ITEM 1.
FINANCIAL STATEMENTS
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,602
|
|
|
$
|
16,253
|
|
Trade receivable, net
|
|
|
726
|
|
|
|
794
|
|
Prepaid expenses and other current assets
|
|
|
1,294
|
|
|
|
903
|
|
Inventories
|
|
|
3,340
|
|
|
|
3,123
|
|
Total current assets
|
|
|
21,962
|
|
|
|
21,073
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and other long term assets
|
|
|
1,049
|
|
|
|
1,061
|
|
Operating lease right-of-use assets
|
|
|
1,721
|
|
|
|
1,737
|
|
Property and equipment, net
|
|
|
485
|
|
|
|
501
|
|
Total long-term assets
|
|
|
3,255
|
|
|
|
3,299
|
|
Total assets
|
|
$
|
25,217
|
|
|
$
|
24,372
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
Current maturities of long term loan
|
|
$
|
5,699
|
|
|
$
|
5,438
|
|
Current maturities of operating leases
|
|
|
658
|
|
|
|
637
|
|
Trade payables
|
|
|
2,789
|
|
|
|
2,698
|
|
Employees and payroll accruals
|
|
|
527
|
|
|
|
670
|
|
Deferred revenues
|
|
|
283
|
|
|
|
323
|
|
Other current liabilities
|
|
|
395
|
|
|
|
402
|
|
Total current liabilities
|
|
|
10,351
|
|
|
|
10,168
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Long term loan, net of current maturities
|
|
|
—
|
|
|
|
1,527
|
|
Deferred revenues
|
|
|
497
|
|
|
|
521
|
|
Non-current operating leases
|
|
|
1,235
|
|
|
|
1,315
|
|
Other long-term liabilities
|
|
|
51
|
|
|
|
61
|
|
Total long-term liabilities
|
|
|
1,783
|
|
|
|
3,424
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,134
|
|
|
|
13,592
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
|
|
|
Ordinary share of NIS 0.25 par value-Authorized: 60,000,000 shares at March 31, 2020 and December 31, 2019; Issued and outstanding: 12,930,155 and 7,319,560 shares at March 31, 2020 and
December 31, 2019, respectively
|
|
|
903
|
|
|
|
504
|
|
Additional paid-in capital
|
|
|
184,489
|
|
|
|
178,745
|
|
Accumulated deficit
|
|
|
(172,309
|
)
|
|
|
(168,469
|
)
|
Total shareholders’ equity
|
|
|
13,083
|
|
|
|
10,780
|
|
Total liabilities and shareholders’ equity
|
|
$
|
25,217
|
|
|
$
|
24,372
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
760
|
|
|
$
|
1,581
|
|
Cost of revenues
|
|
|
387
|
|
|
|
655
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
373
|
|
|
|
926
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
|
985
|
|
|
|
1,414
|
|
Sales and marketing
|
|
|
1,681
|
|
|
|
1,587
|
|
General and administrative
|
|
|
1,309
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,975
|
|
|
|
4,501
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(3,602
|
)
|
|
|
(3,575
|
)
|
Financial expenses, net
|
|
|
246
|
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(3,848
|
)
|
|
|
(3,993
|
)
|
Taxes on income (tax benefit)
|
|
|
(8
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,840
|
)
|
|
$
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per ordinary share, basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(1.25
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing net loss per ordinary share, basic and diluted
|
|
|
10,374,116
|
|
|
|
3,211,386
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
; REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)
(Unaudited)
(In thousands, except share data)
|
|
Ordinary Share
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Number
|
|
|
Amount
|
|
|
paid-in
capital
|
|
|
Accumulated
deficit
|
|
|
shareholders’
equity (deficiency)
|
|
Balance as of December 31, 2018 (1)
|
|
|
2,813,087
|
|
|
|
193
|
|
|
|
154,670
|
|
|
|
(152,918
|
)
|
|
|
1,945
|
|
Share-based compensation to employees and non-employees
|
|
|
—
|
|
|
|
—
|
|
|
|
319
|
|
|
|
—
|
|
|
|
319
|
|
Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees
|
|
|
2,206
|
|
|
|
*
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of ordinary shares in “best efforts” offering, net of issuance expenses in the amount of $686 (2)
|
|
|
760,000
|
|
|
|
52
|
|
|
|
3,632
|
|
|
|
—
|
|
|
|
3,684
|
|
Exercise of pre-funded warrants and warrants (2)
|
|
|
119,881
|
|
|
|
8
|
|
|
|
99
|
|
|
|
—
|
|
|
|
107
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,000
|
)
|
|
|
(4,000
|
)
|
Balance as of March 31, 2019
|
|
|
3,695,174
|
|
|
|
253
|
|
|
|
158,720
|
|
|
|
(156,918
|
)
|
|
|
2,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
|
7,319,560
|
|
|
|
504
|
|
|
|
178,745
|
|
|
|
(168,469
|
)
|
|
|
10,780
|
|
Share-based compensation to employees and non-employees
|
|
|
—
|
|
|
|
—
|
|
|
|
199
|
|
|
|
—
|
|
|
|
199
|
|
Issuance of ordinary shares upon vesting of RSUs by employees and non-employees
|
|
|
10,595
|
|
|
|
*
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of ordinary shares in “best efforts” offering, net of issuance expenses in the amount of $1,056 (2)
|
|
|
4,053,172
|
|
|
|
290
|
|
|
|
3,720
|
|
|
|
—
|
|
|
|
4,010
|
|
Exercise of pre-funded warrants (2)
|
|
|
1,546,828
|
|
|
|
109
|
|
|
|
1,825
|
|
|
|
—
|
|
|
|
1,934
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,840
|
)
|
|
|
(3,840
|
)
|
Balance as of March 31, 2020
|
|
|
12,930,155
|
|
|
|
903
|
|
|
|
184,489
|
|
|
|
(172,309
|
)
|
|
|
13,083
|
|
*)
|
Represents an amount lower than $1.
|
(1)
|
Reflects our one-for-twenty-five reverse share split that became effective on April 1, 2019. See Note 7a to the condensed consolidated financial statements
|
(2)
|
See Note 7f to the condensed consolidated financial statements
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,840
|
)
|
|
$
|
(4,000
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
75
|
|
|
|
94
|
|
Share-based compensation to employees and non-employees
|
|
|
199
|
|
|
|
319
|
|
Deferred taxes
|
|
|
(4
|
)
|
|
|
(36
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade receivables, net
|
|
|
68
|
|
|
|
(334
|
)
|
Prepaid expenses, operating lease right-of-use assets and other assets
|
|
|
(448
|
)
|
|
|
(240
|
)
|
Inventories
|
|
|
(267
|
)
|
|
|
(238
|
)
|
Trade payables
|
|
|
79
|
|
|
|
238
|
|
Employees and payroll accruals
|
|
|
(143
|
)
|
|
|
(56
|
)
|
Deferred revenues and advances from customers
|
|
|
(64
|
)
|
|
|
(25
|
)
|
Other liabilities
|
|
|
4
|
|
|
|
25
|
|
Net cash used in operating activities
|
|
|
(4,341
|
)
|
|
|
(4,253
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(9
|
)
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayment of long term loan
|
|
|
(1,266
|
)
|
|
|
(401
|
)
|
Issuance of ordinary shares in a “best efforts” offering, net of issuance expenses paid in the amount of $496 (1)
|
|
|
—
|
|
|
|
3,874
|
|
Issuance of ordinary shares in a “best efforts” offerings, net of issuance expenses paid in the amount of $ 1,044 (1)
|
|
|
4,022
|
|
|
|
—
|
|
Exercise of pre-funded warrants and warrants (1)
|
|
|
1,934
|
|
|
|
107
|
|
Net cash provided by financing activities
|
|
|
4,690
|
|
|
|
3,580
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash, cash equivalents, and restricted cash
|
|
|
340
|
|
|
|
(673
|
)
|
Cash, cash equivalents, and restricted cash at beginning of period
|
|
|
16,992
|
|
|
|
10,347
|
|
Cash, cash equivalents, and restricted cash at end of period
|
|
$
|
17,332
|
|
|
$
|
9,674
|
|
Supplemental disclosures of non-cash flow information
|
|
|
|
|
|
|
|
|
Classification of inventory to property and equipment, net
|
|
$
|
50
|
|
|
$
|
—
|
|
“Best efforts” offering issuance cost not yet paid (1)
|
|
$
|
12
|
|
|
$
|
189
|
|
Initial recognition of operating lease right-of-use assets
|
|
$
|
—
|
|
|
$
|
2,099
|
|
Initial recognition of operating lease liabilities
|
|
$
|
—
|
|
|
$
|
(2,249
|
)
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,602
|
|
|
$
|
8,862
|
|
Restricted cash included in other long term assets
|
|
|
730
|
|
|
|
812
|
|
Total Cash, cash equivalents, and restricted cash
|
|
$
|
17,332
|
|
|
$
|
9,674
|
|
(1) See Note 7f to the condensed consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1:- GENERAL
|
a.
|
ReWalk Robotics Ltd. (“RRL”, and together with its subsidiaries, the “Company”) was incorporated under the laws of the State of Israel on June 20, 2001 and commenced operations on the same date.
|
|
b.
|
RRL has two wholly-owned subsidiaries: (i) ReWalk Robotics Inc. (“RRI”) incorporated under the laws of Delaware on February 15, 2012 and (ii) ReWalk Robotics GMBH. (“RRG”) incorporated under the laws of Germany on January 14, 2013.
|
The Company is designing, developing and commercializing robotic exoskeletons that allow individuals with mobility impairments or other medical conditions the ability to stand and
walk once again. The Company has developed and is continuing to commercialize the ReWalk, an exoskeleton designed for individuals with paraplegia that uses its patented tilt-sensor technology and an on-board computer and motion sensors to drive
motorized legs that power movement. The ReWalk system consists of a light wearable brace support suit which integrates motors at the joints, rechargeable batteries, an array of sensors and a computer-based control system to power knee and hip
movement. There are currently two types of ReWalk products: ReWalk Personal and ReWalk Rehabilitation. ReWalk Personal is designed for everyday use by individuals at home and in their communities and is custom-fitted for each user. ReWalk
Rehabilitation is designed for the clinical rehabilitation environment where it provides individuals access to valuable exercise and therapy. Additionally, the Company developed and, in June 2019, started to commercialize the ReStore following
receipt of European Union CE mark and United States Food and Drug Administration (“FDA”). The ReStore is a powered, lightweight soft exo-suit intended for use in the rehabilitation of individuals with lower limb disability due to stroke. The Company
markets and sells its products directly to institutions and individuals in Germany and the United States and through third-party distributors in other markets. In its direct markets, the Company has established relationships with rehabilitation
centers and the spinal cord injury community, and in its indirect markets, the Company’s distributors maintain these relationships. RRI markets and sells products mainly in the United States. RRG sell the Company’s products mainly in Germany and
Europe.
|
c.
|
The worldwide spread of COVID-19 has resulted in a global economic slowdown and is expected to continue to disrupt general business operations until the disease is contained. This has already had a negative impact on the Company's
sales and results of operations, and the Company expects that it will continue to negatively affect its sales and results of operations but the Company is currently unable to predict the scale and duration of that impact. As of the date
of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update of its accounting estimates or judgments or revision of the carrying value of its assets or
liabilities. This determination may change as new events occur and additional information is obtained. Actual results could differ from our estimates and judgments, and any such differences may be material to our financial statements.
|
|
d.
|
The Company has an accumulated deficit in the total amount of approximately $172.3 million as of March 31, 2020 and negative cash flow from operations of $4.3 million, and further losses are anticipated in
the development of its business. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary
financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.
|
The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, and future issuances of equity and debt securities,
or through a combination of the foregoing. However, the Company will need to seek additional sources of financing if the Company requires more funds than anticipated during the next 12 months or in later periods.
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 months ended March 31, 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.
|
NOTE 2:- UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and standards of the Public Company Accounting
Oversight Board for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of
management, the accompanying financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's (i) consolidated financial position as of March 31, 2020, (ii)
consolidated results of operations for the three months ended March 31, 2020, (iii) consolidated statements of changes in shareholders’ equity (deficiency) and (iv) consolidated cash flows for the three months ended March 31, 2020. The results for
the three months periods ended March 31, 2020, as applicable, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
NOTE 3:- SIGNIFICANT ACCOUNTING POLICIES
The Company generates revenues from sales of products. The Company sells its products directly to end customers and through distributors. The Company sells its products to private
individuals (who finance the purchases by themselves, through fundraising or reimbursement coverage from insurance companies), rehabilitation facilities and distributors.
Disaggregation of Revenues (in thousands)
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Units placed
|
|
$
|
633
|
|
|
$
|
1,474
|
|
Spare parts and warranties
|
|
|
127
|
|
|
|
107
|
|
Total Revenues
|
|
$
|
760
|
|
|
$
|
1,581
|
|
Units placed
The Company currently offer three products: ReWalk Personal, ReWalk Rehabilitation (both of which are units for spinal cord injury (“SCI Products”)) and ReStore soft suit
exoskeleton for rehabilitation of individuals suffering from stroke. SCI Products are currently designed for everyday use by paraplegic individuals at home and in their communities, and is custom fitted for each user, as well as for use by paraplegia
patients in the clinical rehabilitation environment, where they provide individuals access to valuable exercise and therapy. The ReStore is a powered, lightweight soft exo-suit intended for use in the rehabilitation of individuals with lower limb
disability due to stroke in the clinical rehabilitation environment.
Units placed includes revenue from sales of SCI Products and ReStore.
For units placed, the Company recognizes revenues when it transfers control and title has passed to the customer. Each unit placed is considered an independent, unbundled
performance obligation. The Company also offers a rent-to-purchase model in which the Company recognizes revenue ratably according to the agreed rental monthly fee.
Spare parts and warranties
Spare parts are sold to private individuals, rehabilitation facilities and distributors. Revenue is recognized when the Company satisfies a performance obligation by transferring
control over promised goods or services to the customer. Each part sold is considered an independent, unbundled performance obligation.
Warranties are classified as either assurance type or service type warranty. A warranty is considered an assurance type warranty if it provides the consumer with assurance that the
product will function as intended for a limited period of time.
In the beginning of 2018, the Company updated its service policy for SCI Products to include a five- year warranty compared to a period of two years that were included in the past
for parts and services. The first two years are considered as assurance type warranty and the additional period is considered an extended service arrangement, which is a service type warranty. An assurance type warranty is not accounted for as
separate performance obligations under the revenue model. A service type warranty is either sold with a unit or separately for units for which the warranty has expired. Revenue is then recognized ratably over the life of the warranty.
The ReStore device is offered with a two-year warranty which is considered as assurance type warranty.
Contract balances (in thousands)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Trade receivable, net (1)
|
|
$
|
726
|
|
|
$
|
794
|
|
Deferred revenues (1) (2)
|
|
$
|
780
|
|
|
$
|
844
|
|
|
(1)
|
Balance presented net of unrecognized revenues that were not yet collected.
|
|
(2)
|
$159 thousand of December 31, 2019 deferred revenues balance were recognized as revenues during the three months ended March 31, 2020.
|
Deferred revenue is comprised mainly of unearned revenue related to service type warranty but also includes other
offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
The Company’s unfilled performance obligations as of March 31, 2020 and the estimated revenue expected to be recognized in the future related to the service type warranty amounts
to $897 thousand, which is fulfilled over one to five years.
|
b.
|
New Accounting Pronouncements
|
Recent Accounting Pronouncements Not Yet Adopted
|
|
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments
to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment
requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical
information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires
entities to write down credit losses only when losses are probable and loss reversals are not permitted. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning
after December 15, 2019, with early adoption permitted. An entity should apply the standard by recording a cumulative effect adjustment to retained earnings upon adoption. In November 2019, FASB issued ASU No.
2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller
reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal
2023. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.
|
|
c.
|
Concentrations of Credit Risks:
|
Concentration of credit risk with respect to trade receivable is primarily limited to a customer to which the Company makes substantial sales.
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Customer A
|
|
|
23
|
%
|
|
|
*
|
)
|
Customer B
|
|
|
15
|
%
|
|
|
13
|
%
|
Customer C
|
|
|
14
|
%
|
|
|
12
|
%
|
Customer D
|
|
|
13
|
%
|
|
|
*
|
)
|
Customer E
|
|
|
12
|
%
|
|
|
*
|
)
|
Customer F
|
|
|
*
|
)
|
|
|
14
|
%
|
Customer G
|
|
|
*
|
)
|
|
|
13
|
%
|
Customer H
|
|
|
*
|
)
|
|
|
12
|
%
|
Customer I
|
|
|
*
|
)
|
|
|
12
|
%
|
Customer J
|
|
|
*
|
)
|
|
|
12
|
%
|
*) Less than 10%
The Company’s trade receivables are geographically diversified and derived primarily from sales to customers in various countries, mainly in the United States and Europe.
Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures. The Company performs ongoing credit evaluations of its distributors based upon a specific
review of all significant outstanding invoices. The Company writes off receivables when they are deemed uncollectible and having exhausted all collection efforts. As of March 31, 2020 and December 31, 2019 trade receivables are presented net of
allowance for doubtful accounts in the amount of $31 thousand and $31 thousand, respectively, and net of sales return reserve $86 thousand as of December 31, 2019 and $0 as of March 31, 2020 .
The Company provided a two-year standard warranty for its products. In the beginning of 2018 we updated our service policy for new devices sold to include five-year warranties.
The Company determined that the first two years of warranty is an assurance-type warranty and records a provision for the estimated cost to repair or replace products under warranty at the time of sale. Factors that affect the Company’s warranty
reserve include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair.
|
|
US Dollars
in
thousands
|
|
Balance at December 31, 2019
|
|
$
|
227
|
|
Provision
|
|
|
24
|
|
Usage
|
|
|
(51
|
)
|
Balance at March 31, 2020
|
|
$
|
200
|
|
NOTE 4:- INVENTORIES
The components of inventories are as follows (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Finished products
|
|
$
|
2,548
|
|
|
$
|
2,394
|
|
Raw materials
|
|
|
792
|
|
|
|
729
|
|
|
|
$
|
3,340
|
|
|
$
|
3,123
|
|
NOTE 5:- COMMITMENTS AND CONTINGENT LIABILITIES
The Company has contractual obligations to purchase goods from its contract manufacturer. Purchase obligations do not include contracts
that may be canceled without penalty. As of March 31, 2020, non-cancelable outstanding obligations amounted to approximately $1,163 thousand.
|
b.
|
Operating lease commitment:
|
|
(i)
|
The Company operates from leased facilities in Israel, the United States and Germany. These leases expire between 2019 and 2023. A portion of our facilities leases is generally subject to annual changes in the Consumer Price Index
(CPI). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
|
|
(ii)
|
RRL and RRG lease cars for their employees under cancelable operating lease agreements expiring at various dates in between 2019 and 2022. A subset of our cars leases is considered variable. The variable lease payments for such cars
leases are based on actual mileage incurred at the stated contractual rate. RRL and RRG have an option to be released from these agreements, which may result in penalties in a maximum amount of approximately $41 thousand as of March 31,
2020.
|
The Company's future lease payments for its facilities and cars, which are presented as current maturities of operating leases and non-current operating leases liabilities on the
Company's condensed consolidated balance sheets as of March 31, 2020 are as follows (in thousands):
2020
|
|
$
|
708
|
|
2021
|
|
|
693
|
|
2022
|
|
|
624
|
|
2023
|
|
|
306
|
|
Total lease payments
|
|
|
2,331
|
|
Less: imputed interest
|
|
|
(438
|
)
|
Present value of future lease payments
|
|
|
1,893
|
|
Less: current maturities of operating leases
|
|
|
(658
|
)
|
Non-current operating leases
|
|
$
|
1,235
|
|
|
|
|
|
|
Weighted-average remaining lease term (in years)
|
|
|
3.36
|
|
Weighted-average discount rate
|
|
|
12.6
|
%
|
|
|
Lease expense under the Company’s operating leases was $183 and $178 for the three months ended March 31, 2020 and 2019, respectively.
|
The Company’s research and development efforts are financed, in part, through funding from the IIA and BIRD. Since the Company’s inception through March 31, 2020, the Company
received funding from the IIA and BIRD in the total amount of $1.97 million and $500 thousand, respectively. Out of the $1.97 million in funding from the IIA, a total amount of $1.57 million were royalty bearing grants (as of March 31, 2020, the
Company paid royalties to the IIA in the total amount of $50 thousand), while a total amount of $400 thousand was received in consideration of 209 convertible preferred A shares, which converted after the Company’s initial public offering in
September 2014 into ordinary shares in a conversion ratio of 1 to 1. The Company is obligated to pay royalties to the IIA, amounting to 3%-3.5% of the sales of the products and other related revenues generated from such projects, up to 100% of the
grants received. The royalty payment obligations also bear interest at the LIBOR rate. The obligation to pay these royalties is contingent on actual sales of the applicable products and in the absence of such sales, no payment is required.
Additionally, the Harvard License Agreement requires the Company to pay Harvard royalties on net sales, See note 6 below for more information about the Collaboration Agreement and
the License Agreement.
During each of the three months ended March 31, 2020, and 2019, $3 thousand were recorded as royalties expenses in cost of revenues.
As of March 31, 2020, the contingent liability to the IIA amounted to $1.6 million. The Israeli Research and Development Law provides that know-how developed under an approved
research and development program may not be transferred to third parties without the approval of the IIA. Such approval is not required for the sale or export of any products resulting from such research or development. The IIA, under special
circumstances, may approve the transfer of IIA-funded know-how outside Israel, in the following cases:
(a) the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-funded know-how or in consideration for the sale of the grant recipient
itself, as the case may be, which portion will not exceed six times the amount of the grants received plus interest (or three times the amount of the grant received plus interest, in the event that the recipient of the know-how has committed to
retain the R&D activities of the grant recipient in Israel after the transfer); (b) the grant recipient receives know-how from a third party in exchange for its IIA-funded know-how; (c) such transfer of IIA-funded know-how arises in connection
with certain types of cooperation in research and development activities; or (d) If such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient.
As discussed in Note 6 to the Company’s audited consolidated financial statements in its annual report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form
10-K”), the Company is party to a loan agreement, as amended (the “Loan Agreement”), with Kreos Capital V (Expert Fund) Limited (“Kreos”), pursuant to which Kreos extended a $20 million line of credit to the Company. In connection with the Loan
Agreement, the Company granted Kreos a first priority security interest over all of its assets, including intellectual property and equity interests in its subsidiaries, subject to certain permitted security interests.
The Company's other long-term assets in the amount of $730 thousand have been pledged to third parties as a security in respect to lease agreements. Such
deposit cannot be pledged to others or withdrawn without the consent of such third party.
Occasionally the Company is involved in various claims, lawsuits, regulatory examinations, investigations and other legal matters arising, for the most part, in the ordinary course
of business. The outcome of litigation and other legal matters is inherently uncertain. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory
proceedings to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. Where the Company determines an unfavorable outcome is not probable
or reasonably estimable, the Company does not accrue for any potential litigation loss. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of the company's defenses and consultation with legal
counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company’s current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses
material to the Company’s consolidated results of operations, liquidity or financial condition.
As previously disclosed, between September 2016 and January 2017, eight putative class actions on behalf of alleged shareholders that purchased or acquired the Company ordinary
shares pursuant and/or traceable to its registration statement on Form F-1 (File No. 333-197344) used in connection with the initial public offering, or the Company’s IPO, were commenced in the following courts: (i) the Superior Court of the State of
California, County of San Mateo; (ii) the Superior Court of the Commonwealth of Massachusetts, Suffolk County; (iii) the United States District Court for the Northern District of California; and (iv) the United States District Court for the District
of Massachusetts. As of March 31, 2020, all complaints have been dismissed, with one dismissal appealed. The actions involved or involve claims under various sections of the Securities Act of 1933, or the Securities Act, against the Company, certain
of its current and former directors and officers, the underwriters of the Company’s IPO and certain other defendants.
The four actions commenced in the Superior Court of the State of California, County of San Mateo were dismissed in January 2017 for lack of personal jurisdiction, and the action
commenced in the United States District Court for the Northern District of California was voluntarily dismissed in March 2017. Additionally, the two actions commenced in the Superior Court of the Commonwealth of Massachusetts, Suffolk County, or the
Superior Court, were consolidated in December 2017, and voluntarily dismissed with prejudice in November 2018, after the District Court for the District of Massachusetts partially dismissed the related claims in that court and the parties in the
Superior Court entered a stipulation of dismissal with prejudice.
The action commenced in the United States District Court for the District of Massachusetts (the “District Court”), alleging violations of Sections 11 and 15 of the Securities Act
and Sections 10(b) and 20(a) of the Exchange Act, was partially dismissed on August 23, 2018. In particular, the District Court granted the motion to dismiss the claims under Sections 11 and 15 of the Securities Act, finding that the plaintiff failed
to plead a false or misleading statement in the IPO registration statement. The District Court did not address the claims under Sections 10(b) and 20(a) of the Exchange Act because, as a result of the dismissal of the claims under the Securities Act,
the lead plaintiff lacked standing to pursue those claims. Because the action in the District Court was styled as a class action, the District Court permitted the plaintiff to file a supplemental memorandum concerning standing or a motion to appoint
a substitute or supplemental plaintiff. On September 10, 2018, the plaintiff sought leave to amend his complaint to add a new plaintiff that purportedly has standing to pursue Exchange Act claims, and the Company opposed the motion to amend on
September 24, 2018. On May 16, 2019, the court denied the plaintiff’s motion to amend and the complaint was dismissed. Thereafter, the plaintiff timely appealed to the United States Court of Appeals for the First Circuit. The appeal has been fully
briefed and the court held oral arguments on March 2, 2020.
Based on information currently available and the current stage of the litigation, the Company is unable to reasonably estimate a possible loss or range of possible losses, if any,
with regard to the remaining lawsuit in the District Court; therefore, no litigation reserve has been recorded in the Company’s condensed consolidated balance sheets as of March 31, 2020. the Company will continue to evaluate information as it
becomes known and will record an estimate for losses at the time or times if and when it is probable that a loss will be incurred and the amount of the loss is reasonably estimable.
NOTE 6:- RESEARCH COLLABORATION AGREEMENT AND LICENSE AGREEMENT
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.
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 installments for the funding of this research, subject to a minimum funding
commitment under applicable circumstances. The Collaboration Agreement expires on May 16, 2022.
Under the Harvard License Agreement, Harvard has granted the Company an exclusive, worldwide royalty-bearing license under certain patents of Harvard relating to lightweight “soft
suit” exoskeleton system technologies for lower limb disabilities, a royalty-free license under certain related know-how and the option to obtain a license under certain inventions conceived under the joint research collaboration.
The Harvard License Agreement requires the Company to pay Harvard an upfront fee, reimbursements for expenses that Harvard incurred in connection with the licensed patents,
royalties on net sales and several milestone payments contingent upon the achievement of certain product development and commercialization milestones. The Harvard License Agreement will continue in full force and effect until the expiration of the
last-to-expire valid claim of the licensed patents. As of March 31, 2020, the company achieved the three development milestones. The Company continues to evaluate the likelihood that the other milestones will be achieved on a quarterly basis.
The Company’s total payment obligation under the Collaboration Agreement and the Harvard License Agreement is $7.2 million, some of which is subject to a minimum funding commitment
under applicable circumstances as indicated above.
The Company has recorded expenses in the amount of $222 thousand which is 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 months ended March 31, 2020. 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.
NOTE 7:- 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 give retroactive effect to the reverse stock split for all periods presented.
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.
As of March 31, 2020, and December 31, 2019, the Company had reserved 55,414 and 12,409 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'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 three months ended March 31, 2019 was estimated at the date of the grant using a Black-Scholes-Merton option pricing model with the
following assumptions:
|
|
Three Months Ended March 31,
|
|
|
|
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 three months ended March 31, 2020.
The fair value of restricted share units (“RSUs”) granted is determined based on the price of the Company's ordinary shares on the date of grant.
A summary of employee share options activity during the three months ended March 31, 2020 is as follows:
|
|
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
|
|
|
$
|
41.60
|
|
|
|
6.34
|
|
|
$
|
135
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(320
|
)
|
|
|
26.875
|
|
|
|
|
|
|
|
|
|
Options outstanding at the end of the period
|
|
|
74,393
|
|
|
$
|
41.67
|
|
|
|
5.98
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at the end of the period
|
|
|
49,609
|
|
|
$
|
51.87
|
|
|
|
4.81
|
|
|
$
|
—
|
|
A summary of employee RSUs activity during the three months ended March 31, 2020 is as follows:
|
|
Number of shares underlying outstanding RSUs
|
|
|
Weighted average grant date fair value
|
|
Unvested RSUs at the beginning of the period
|
|
|
62,378
|
|
|
$
|
44.61
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(10,595
|
)
|
|
|
7.06
|
|
Forfeited
|
|
|
(3,805
|
)
|
|
|
10.25
|
|
Unvested RSUs at the end of the period
|
|
|
47,978
|
|
|
$
|
55.80
|
|
The weighted average grant date fair value of options granted during the three months ended March 31, 2019 was $6.3. The weighted average grant date fair value of RSUs granted
during the three months ended March 31, 2019 was $5.37. The Company did not grant options or 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 three months ended March 31, 2020 and March 31, 2019. As of March 31, 2020, there were $611 thousand 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 1.75 years.
The number of options and RSUs outstanding as of March 31, 2020 is set forth below, with options separated by range of exercise price.
Range of exercise price
|
|
Options and RSUs outstanding as of March 31, 2020
|
|
Weighted
average
remaining
contractual
life (years) (1)
|
|
Options outstanding and exercisable as of March 31, 2020
|
|
Weighted
average
remaining
contractual
life (years) (1)
|
RSUs only
|
|
47,978
|
|
—
|
|
—
|
|
—
|
$5.37
|
|
12,425
|
|
8.99
|
|
3,106
|
|
8.99
|
$20.42 - $33.75
|
|
36,531
|
|
5.97
|
|
23,377
|
|
4.79
|
$37.14 - $38.75
|
|
10,194
|
|
3.71
|
|
10,194
|
|
3.71
|
$50 - $52.50
|
|
11,395
|
|
5.34
|
|
9,084
|
|
4.87
|
$182.5 - $524
|
|
3,848
|
|
4.32
|
|
3,848
|
|
4.32
|
|
|
122,371
|
|
5.98
|
|
49,609
|
|
4.81
|
|
(1)
|
Calculation of weighted average remaining contractual term does not include the RSUs that were granted, which have an indefinite contractual term.
|
|
c.
|
Share-based awards to non-employee consultants:
|
As of March 31, 2020, there are no outstanding options or RSUs held by non-employee consultants.
|
d.
|
Warrants to purchase ordinary shares:
|
The following table summarizes information about warrants outstanding and exercisable as of March 31, 2020:
Issuance date
|
|
Warrants outstanding
|
|
|
Exercise
price
per warrant
|
|
|
Warrants outstanding and
exercisable
|
|
Contractual term
|
|
|
(number)
|
|
|
|
|
|
(number)
|
|
|
December 31, 2015 (1)
|
|
|
4,771
|
|
|
$
|
7.5
|
|
|
|
4,771
|
|
See footnote (1)
|
November 1, 2016 (2)
|
|
|
97,496
|
|
|
$
|
118.75
|
|
|
|
97,496
|
|
November 1, 2021
|
December 28, 2016 (3)
|
|
|
1,908
|
|
|
$
|
7.5
|
|
|
|
1,908
|
|
See footnote (1)
|
November 20, 2018 (4)
|
|
|
126,839
|
|
|
$
|
7.5
|
|
|
|
126,839
|
|
November 20, 2023
|
November 20, 2018 (5)
|
|
|
106,680
|
|
|
$
|
9.375
|
|
|
|
106,680
|
|
November 15, 2023
|
February 25, 2019 (6)
|
|
|
45,600
|
|
|
$
|
7.1875
|
|
|
|
45,600
|
|
February 21, 2024
|
April 5, 2019 (7)
|
|
|
408,457
|
|
|
$
|
5.140
|
|
|
|
408,457
|
|
October 7, 2024
|
April 5, 2019 (8)
|
|
|
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
|
June 5, 2019 (10)
|
|
|
87,880
|
|
|
$
|
9.375
|
|
|
|
87,880
|
|
June 5, 2024
|
June 12, 2019 (11)
|
|
|
416,667
|
|
|
$
|
6.000
|
|
|
|
416,667
|
|
December 12, 2024
|
June 10, 2019 (12)
|
|
|
50,000
|
|
|
$
|
7.500
|
|
|
|
50,000
|
|
June 10, 2024
|
February 10, 2020 (13)
|
|
|
5,600,000
|
|
|
$
|
1.25
|
|
|
|
5,600,000
|
|
February 10, 2025
|
February 10, 2020 (14)
|
|
|
336,000
|
|
|
$
|
1.5625
|
|
|
|
336,000
|
|
February 10, 2025
|
|
|
|
8,795,978
|
|
|
|
|
|
|
|
8,795,978
|
|
|
|
(1)
|
Represents warrants for ordinary shares issuable upon an exercise price of $7.5 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 our 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 March 31, 2020.
|
|
(2)
|
Represents warrants issued as part of our follow-on offering in November 2016. At any time, the 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 $8.0 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 our follow-on offering in November 2018.
|
|
(5)
|
Represents common warrants that were issued to the underwriters as compensation for their role in our follow-on offering in November 2018.
|
|
(6)
|
Represents warrants that were issued to the exclusive placement agent and its designees as compensation for their role in our follow-on offering in February 2019.
|
|
(7)
|
Represents warrants that were issued to certain institutional purchasers in a private placement in the 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 the 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 the Company’s June 2019 warrant exercise agreement and concurrent private placement of warrants.
|
|
(11)
|
Represents warrants that were issued to certain institutional purchasers in a private placement in the Company’s registered direct offering of ordinary shares in June 2019.
|
|
(12)
|
Represents warrants that were issued to the placement agent as compensation for its role in the 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.
|
|
(14)
|
Represents warrants that were issued to the placement agent as compensation for its role in the Company’s February 2020 best efforts offering`
|
|
e.
|
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):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cost of revenues
|
|
$
|
2
|
|
|
$
|
4
|
|
Research and development, net
|
|
|
42
|
|
|
|
61
|
|
Sales and marketing
|
|
|
29
|
|
|
|
72
|
|
General and administrative
|
|
|
126
|
|
|
|
182
|
|
Total
|
|
$
|
199
|
|
|
$
|
319
|
|
In November 2018, the Company entered into an underwriting 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 March 31, 2019 additional pre-funded warrants and warrants to purchase an aggregate 119,881 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.
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.
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 was 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 closings of the second and third tranches 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 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.
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.
NOTE 8:- FINANCIAL EXPENSES, NET
The components of financial expenses, net were as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Foreign currency transactions and other
|
|
$
|
(73
|
)
|
|
$
|
3
|
|
Financial expenses related to loan agreement with Kreos
|
|
|
310
|
|
|
|
404
|
|
Bank commissions
|
|
|
9
|
|
|
|
11
|
|
|
|
$
|
246
|
|
|
$
|
418
|
|
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 systems and services (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues based on customer’s location :
|
|
|
|
|
|
|
Israel
|
|
$
|
—
|
|
|
$
|
—
|
|
United States
|
|
|
216
|
|
|
|
497
|
|
Europe
|
|
|
542
|
|
|
|
1,079
|
|
Asia-Pacific
|
|
|
2
|
|
|
|
5
|
|
Total revenues
|
|
$
|
760
|
|
|
$
|
1,581
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Long-lived assets by geographic region (*):
|
|
|
|
|
|
|
Israel
|
|
$
|
175
|
|
|
$
|
179
|
|
United States
|
|
|
232
|
|
|
|
244
|
|
Germany
|
|
|
78
|
|
|
|
78
|
|
|
|
$
|
485
|
|
|
$
|
501
|
|
(*) Long-lived assets are comprised of property and equipment, net.
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Major customer data as a percentage of total revenues:
|
|
|
|
|
|
|
Customer A
|
|
|
22.4
|
%
|
|
|
*
|
)
|
Customer B
|
|
|
14.1
|
%
|
|
|
*
|
)
|
Customer C
|
|
|
12.9
|
%
|
|
|
*
|
)
|
Customer D
|
|
|
12.3
|
%
|
|
|
*
|
)
|
Customer E
|
|
|
11.3
|
%
|
|
|
*
|
)
|
Customer F
|
|
|
*
|
)
|
|
|
12.9
|
%
|
*) Less than 10%.
NOTE 10:- SUBSEQUENT EVENTS
|
•
|
On April 21, 2020, RRI entered into an unsecured note (the “Note”) evidencing an unsecured loan in the amount of $392 thousand under the Paycheck Protection Program (the “PPP”) as part of the Coronavirus
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 April 30, 2020, the Company and Harvard amended the Collaboration Agreement with certain adjustments to the quarterly installments and extending the term an additional three quarters until February 2023.
For further details on the Collaboration Agreement, see note 6 above.
|
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 2019 Form 10-K as filed with the SEC. 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:
|
•
|
our management’s conclusion, and our independent registered public accounting firm’s statement in its opinion relating to our consolidated financial statements for the fiscal year ended December 31, 2019, that there is a substantial
doubt as to our ability to continue as a going concern;
|
|
•
|
the current coronavirus (COVID-19) pandemic has adversely affected and may continue to affect adversely 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 ability to establish a pathway to commercialize our products in China;
|
|
•
|
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 expectations regarding future growth, including our ability to increase sales in our existing geographic markets and expand to new markets;
|
|
•
|
our ability to obtain certain components of our products from third-party suppliers and our continued access to our product manufacturers;
|
|
•
|
our ability to repay our secured indebtedness;
|
|
•
|
our ability to improve our products and develop new products;
|
|
•
|
the outcome of ongoing shareholder class action litigation relating to our initial public offering (“IPO”);
|
|
•
|
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;
|
|
•
|
our ability to maintain adequate protection of our intellectual property and to avoid violation of the intellectual
property rights of others;
|
|
•
|
the risk of a cybersecurity attack or breach of our IT systems significantly disrupting our business operations;
|
|
•
|
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; and
|
|
•
|
the impact of the market price of our ordinary shares on the determination of whether we are a passive foreign investment company.
|
The preceding list is not intended to be an exhaustive list of all of our 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 2019 Form 10-K, and in other reports filed by us with 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 ReWalk Personal and ReWalk Rehabilitation devices for individuals with spinal cord injury (“SCI Products”), which are exoskeletons designed
for individuals with paraplegia that 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 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. 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, where we operate our business from.
We have in the past generated and expect to generate in the future revenues from a combination of third-party payors, self-payors, including private and government 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. 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 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 March 31, 2020, we had placed 24 units as
part of the VA policy.
According to a 2017 report published by the Centers for Medicare and Medicaid Services, or CMS, approximately 55% of the spinal cord injury population which are at least five
years post their injury date are covered by CMS. In December 2019, we submitted the first application for code issuance for ReWalk Personal 6.0, which might later be followed by coverage policy of CMS.
Additionally, to date several private insurers in the United States and Europe have provided reimbursement for ReWalk in certain cases. In Germany, we continue to make progress
toward achieving ReWalk coverage from the various government, private and worker’s compensation payors. In September 2017, each of German insurer BARMER GEK (“Barmer”) and national social accident insurance provider Deutsche Gesetzliche
Unfallversicherung (“DGUV”), indicated that they will provide coverage to users who meet certain inclusion and exclusion criteria. In February 2018, the head office of German statutory health insurance, or SHI, Spitzenverband (“GKV”) confirmed their
decision to list the ReWalk Personal 6.0 exoskeleton system in the German Medical Device Directory. This decision means that ReWalk will be listed among all medical devices for compensation, which SHI providers can procure for any approved
beneficiary on a case-by-case basis.
First Quarter 2020 and Subsequent Period Business Highlights
|
•
|
Total revenue for the first quarter of 2020 was $0.8 million, compared to $1.6 million in the prior year quarter.
|
|
•
|
Amended our research collaboration agreement with Harvard to focus on tele-health solutions and extend the term through March 2023.
|
|
•
|
Entering upper and lower extremity products, offering hand, leg, arm and balance systems with MediTouch.
|
|
•
|
Adding functional electrical stimulation cycle for home and rehab therapy with Myolyn.
|
|
•
|
DGUV accepted a binding offer to provide qualified SCI patients ReWalk Personal 6.0.
|
|
•
|
Finalized national agreement for the supply of ReWalk Personal 6.0 to qualified patients with multiple German SHIs - Techniker Krankenkasse ("TK") and Deutsche Angestellten-Krankenkasse – Gesundheit ("DAK-Gesundheit") and a third SHI
group of payors.
|
|
•
|
CMS code hearing for ReWalk Personal scheduled for June 1, 2020.
|
|
•
|
Regained compliance with Nasdaq $1 bid price listing requirement.
|
Evolving COVID-19 Pandemic
The recent outbreak of COVID-19, which surfaced in Wuhan, China, in December 2019, has since been declared a pandemic and has spread to
multiple global regions, including the United States, Europe and other parts of Asia. The impact of this 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 certain of these countries or locales within the countries have begun to allow reopening of certain businesses, it is unclear how long
total or partial shutdowns may last and whether additional shutdowns will be necessary to the extent future outbreaks occur.
The COVID-19 pandemic has affected our ability to engage with our SCI Products and ReStore customers, 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 of 2020 have been adversely impacted. The overall impact of the limitations on our sales efforts are currently difficult to determine, but we believe that the adverse impact
may continue. 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, 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 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 to government directives or health protocols that might impact our production facility, and the current limitations on our sales activities has made it hard for us to effectively forecast our future requirements for systems. For
more information, see “Part II, Item 1A. Risk Factors-A 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.”
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. Continued 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 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 with the current business environment, we took measures to adjust our cost structure and anticipated cash usage that will take effect starting 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, implementing remote working in the United States and Germany, and establishing in-office measures to contain the spread of the virus. These 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 last throughout 2020 as needed, but the Company will continue to monitor the environment and extend or modify these actions, if necessary. Despite this
current situation and the challenges it imposes, we 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 Months Ended March 31, 2020 and March 31, 2019
Our operating results for the three months ended March 31, 2020, as compared to the same period in 2019, are presented below. The results
set forth below are not necessarily indicative of the results to be expected in future periods.
|
|
Three Months Ended March 31,
|
|
Statements of Operations Data:
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
760
|
|
|
$
|
1,581
|
|
Cost of revenues
|
|
|
387
|
|
|
|
655
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
373
|
|
|
|
926
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development, net
|
|
|
985
|
|
|
|
1,414
|
|
Sales and marketing
|
|
|
1,681
|
|
|
|
1,587
|
|
General and administrative
|
|
|
1,309
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,975
|
|
|
|
4,501
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(3,602
|
)
|
|
|
(3,575
|
)
|
Financial expenses, net
|
|
|
246
|
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(3,848
|
)
|
|
|
(3,993
|
)
|
Income taxes (tax benefit)
|
|
|
(8
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,840
|
)
|
|
$
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per ordinary share, basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(1.25
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing net loss per ordinary share, basic and diluted
|
|
|
10,374,116
|
|
|
|
3,211,386
|
|
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
Revenues
Our revenues for the three months ended March 31, 2020 and 2019 were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands, except unit amounts)
|
|
Personal unit revenues
|
|
$
|
714
|
|
|
$
|
1,546
|
|
Rehabilitation unit revenues
|
|
|
46
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
760
|
|
|
$
|
1,581
|
|
Personal unit revenues may consist of ReWalk Personal 6.0 sale, rental, service and warranty revenue.
Rehabilitation unit revenues may consist of ReStore and SCI Products sale, rental, service and warranty revenue.
Revenues decreased by $821 thousand, or 52%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The decrease is due to several units for
which we could not complete the delivery because of the impacts of COVID-19 as well as a lower number of ReWalk Personal 6.0 placed in Germany during this period.
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.
Gross Profit
Our gross profit for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Gross profit
|
|
$
|
373
|
|
|
$
|
926
|
|
Gross profit was 49% of revenue for the three months ended March 31, 2020 compared to 59% for the three months ended March 31, 2019. The decrease in gross profit for the three months ended March 31,
2020 was mainly driven by the lower volume of units 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 device and increase in the cost of product parts.
Research and Development Expenses
Our research and development expenses, net, for the three months ended March 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development expenses, net
|
|
$
|
985
|
|
|
$
|
1,414
|
|
Research and development expenses, net, decreased $429 thousand, or 30%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The decrease
is attributable to decreased costs associated with the development and clinical study costs of our ReStore soft suit exoskeleton which completed in the second quarter of 2019.
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 months ended March 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Sales and marketing expenses
|
|
$
|
1,681
|
|
|
$
|
1,587
|
|
Sales and marketing expenses increased $94 thousand, or 6%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, driven by higher consulting
spend in Germany to support our payor contract implementation.
In the near term our sales and marketing expenses are expected to be driven by our efforts to commercialize our current products , and to increase reimbursement coverage of the
ReWalk Personal device.
General and Administrative Expenses
Our general and administrative expenses for the three months ended March 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
General and administrative
|
|
$
|
1,309
|
|
|
$
|
1,500
|
|
General and administrative expenses decreased $191 thousand, or 13%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, driven mainly by
lower consulting spend and non-cash compensation expense.
Financial Expenses, Net
Our financial expenses, net, for the three months ended March 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Financial expenses, net
|
|
$
|
246
|
|
|
$
|
418
|
|
Financial expenses, net, decreased $172 thousand, or 41%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, mainly due to lower interest
expenses attributable to the Loan Agreement with Kreos.
Income Taxes (Tax Benefit)
Our income tax for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Income taxes (tax benefit)
|
|
$
|
(8
|
)
|
|
$
|
7
|
|
Income taxes increased $15 thousand for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles. The preparation of our 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 financial statements and related disclosures. See Note 2 to our audited consolidated
financial statements included in our 2019 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 2019 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.
As of March 31, 2020, the Company had cash and cash equivalents of $16.6 million. The Company has an accumulated deficit in the total amount of approximately $172.3 million as of
March 31, 2020 and further losses are anticipated in the development of its business. Those factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the
Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company intends to finance operating costs over the next twelve months with existing cash on hand, reducing operating spend, and future issuances of equity and debt securities,
or through a combination of the foregoing. However, the Company will need to seek additional sources of financing if the Company requires more funds than anticipated during the next 12 months or in later periods.
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 months ended March 31, 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 are (i) sales, marketing and reimbursement expenses related to market development activities of our ReStore device as well as broadening
third-party payor coverage, and (ii) research and development costs related to our current products maintenance and expanding the indication of use of our lightweight “soft suit” exoskeleton to other medical conditions as well as home therapy. 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”) 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 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 is 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 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.
In connection with the $12.0 million drawdown under the Loan Agreement, 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 our 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. 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- 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, $3.0 million of the outstanding principal under the Loan Agreement is 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, the Company agreed to repay
$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 terminate the Kreos Convertible Note. The
Company repaid Kreos the $3.6 million by issuing to Kreos 192,000 units and 288,000 pre-funded units at the applicable public offering prices for an aggregate price of $3.6 million (including 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 also 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. 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 existing exercise price of $7.5 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 per share with an exercise period of five years.
As of March 31, 2020, the outstanding principal amount under the Kreos Loan Agreement was $5.7 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.
Equity Raises
Form S-3 Limitations
Since we filed our Form 10-K on February 17, 2017, we have been subject to limitations under the applicable rules of Form S-3, which constrain our ability to secure capital
pursuant to our 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. Pursuant to these rules, until June 10, 2020, we may not sell in primary offerings under our Form S-3 more than approximately $5.8 million in any 12-month period, unless and until we are no longer subject
to these limitations. We will cease to be subject to these limitations once our public float exceeds $75 million. As of the date of this quarterly report, we have sold approximately $5.0 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 $0.8 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, 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. Our Form S-3 expires on May 23, 2022. With respect to our ATM Offering Program, because we 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
$5.8 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 Agreement 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 under the Equity Distribution Agreement may be
registered under the Securities Act using our Form S-3.
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 its follow-on 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 year ended December 31, 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,
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.
ATM Offering Program
On May 10, 2016, we entered into our Equity Distribution Agreement 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. 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 termination of the Equity Distribution Agreement. 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. As of March 31, 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, we had paid Piper Jaffray
compensation of $471 thousand and had incurred total expenses 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 intend to continue using the ATM Offering
Program 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. 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 Tranche and Third 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 Closing 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, 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 Three Months Ended March 31, 2020 and March 31, 2019 (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash used in operating activities
|
|
$
|
(4,341
|
)
|
|
$
|
(4,253
|
)
|
Net cash used in investing activities
|
|
|
(9
|
)
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
4,690
|
|
|
|
3,580
|
|
Net cash flow
|
|
$
|
340
|
|
|
$
|
(673
|
)
|
Net Cash Used in Operating Activities
Net cash used in operating activities remained flat between the three months ended March 31, 2020 and 2019.
Net Cash Provided by Financing Activities
Net cash provided by financing activities increased to $4.7 million for the three months ended March 31, 2020 compared to $3.6 million for the three months ended March 31, 2019,
primarily due to the higher proceeds received through the “best efforts” offering in February 2020 offset with higher principal repayments under the Kreos loan.
Obligations and Commercial Commitments
Set forth below is a summary of our contractual obligations as of March 31, 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)
|
|
$
|
1,163
|
|
|
$
|
1,163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collaboration Agreement and License Agreement obligations (2)
|
|
|
2,461
|
|
|
|
973
|
|
|
|
1,488
|
|
|
|
—
|
|
|
|
—
|
|
Operating lease obligations (3)
|
|
|
2,331
|
|
|
|
708
|
|
|
|
1,317
|
|
|
|
306
|
|
|
|
—
|
|
Long-term debt obligations (4)
|
|
|
6,300
|
|
|
|
6,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
12,255
|
|
|
$
|
9,144
|
|
|
$
|
2,805
|
|
|
$
|
306
|
|
|
$
|
—
|
|
(1) The Company depends on one contract manufacturer, Sanmina, for both the ReStore products and the ReWalk products. We place our manufacturing orders with Sanmina pursuant to purchase orders or by
providing forecasts for future requirements. Additionally, we have purchase obligations to our raw material vendors related to the ReStore production, which began in the second quarter of 2019 following regulatory clearance.
(2) Our Collaboration Agreement is for a period of six years and requires us to pay in quarterly installments for the funding of our joint research collaboration with Harvard, subject to a minimum
funding commitment under applicable circumstances. Our License Agreement consists of patent reimbursement expenses payments and of 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. These product development milestones have been met as of March 31, 2020. There are commercialization milestones which
depend on us reaching certain sales amounts some or all of which may not occur.
(3) Our operating leases consist of leases for our facilities and motor vehicles.
(4) Our long-term debt obligations consist of payments of principal and interest under our Loan Agreement with Kreos.
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 3.565:$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:$1.094, both of which were the applicable exchange rates as of March 31, 2020. We calculated the payments due under our Loan Agreement
with Kreos according to the current schedule of repayment of principal and interest.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party obligations as of March 31, 2020.