Per Share | | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | | (In Thousands) Maximum Value of Shares That May Yet Be Purchased Under the Plan | |
April 1 - April 30, 2023 | | | | | | | | | | | | |
Share repurchase program (1) | | | — | | | $ | — | | | | — | | | $ | 4,730 | |
| | | | | | | | | | | | | | | | |
May 1 - May 31, 2023 | | | | | | | | | | | | | | | | |
Share repurchase program (1) | | | 67,551 | | | $ | 0.59 | | | | 67,551 | | | $ | 4,688 | |
| | | | | | | | | | | | | | | | |
June 1 - June 30, 2023 | | | | | | | | | | | | | | | | |
Share repurchase program (1) | | | 291,498 | | | $ | 0.59 | | | | 291,498 | | | $ | 4,509 | |
Quarter Total | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Share repurchase program (1) | | | 359,049 | | | $ | 0.59 | | | | 359,049 | | | $ | 4,509(2 | ) |
(1) Ordinary Shares were repurchased by us through our publicly announced share repurchase program approved by our Board of Directors on June 2, 2022, and approved by an Israeli court on July 20, 2022. The program was scheduled to expire on the earlier of January 20, 2023, or reaching $8.0 million of repurchases. On December 22, 2022, our Board of Directors approved an extension of the repurchase program, with such extension to be in the aggregate amount of up to $5.8 million. The extension was approved by an Israeli court on February 9, 2023 for a six month period ending on August 9, 2023.
(2) The share repurchase program, as extended, expired on August 9, 2023. No Ordinary Shares were repurchased by us subsequent to June 30, 2023.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBIT INDEX
Exhibit Number | | Description |
2.1
| | |
| 10.1 | | |
| | |
| | |
| | |
| | |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
__________________________
* | Furnished herewith. |
| | |
| ** | Filed herewith |
| |
^ | Schedules have been omitted from this exhibit pursuant to Item 601(b)(2) of Regulation S-K. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ReWalk Robotics Ltd. |
| |
Date: August 11, 2023 | By: | /s/ Larry Jasinski |
| | Larry Jasinski |
| | Chief Executive Officer (Principal Executive Officer) |
| | |
Date: August 11, 2023 | By: | /s/ Michael Lawless |
| | Michael Lawless |
| | Chief Financial Officer |
| | (Principal Financial Officer) |
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