10-Q 1 zk2025078.htm 10-Q

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the quarterly period ended September 30, 2020
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the transition period from _____ to ______
 
Commission File Number: 001-36612


ReWalk Robotics Ltd.
(Exact name of registrant as specified in charter)
 
Israel
 
Not applicable
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
 
 
 
3 Hatnufa Street, Floor 6, Yokneam Ilit, Israel
 
2069203
(Address of principal executive offices)
 
(Zip Code)
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading symbol
 
Name of exchange on which registered
Ordinary shares, par value NIS 0.25
 
RWLK
 
Nasdaq Capital Market

 +972.4.959.0123
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒     No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒

Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒
 
As of November 10, 2020, the registrant had outstanding 19,177,201 ordinary shares, par value NIS 0.25 per share.
 

 
 
REWALK ROBOTICS LTD.
 
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2020
 
TABLE OF CONTENTS
 
 
Page No.
ii
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1-2
 
3
 
4-5
 
6
 
7-26
27-42
43
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44
44-51
52
52
52
52
53
54
 
i

 
General and Where You Can Find Other Information
 
As used in this quarterly report on Form 10-Q, the terms “ReWalk,” “we,” “us” and “our” refer to ReWalk Robotics Ltd. and its subsidiaries, unless the context clearly indicates otherwise. Our website is www.rewalk.com. Information contained, or that can be accessed through, our website does not constitute a part of this quarterly report on Form 10-Q and is not incorporated by reference herein. We have included our website address in this quarterly report solely for informational purposes. Information that we furnish to or file with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are available for download, free of charge, on our website as soon as reasonably practicable after such materials are filed with or furnished to the SEC. Our SEC filings, including exhibits filed or furnished therewith, are also available on the SEC’s website at http://www.sec.gov.
 
ii

 
PART I - FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
 
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
 
$
18,050
   
$
16,253
 
Trade receivable, net
   
715
     
794
 
Prepaid expenses and other current assets
   
833
     
903
 
Inventories
   
3,707
     
3,123
 
Total current assets
   
23,305
     
21,073
 
 
               
LONG-TERM ASSETS
               
 
               
Restricted cash and other long-term assets
   
1,034
     
1,061
 
Operating lease right-of-use assets
   
1,421
     
1,737
 
Property and equipment, net
   
474
     
501
 
Total long-term assets
   
2,929
     
3,299
 
Total assets
 
$
26,234
   
$
24,372
 
   
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
1

 
REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
 
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
           
CURRENT LIABILITIES
           
Current maturities of long-term loans
 
$
3,280
   
$
5,438
 
Current maturities of operating leases
   
622
     
637
 
Trade payables
   
2,107
     
2,698
 
Employees and payroll accruals
   
687
     
670
 
Deferred revenues
   
445
     
323
 
Other current liabilities
   
504
     
402
 
Total current liabilities
   
7,645
     
10,168
 
 
               
LONG-TERM LIABILITIES
               
Long-term loan, net of current maturities
   
154
     
1,527
 
Deferred revenues
   
626
     
521
 
Non-current operating leases
   
985
     
1,315
 
Other long-term liabilities
   
35
     
61
 
Total long-term liabilities
   
1,800
     
3,424
 
 
               
Total liabilities
   
9,445
     
13,592
 
 
               
COMMITMENTS AND CONTINGENT LIABILITIES
               
Shareholders’ equity:
               
 
               
Share capital
               
Ordinary share of NIS 0.25 par value-Authorized: 60,000,000 shares at September 30,
     2020 and December 31, 2019; Issued and outstanding: 19,158,963 and 7,319,560
     shares at September 30, 2020 and December 31, 2019, respectively
   
1,352
     
504
 
Additional paid-in capital
   
193,937
     
178,745
 
Accumulated deficit
   
(178,500
)
   
(168,469
)
Total shareholders’ equity
   
16,789
     
10,780
 
Total liabilities and shareholders’ equity
 
$
26,234
   
$
24,372
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
2

REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Revenues
 
$
747
   
$
1,234
   
$
3,175
   
$
3,692
 
Cost of revenues
   
355
     
585
     
1,388
     
1,682
 
 
                               
Gross profit
   
392
     
649
     
1,787
     
2,010
 
 
                               
Operating expenses:
                               
Research and development, net
   
756
     
1,018
     
2,695
     
4,292
 
Sales and marketing
   
1,507
     
1,453
     
4,541
     
4,571
 
General and administrative
   
1,198
     
1,209
     
3,774
     
3,988
 
 
                               
Total operating expenses
   
3,461
     
3,680
     
11,010
     
12,851
 
 
                               
Operating loss
   
(3,069
)
   
(3,031
)
   
(9,223
)
   
(10,841
)
Financial expenses, net
   
242
     
360
     
723
     
1,131
 
 
                               
Loss before income taxes
   
(3,311
)
   
(3,391
)
   
(9,946
)
   
(11,972
)
Taxes on income (tax benefit)  
   
25
     
(2
)
   
85
     
4
 
 
                               
Net loss
 
$
(3,336
)
 
$
(3,389
)
 
$
(10,031
)
 
$
(11,976
)
 
                               
Net loss per ordinary share, basic and diluted
 
$
(0.18
)
 
$
(0.46
)
 
$
(0.71
)
 
$
(2.27
)
 
                               
Weighted average number of shares used in computing
   net loss per ordinary share, basic and diluted
   
18,881,694
     
7,290,791
     
14,132,375
     
5,284,451
 
   
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
3

REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share data)
 
 
 
Ordinary Share
   
Additional
paid-in
capital
   
Accumulated
deficit
   
Total
shareholders’
equity
 
 
 
Number
   
Amount
             
Balance as of June 30, 2019
   
7,289,110
     
503
     
178,270
     
(161,505
)
   
17,268
 
Share-based compensation to employees and non-employees
   
     
     
236
     
     
236
 
Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees
   
10,962
     
*
)
   
     
     
 
Net loss
   
     
     
     
(3,389
)
   
(3,389
)
Balance as of September 30, 2019
   
7,300,072
     
503
     
178,506
     
(164,894
)
   
14,115
 
 
                                       
Balance as of June 30, 2020
   
14,190,685
     
993
     
186,070
     
(175,164
)
   
11,899
 
Share-based compensation to employees and non-employees
   
     
     
232
     
     
232
 
Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees
   
20,000
     
2
     
(2
)
   
     
 
Issuance of ordinary shares in a “registered direct" offering, net of issuance expenses in the amount of $ 1,019 (1)
   
4,938,278
     
357
     
7,624
     
     
7,981
 
Exercise of warrants (1)(2)
   
10,000
     
     
13
     
     
13
 
Net loss
   
     
     
     
(3,336
)
   
(3,336
)
Balance as of September 30, 2020
   
19,158,963
     
1,352
     
193,937
     
(178,500
)
   
16,789
 
  
 
*)
Represents an amount lower than $1.
 
 
(1)
See Note 8f to the condensed consolidated financial statements.
 
 
(2)
See Note 8d to the condensed consolidated financial statements.

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

4


REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share data)
 
 
 
Ordinary Share
   
Additional
paid-in
   
Accumulated
   
Total
shareholders’
equity
 
 
 
Number
   
Amount
   
capital
   
deficit
     
Balance as of December 31, 2018
   
2,813,087
     
193
     
154,670
     
(152,918
)
   
1,945
 
Share-based compensation to employees and non-employees
   
     
     
869
     
     
869
 
Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees
   
27,985
     
1
     
     
     
1
 
Issuance of ordinary shares in a “best efforts” offering, net of issuance expenses in the amount of $686 (1)
   
760,000
     
52
     
3,632
     
     
3,684
 
Exercise of pre-funded warrants and warrants (1) (2)
   
584,087
     
40
     
1,461
     
     
1,501
 
Issuance of ordinary shares in a “Registered Direct” offerings, net of issuance expenses in the amount of $1,125 (1)
   
1,650,248
     
115
     
8,010
     
     
8,125
 
Issuance of ordinary shares in a “Warrant exercise” agreement, net of issuance expenses in the amount of $1,019 (1)
   
1,464,665
     
102
     
9,864
     
     
9,966
 
Net loss
   
     
     
     
(11,976
)
   
(11,976
)
Balance as of September 30, 2019
   
7,300,072
     
503
     
178,506
     
(164,894
)
   
14,115
 
 
                                       
Balance as of December 31, 2019
   
7,319,560
     
504
     
178,745
     
(168,469
)
   
10,780
 
Share-based compensation to employees and non-employees
   
     
     
544
     
     
544
 
Issuance of ordinary shares upon exercise of options to purchase ordinary shares and RSUs by employees and non-employees
   
44,625
     
2
     
(2
)
   
     
 
Issuance of ordinary shares in a “best effort” offering, net of issuance expenses in the amount of $1,056 (1)
   
4,053,172
     
290
     
3,720
     
     
4,010
 
Issuance of ordinary shares in a “registered direct" offering, net of issuance expenses in the amount of $ 1,019 (1)
   
4,938,278
     
357
     
7,624
     
     
7,981
 
Exercise of pre-funded warrants and warrants (1) (2)
   
2,803,328
     
199
     
3,306
     
     
3,505
 
Net loss
   
     
     
     
(10,031
)
   
(10,031
)
Balance as of September 30, 2020
   
19,158,963
     
1,352
     
193,937
     
(178,500
)
   
16,789
 
  
 
*)
Represents an amount lower than $1.
 
 
(1)
See Note 8f to the condensed consolidated financial statements.
 
 
(2)
See Note 8d to the condensed consolidated financial statements.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 

5


REWALK ROBOTICS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
  
 
 
Nine Months Ended
September 30,
 
 
 
2020
   
2019
 
Cash flows used in operating activities:
           
Net loss
 
$
(10,031
)
 
$
(11,976
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
   
215
     
242
 
Share-based compensation to employees and non-employees
   
544
     
869
 
Deferred taxes
   
(68
)
   
(67
)
Financial expenses related to long-term loans
   
59
     
 
Changes in assets and liabilities:
               
Trade receivables, net
   
79
     
186
 
Prepaid expenses, operating lease right-of-use assets and other assets
   
33
     
(397
)
Inventories
   
(634
)
   
(828
)
Trade payables
   
(633
)
   
625
 
Employees and payroll accruals
   
17
     
(56
)
Deferred revenues and advances from customers
   
227
     
180
 
Operating lease liabilities and other liabilities
   
61
     
(3
)
Net cash used in operating activities
   
(10,131
)
   
(11,225
)
 
               
Cash flows used in investing activities:
               
Purchase of property and equipment
   
(73
)
   
(8
)
Net cash used in investing activities
   
(73
)
   
(8
)
 
               
Cash flows from financing activities:
               
Repayment of long-term loan
   
(3,982
)
   
(1,261
)
Proceeds from issuance of long-term debt
   
392
     
 
Issuance of ordinary shares in a “best efforts” offering, net of issuance expenses in the amount of $ 686 (1)
   
     
3,684
 
Issuance of ordinary shares in a “registered direct” offerings, net of issuance expenses in the amount of $1,035 (1)
   
     
8,215
 
Issuance of ordinary shares in a “warrant exercise” agreement, net of issuance expenses in the amount of $ 1,019 (1)
   
     
9,966
 
Issuance of ordinary shares in a “best efforts” offerings, net of issuance expenses paid in the amount of $ 1,056 (1)
   
4,010
     
 
Issuance of ordinary shares in a “registered direct” offerings, net of issuance expenses in the amount of $977 (1)
   
8,023
     
 
Exercise of pre-funded warrants and warrants (1) (2)
   
3,505
     
1,429
 
Net cash provided by financing activities
   
11,948
     
22,033
 
 
               
Increase  in cash, cash equivalents, and restricted cash
   
1,744
     
10,800
 
Cash, cash equivalents, and restricted cash at beginning of period
   
16,992
     
10,347
 
Cash, cash equivalents, and restricted cash at end of period
 
$
18,736
   
$
21,147
 
Supplemental disclosures of non-cash flow information
               
“Registered direct” offerings issuance cost not yet paid (1)
 
$
42
    $
 
Classification of other current assets to property and equipment, net
 
$
65
   
$
90  
Classification of inventory to property and equipment, net
 
$
50
   
$
88
 
Cashless exercise of pre-funded warrants (1) (2)
 
$
   
$
72
 
Initial recognition of operating lease right-of-use assets
 
$
   
$
2,099
 
Initial recognition of operating lease liabilities
 
$
   
$
(2,249
)
Supplemental cash flow information:
               
Cash and cash equivalents
 
$
18,050
   
$
20,410
 
Restricted cash included in other long-term assets
   
686
     
737
 
Total Cash, cash equivalents, and restricted cash
 
$
18,736
   
$
21,147
 
   
 
(1)
See Note 8f to the condensed consolidated financial statements.
 
 
(2)
See Note 8d to the condensed consolidated financial statements.
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
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.
 
 
c.
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.
 
The company added two new product lines through distribution agreements and started commercializing them during the third quarter.
 
 
d.
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 had a negative impact on the Company's sales and results of operations during 2020, 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.
 

7

 
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   
 
e.
The Company has an accumulated deficit in the total amount of approximately $179 million as of September 30, 2020 and negative cash flow from operations of $10 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, continued close examination of its  operating spend and potential reduction in specific areas, 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 and nine months ended September 30, 2020 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

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 September 30, 2020, (ii) consolidated results of operations for the three and nine months ended September 30, 2020, (iii) consolidated statements of changes in shareholders’ equity as of September 30, 2020 and  (iv) consolidated cash flows for the nine months ended September 30, 2020. The results for the three and nine months periods ended September 30, 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
 
 
a.
Revenue Recognition 

The Company generates revenues from sales of products. The Company sells its products directly to end customers and through distributors. The Company sells its products to private individuals (who finance the purchases by themselves, through fundraising or reimbursement coverage from insurance companies), rehabilitation facilities and distributors.
 
8


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Disaggregation of Revenues (in thousands)
  
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Units placed
 
$
522
   
$
1,104
   
$
2,583
   
$
3,350
 
Spare parts and warranties
   
225
     
130
     
592
     
342
 
Total Revenues
 
$
747
   
$
1,234
   
$
3,175
   
$
3,692
 
 
Units placed
 
The Company currently offer five products: (1) ReWalk Personal, (2) ReWalk Rehabilitation, (3) ReStore, (4) MyoCycle and (5) MediTouch.

ReWalk Personal and ReWalk Rehabilitation are units for spinal cord injuries (“SCI Products”). SCI Products are currently designed for everyday use by paraplegic individuals at home and in their communities, and are 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.

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.

MyoCycle which uses Functional Electrical Stimulation (“FES”) technology and MediTouch tutor movement biofeedback devices (“Distributed Products”).  The Company markets the Distributed Products in the United States for use at home or in clinic.

Units placed includes revenue from sales of SCI Products, ReStore and Distributed Products.

For units placed, the Company recognizes revenues when it transfers control and title has passed to the customer.  Each unit placed is considered an independent, unbundled performance obligation. The Company 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.

The Distributed Products are offered with assurance type warranty ranging between one year to ten years depending on the specific product and part.

9


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Contract balances
  
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
Trade receivable, net (1)
 
$
715
   
$
794
 
Deferred revenues (1) (2)
 
$
1,071
   
$
844
 
  
(1)
Balance presented net of unrecognized revenues that were not yet collected.
  
(2)
$345 thousand of December 31, 2019 deferred revenues balance were recognized as revenues during the nine months ended September 30, 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 September 30, 2020 and the estimated revenue expected to be recognized in the future related to the service type warranty amounts to $1,088 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.
 

10

 
REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. ASU 2020-06 also requires that the effect of potential share settlement be included in the diluted EPS calculation when an instrument may be settled in cash or share. This amendment removes current guidance that allows an entity to rebut this presumption if it has a history or policy of cash settlement. Furthermore, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, the treasury stock method will be no longer available. In addition, ASU 2020-06 clarifies that an average market price should be used to calculate the diluted EPS denominator in cases in which the exercise prices may change on the basis of an entity’s share price or changes in the entity’s share price may affect the number of shares that may be used to settle a financial instrument and that an entity should use the weighted-average share count from each quarter when calculating the year-to-date weighted-average share. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated 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.
 
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
Customer A
   
15
%
   
*
)
Customer B
   
13
%
   
*
)
Customer C
   
13
%
   
*
)
Customer D
   
13
%
   
*
)
Customer E
   
12
%
   
*
)
Customer F
   
11
%
   
12
%
Customer G
   
*
)
   
14
%
Customer H
   
*
)
   
13
%
Customer I
   
*
)
   
13
%
Customer J
   
*
)
   
12
%
Customer K
   
*
)
   
12
%
Customer L
   
*
)
   
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 September 30, 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 $0 as of September 30, 2020 and $86 thousand as of December 31, 2019.


11

 

REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 
d.
Warranty provision

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
   
60
 
Usage
   
(133
)
Balance at September 30, 2020
 
$
154
 
  
NOTE 4:-
INVENTORIES
 
The components of inventories are as follows (in thousands):
  
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
Finished products
 
$
2,954
   
$
2,394
 
Raw materials
   
753
     
729
 
 
 
$
3,707
   
$
3,123
 
 

12


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 5:-
COMMITMENTS AND CONTINGENT LIABILITIES
 
 
a.
Purchase commitments:

The Company has contractual obligations to purchase goods from its contract manufacturer as well as raw materials from different vendors. Purchase obligations do not include contracts that may be canceled without penalty. As of September 30, 2020, non-cancelable outstanding obligations to the Company’s contract manufacturer and raw material vendors amounted to approximately $0.9 million.
 
 
b.
Operating lease commitment:
 
 
(i)
The Company operates from leased facilities in Israel, the United States and Germany. These leases expire between 2020 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 2020 and 2023. 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 $23 thousand as of September 30, 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 September 30, 2020 are as follows (in thousands):
 
2020
 
$
167
 
2021
   
668
 
2022
   
637
 
2023
   
461
 
Total lease payments
   
1,933
 
Less: imputed interest
   
(326
)
Present value of future lease payments
   
1,607
 
Less: current maturities of operating leases
   
(622
)
Non-current operating leases
 
$
985
 
Weighted-average remaining lease term (in years)
   
2.93
 
Weighted-average discount rate
   
12.6
%
  
Lease expense under the Company’s operating leases were $178 thousand and $185 thousand for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019 the lease expense were $553 thousand and $560 thousand, respectively.

13


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 
c.
Royalties:

The Company’s research and development efforts are financed, in part, through funding from the IIA and BIRD. Since the Company’s inception through September 30, 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 September 30, 2020, the Company paid royalties to the IIA in the total amount of $92 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%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 License Agreement requires the Company to pay Harvard royalties on net sales, See note 7 below for more information about the Collaboration Agreement and the License Agreement.
 
Royalties expenses in cost of revenue were $2 and $8 thousand for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the royalties expenses were $5 thousand and $13 thousand, respectively.

As of September 30, 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 research and development activities of the grant recipient in Israel after the transfer); (b) the grant recipient receives know-how from a third party in exchange for its IIA-funded know-how; (c) such transfer of IIA-funded know-how arises in connection with certain types of cooperation in research and development activities; or (d) if such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient.
 
 
d.
Liens:

As discussed in Note 6 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 $686 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.
 
14



REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

 
e.
Legal Claims:

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 affirmed on appeal. 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 “First Circuit”). The appeal was fully briefed in January 2020 and the court held oral arguments on March 2, 2020. On August 25, the First Circuit affirmed the dismissal and the denial of the plaintiff’s motion to amend. The plaintiff’s deadline to file a petition for certiorari for appeal of the case to the Supreme Court of the United States is November 24, 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 September 30, 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. 
 
15


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

NOTE 6:-
PAYCHECK PROTECTION PROGRAM LOAN

On April 21, 2020, RRI entered into a loan  (the “PPP Loan”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured promissory note in the amount of $392 thousand (the “PPP Note”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Subject to the terms of the PPP Note, the PPP Loan bears interest at a fixed rate of 1% per year, with the first six months of interest deferred, and has an initial term of two years. The PPP Loan is unsecured and guaranteed by the Small Business Administration.

The PPP Loan 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.  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. On September 29, 2020, the Company  submitted an application for loan forgiveness to the Small Business Administration.

The PPP Note provides for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default.

The follow table presents the scheduled principal payments of the Company's PPP Loan payable as of September 30, 2020, shown if the PPP Loan is not forgiven:

Period
 
Amount
 
Remainder of 2020
 
$
43
 
2021
   
263
 
2022
   
88
 
Total principal payments
 
$
394
 
 
       
Current portion
 
$
240
 
Long-term portion
   
154
 
Note payable, net
 
$
394
 


16


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 
 
NOTE 7:-
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. On April 30, 2020, the Company and Harvard amended the Collaboration Agreement, which included certain adjustments to the quarterly installments and extended the term an additional three quarters until February 2023.

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.

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 September 30, 2020, the company achieved the three development milestones. The Company continues to evaluate the likelihood that the other milestones will be achieved on a quarterly basis.

The Company’s total payment obligation under the Collaboration Agreement and the License Agreement  is $7.2 million on the date the agreement were signed, 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 $175 thousand and $599 thousand which are part of the total payment obligation indicated above, as research and development expenses related to the License Agreement and to the Collaboration Agreement for the three and nine months ended September 30, 2020, respectively. No withholding tax was deducted from the Company’s payments to Harvard in respect of the Collaboration Agreement and the License Agreement since this is not taxable income in Israel in accordance with Section 170 of the Israel Income Tax Ordinance 1961-5721.

17


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 8:-
SHAREHOLDERS’ EQUITY
 
 
a.
Reverse share split: 

On March 27, 2019, the Company’s shareholders approved (i) a reverse share split within a range of 1:8 to 1:32, to be effective at the ratio and on a date to be determined by the Board of Directors, and (ii) amendments to the Company’s Articles of Association authorizing an increase in the Company’s authorized share capital (and corresponding authorized number of ordinary shares, proportionally adjusting such number for the reverse share split) by up to NIS 17.5 million. Following the shareholder approval, an authorized committee of the Board of Directors of the Company approved a one-for-twenty-five reverse share split of the Company’s ordinary shares, and the Company filed the Third Amended and Restated Articles of Association of the Company with the Registrar of Companies of the State of Israel to effect the reverse share split and to increase the Company’s authorized share capital after the effect of the reverse share split. The reverse share split became effective on April 1, 2019. Additionally, effective at the same time, the total number of ordinary shares the Company is authorized to issue changed from 250,000,000 shares to 60,000,000 shares, the par value per share of the ordinary shares changed to NIS 0.25 and the authorized share capital of the Company changed from NIS 2,500,000 to NIS 15,000,000. All share and per share data included in these condensed consolidated financial statements, for periods before the three months ended June 30, 2019, give retroactive effect to the reverse stock split. 
 
Upon the effectiveness of the reverse share split, every twenty-five shares were automatically combined and converted into one ordinary share. Appropriate adjustments were also made to all outstanding derivative securities of the Company, including all outstanding equity awards and warrants.
 
No fractional shares were issued in connection with the reverse share split. Instead, all fractional shares (including shares underlying outstanding equity awards and warrants) were rounded down to the nearest whole number.
 
 
b.
Share option plans:

As of September 30, 2020, and December 31, 2019, the Company had reserved 623,408 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 nine months ended September 30, 2019  was estimated at the date of the grant using a Black-Scholes-Merton option pricing model with the following assumptions:
 
 
 
Nine Months Ended
September 30,
 
 
 
2019
 
Expected volatility
   
57.5
%
Risk-free rate
   
2.22
%
Dividend yield
   
%
Expected term (in years)
   
6.11
 
Share price
 
$
5.37
 
  
18


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

There were no options granted during the nine months ended September 30, 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 and non-employee directors share options activity during the nine months ended September 30, 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
   
$
41.6
     
6.34
   
$
135
 
Granted
   
     
                 
Exercised
   
     
                 
Forfeited
   
(1,713
)
   
133.74
                 
Options outstanding at the end of the period
   
73,000
   
$
39.4
     
5.57
   
$
 
 
                               
Options exercisable at the end of the period
   
53,668
   
$
46.39
     
4.74
   
$
 
  
A summary of employee and non-employee directors RSUs activity during the nine months ended September 30, 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
   
1,238,688
     
0.85
 
Vested
   
(44,625
)
   
8.86
 
Forfeited
   
(9,126
)
   
8.46
 
Unvested RSUs at the end of the period
   
1,247,315
   
$
2.78
 

The weighted average grant date fair value of options granted during the nine months ended September 30, 2019 was $2.98. The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2020 and 2019 were $1.44 and $4.69, respectively.
 
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 nine months ended September 30, 2020 and 2019. As of September 30, 2020, there were $2.0 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company’s 2012 Equity Incentive Plan and its 2014 Plan. This cost is expected to be recognized over a period of approximately 3.22 years.

19



REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The number of options and RSUs outstanding as of September 30, 2020 is set forth below, with options separated by range of exercise price.

Range of exercise price
 
Options and RSUs outstanding as of
September 30,
2020
 
 
Weighted
average
remaining
contractual
life (years) (1)
 
 
Options
outstanding and exercisable as of
 September  30,
2020
 
 
Weighted
average
remaining
contractual
life (years) (1)
 
RSUs only
 
 
1,247,315
 
 
 
 
 
 
 
 
 
 
$5.37
 
 
12,425
 
 
 
8.49
 
 
 
4,659
 
 
 
8.49
 
$20.42 - $33.75
 
 
36,299
 
 
 
5.51
 
 
 
26,120
 
 
 
4.70
 
$37.14 - $38.75
 
 
10,092
 
 
 
3.21
 
 
 
10,092
 
 
 
3.21
 
$50 - $52.5
 
 
11,228
 
 
 
4.91
 
 
 
9,841
 
 
 
4.67
 
$182.5 - $524.25
 
 
2,956
 
 
 
4.60
 
 
 
2,956
 
 
 
4.60
 
 
 
 
1,320,315
 
 
 
5.57
 
 
 
53,668
 
 
 
4.74
 
 
(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 September 30, 2020, there are no outstanding options or RSUs held by non-employee consultants.
 

20


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
d.
Warrants to purchase ordinary shares:

The following table summarizes information about warrants outstanding and exercisable as of September 30, 2020:
 
Issuance date
 
Warrants
outstanding
 
 
Exercise price per warrant
 
 
Warrants outstanding and exercisable
 
Contractual
term
 
 
(number)
 
 
 
 
 
(number)
 
 
December 31, 2015 (1)
 
 
4,771
 
 
$
7.500
 
 
 
4,771
 
See footnote (1)
November 1, 2016 (2)
 
 
97,496
 
 
$
118.750
 
 
 
97,496
 
November 1, 2021
December 28, 2016 (3)
 
 
1,908
 
 
$
7.500
 
 
 
1,908
 
See footnote (1)
November 20, 2018 (4)
 
 
126,839
 
 
$
7.500
 
 
 
126,839
 
November 20, 2023
November 20, 2018 (5)
 
 
106,680
 
 
$
9.375
 
 
 
106,680
 
November 15, 2023
February 25, 2019 (6)
 
 
45,600
 
 
$
7.187
 
 
 
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)
 
 
4,343,500
 
 
$
1.250
 
 
 
4,343,500
 
February 10, 2025
February 10, 2020 (14)
 
 
336,000
 
 
$
1.5625
 
 
 
336,000
 
February 10, 2025
July 6, 2020 (15)
   
2,469,139
   
$
1.76
     
2,469,139
 
July 2, 2025
July 6, 2020 (16)
   
296,297
     
2.2781
     
296,297
 
July 2, 2025
 
 
 
10,304,914
 
 
 
 
 
 
 
10,304,914
 
 
 
(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 September 30, 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.

21


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(6)
Represents warrants that were issued to the exclusive placement agent as compensation for its role in our follow-on offering in February 2019.
 
(7)
Represents warrants that were issued to certain institutional purchasers in a private placement in our 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 our 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 our 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 our 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.

(15)
Represents warrants that were issued to certain institutional purchasers in a private placement in our registered direct offering of ordinary shares in July 2020.

(16)
Represents warrants that were issued to the placement agent as compensation for its role in the Company’s July 2020 registered direct 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):
 
 
 
Nine Months Ended
September 30,
 
 
 
2020
   
2019
 
Cost of revenues
 
$
6
   
$
9
 
Research and development, net
   
105
     
161
 
Sales and marketing
   
113
     
140
 
General and administrative
   
320
     
559
 
Total
 
$
544
   
$
869
 

22


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

 
f.
Equity raise:
 
 
1.
Follow-on offerings

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 nine month ended September 30, 2019 additional 288,000 pre-funded warrants and 296,087 warrants to purchase an aggregate 584,087 ordinary shares had been exercised, for additional proceeds of $1.5 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 became immediately exercisable starting on November 20, 2018 until November 15, 2023 at $9.375 per share.

In February 2019, the Company entered into an exclusive placement agent agreement with H.C. Wainwright, on a reasonable best-efforts basis in connection with a public offering of 760,000 ordinary shares at a price of $5.75 per share.
 
The total gross proceeds received from the February 2019 follow-on public offering, before deducting commissions, discounts and expenses, were $4.37 million. The Company also issued to H.C Wainwright and/or its designees warrants to purchase up to 45,600 ordinary shares, which are immediately exercisable starting on February 25, 2019 until February 21, 2024 at $7.1875 per share.
 
In April 2019, the Company entered into securities purchase agreements with certain institutional purchasers whereby the Company issued 816,914 ordinary shares at $5.2025 per ordinary share and warrants to purchase up to 408,457 ordinary shares with an exercise price of $5.14 per share, exercisable from April 5, 2019 until October 7, 2024, in a private placement that took place concurrently with the Company’s registered direct offering of ordinary shares in April 2019. Additionally the Company issued warrants to purchase up to 49,015 ordinary shares, with an exercise price of $6.503125 per share, exercisable from April 5, 2019 until April 3, 2024, to representatives of H.C. Wainwright as compensation for its role as the placement agent in our April 2019 registered direct offering and concurrent private placement of warrants.
  
23


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 of the 1,546,828 pre-funded unit consisted of one pre-funded warrant to purchase one ordinary share and one common warrant. Additionally, the Company issued warrants to purchase up to 336,000 ordinary shares, with an exercise price of $1.5625 per share, to representatives of H.C. Wainwright as compensation for its role as the placement agent in the Company’s February 2020 offering.  During the three months ended March 31, 2020, all pre-funded warrants to purchase ordinary shares were exercised. During the three months ended September 30, 2020, 10,000 warrants to purchase ordinary shares were exercised. As of September 30, 2020, a total of 1,256,500 warrants to purchase ordinary shares were exercised.

On July 6, 2020 the Company entered into a purchase agreement with certain institutional investors for the issuance and sale of (i) 4,938,278 ordinary shares, par value NIS 0.25 per share, at a price of $1.8225 per ordinary share and (ii) warrants to purchase up to 2,469,139 ordinary shares with an exercise price of $1.76 per share, exercisable from July 6, 2020 until January 6, 2026. Additionally, the Company issued warrants to purchase up to 296,297 ordinary shares, with an exercise price of $2.2781 per share, exercisable from July 6, 2020 until July 2, 2025, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in its July 2020 registered direct offering.

24


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
3.
Investment agreement

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 closing of the first tranche on May 15, 2018 (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, 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 9:-
FINANCIAL EXPENSES, NET
 
The components of financial expenses, net were as follows (in thousands):
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
 
2020
 
 
 2019
 
 
 2020
 
 
 2019
 
Foreign currency transactions and other
 
$
(7
)
 
$
(10
)
 
$
(99
)
 
$
(50
)
Financial expenses related to loan agreement with Kreos
 
 
243
 
 
 
365
 
 
 
802
 
 
 
1,155
 
Bank commissions
 
 
6
 
 
 
5
 
 
 
20
 
 
 
26
 
 
 
$
242
 
 
$
360
 
 
$
723
 
 
$
1,131
 

25


REWALK ROBOTICS LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 10:-
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 units and services (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas:
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
 
2020
 
 
 2019
 
 
2020
 
 
 2019
 
Revenues based on customer’s location:
 
 
 
 
 
 
 
 
 
 
 
 
Israel
 
$
 
 
$
 
 
$
 
 
$
2
 
United States
 
 
325
 
 
 
569
 
 
 
1,172
 
 
 
1,492
 
Europe
 
 
413
 
 
 
665
 
 
 
1,990
 
 
 
2,162
 
Asia-Pacific
 
 
2
 
 
 
 
 
 
6
 
 
 
36
 
Latin America
 
 
6
 
 
 
 
 
 
6
 
 
 
 
Africa
 
 
1
 
 
 
 
 
 
1
 
 
 
 
Total revenues
 
$
747
 
 
$
1,234
 
 
$
3,175
 
 
$
3,692
 
 
 
 
September 30,
   
December 31,
 
 
 
2020
   
2019
 
Long-lived assets by geographic region (*):
           
Israel
 
$
155
   
$
179
 
United States
   
263
     
244
 
Germany
   
56
     
78
 
 
 
$
474
   
$
501
 
 
(*)
Long-lived assets are comprised of property and equipment, net.
  
 
 
Nine Months Ended
September 30,
 
 
 
2020
 
 
2019
 
Major customer data as a percentage of total revenues:
 
 
 
 
 
 
Customer A
 
 
*
)
 
 
13.13
%
   
NOTE 11:-
 SUBSEQUENT EVENTS

On November 6, 2020 the Company received confirmation of its PPP Note forgiveness, see note 6 above for further details.
26


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;

27


 
•      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 litigation and other legal matters;
 
•      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.

28


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 September 30, 2020, we had placed 24 units as part of the VA policy.

 According to a 2017 report published by the Centers for Medicare and Medicaid Services, or CMS, approximately 55% of the spinal cord injury population which are at least five years post their injury date are covered by CMS. In July 2020, a code was issued for ReWalk Personal 6.0 (effective October 1, 2020), which might later be followed by coverage policy of CMS.

Additionally, to date, several private insurers in the United States and Europe have provided reimbursement for ReWalk in certain cases. In Germany, we continue to make progress toward achieving ReWalk coverage from the various government, private and worker’s compensation payors. In September 2017, each of German insurer BARMER GEK (“Barmer”) and national social accident insurance provider Deutsche Gesetzliche Unfallversicherung (“DGUV”), indicated that they will provide coverage to users who meet certain inclusion and exclusion criteria. In February 2018, the head office of German statutory health insurance, or SHI, Spitzenverband (“GKV”) confirmed their decision to list the ReWalk Personal 6.0 exoskeleton system in the German Medical Device Directory. This decision means that ReWalk will be listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. Since then, we have announced several contracts with German payors.

During the second quarter of 2020 we have finalized and moved to implement two separate agreements to distribute additional product lines in the U.S. market. The Company will be the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States, and will also have distribution rights for the MYOLYN MyoCycle FES cycles to U.S. rehabilitation clinics and personal sales through the U.S. Department of Veterans Affairs (“VA”) hospitals. These new products will improve our product offering to clinics as well as patients within the VA as they both have similar clinician and patient profile.

29

 
Third Quarter 2020 and Subsequent Period Business Highlights

 
Total revenue for the third quarter of 2020 was $0.7 million, compared to $1.2 million in the prior year quarter;
   
 
Received Medicare Provider certification from the Centers for Medicare & Medicaid Services ("CMS");

 
Completed additional contract with a German payor; and
  
 
Raised total of approximately $9.0 million in gross proceeds from a registered direct offering of ordinary shares and a concurrent private placement of unregistered warrants to purchase ordinary shares (as previously referenced in ReWalk’s Second Quarter 2020 Financial Results).
 
Evolving COVID-19 Pandemic

The impact of the novel coronavirus (COVID-19) pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States and many countries in Europe, have placed significant restrictions on travel, and many businesses have announced extended closures. Although 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, ReStore and Distributed Products 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 were adversely impacted. During the second quarter of 2020, we were able to deliver several units that we could not complete in the first quarter of 2020. During the third quarter of 2020, we had limited market access and we encountered reduced payor attention that affected our results for the quarter. The overall impact of the limitations on our sales efforts are currently difficult to determine, but we believe that the adverse impact may continue especially as our ability to trial new patients with our SCI Products is limited and as capital budgets for rehabilitation devices such as the ReStore are reduced or currently on-hold in most of the clinics and some are enforcing in-clinic restrictions that effect our ability to demonstrate our devices. 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 have taken effect  in the second quarter and beyond, which included reducing our personnel costs and deferring our subcontractors costs mainly within the research and development segment as well as short term reduction in employee’s hours of work in specific areas, eliminating or reducing non-critical consultants, implementing remote working in the United States and Germany, and establishing in-office measures to contain the spread of COVID-19. 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 and Nine Months Ended September 30, 2020 and September 30, 2019
 
Our operating results for the three and nine months ended September 30, 2020, as compared to the same periods 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
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Revenues
 
$
747
   
$
1,234
   
$
3,175
   
$
3,692
 
Cost of revenues
   
355
     
585
     
1,388
     
1,682
 
 
                               
Gross profit
   
392
     
649
     
1,787
     
2,010
 
 
                               
Operating expenses:
                               
Research and development, net
   
756
     
1,018
     
2,695
     
4,292
 
Sales and marketing
   
1,507
     
1,453
     
4,541
     
4,571
 
General and administrative
   
1,198
     
1,209
     
3,774
     
3,988
 
 
                               
Total operating expenses
   
3,461
     
3,680
     
11,010
     
12,851
 
 
                               
Operating loss
   
(3,069
)
   
(3,031
)
   
(9,223
)
   
(10,841
)
Financial expenses, net
   
242
     
360
     
723
     
1,131
 
 
                               
Loss before income taxes
   
(3,311
)
   
(3,391
)
   
(9,946
)
   
(11,972
)
Taxes on income (tax benefit)
   
25
     
(2
)
   
85
     
4
 
 
                               
Net loss
 
$
(3,336
)
 
$
(3,389
)
 
$
(10,031
)
 
$
(11,976
)
 
                               
Net loss per ordinary share, basic and diluted
 
$
(0.18
)
 
$
(0.46
)
 
$
(0.71
)
 
$
(2.27
)
 
                               
Weighted average number of shares used in computing net loss per ordinary share, basic and diluted
   
18,881,694
     
7,290,291
     
14,132,375
     
5,284,451
 
 
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Three and Nine Months Ended September 30, 2020 Compared to Three and Nine Months Ended September 30, 2019
 
Revenues
 
Our revenues for the three and nine months ended September 30, 2020 and 2019 were as follows:
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
 
 
(in thousands, except
unit amounts)
   
(in thousands, except
unit amounts)
 
Personal unit revenues
 
$
698
   
$
1,127
   
$
3,079
   
$
3,524
 
Rehabilitation unit revenues
   
49
     
107
     
96
     
168
 
Revenues
 
$
747
   
$
1,234
   
$
3,175
   
$
3,692
 
 
Revenues decreased by $487 thousand, or 39%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Revenues decreased by approximately $517 thousand, or 14%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease in revenue for both three and nine months ended September 30, 2020 was driven primarily by the impact of the COVID-19 pandemic, as we had limited market access.
 
In the future we expect our growth to be driven by sales of our ReWalk Personal device to third-party payors as we continue to focus our resources on broader commercial coverage policies with third-party payors as well as sales of the ReStore and other products to rehabilitation clinics and personal users.
 
Gross Profit
 
Our gross profit for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Gross profit
 
$
392
   
$
649
   
$
1,787
   
$
2,010
 
 
Gross profit was 52% of revenue for the three months ended September 30, 2020 compared to 53% for the three months ended September 30, 2019. Gross profit was 56% of revenue for the nine months ended September 30, 2020 compared to 54% for the nine months ended September 30, 2019. Our gross profit decreased for the three and nine months ended September 30, 2020 compared to 2019, the decrease is mainly due to lower number 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 and Distributed Products as well as due to an increase in the cost of product parts 
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  Research and Development Expenses
 
Our research and development expenses, net, for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands): 
  
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Research and development expenses, net
 
$
756
   
$
1,018
   
$
2,695
   
$
4,292
 
 
Research and development expenses, net, decreased $262 thousand, or 26%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Research and development expenses, net, decreased $1,597 thousand, or 37%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease is attributable to decreased personnel and personnel related expenses and decreased consulting costs associated with the development and clinical study costs of our ReStore soft suit exoskeleton.
 
We intend to focus our research and development expenses mainly on our current products maintenance as well as developing our “soft suit” exoskeleton for additional indications affecting the ability to walk or a home use design.
  
Sales and Marketing Expenses
 
Our sales and marketing expenses for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands): 
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Sales and marketing expenses
 
$
1,507
   
$
1,453
   
$
4,541
   
$
4,571
 
 
Sales and marketing expenses increased $54 thousand, or 4%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Sales and marketing expenses decreased $30 thousand, or 1%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The increase in expenses for the three months ended September 30, 2020 was driven by increased personnel and personnel related expenses offset with a decrease in travel and tradeshow activities due to COVID-19.
 
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.
 
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General and Administrative Expenses
 
Our general and administrative expenses for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands): 
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
General and administrative expenses
 
$
1,198
   
$
1,209
   
$
3,774
   
$
3,988
 
 
General and administrative expenses decreased $11 thousand, or 1%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. General and administrative expenses decreased $214 thousand, or 5%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The expenses for the three month period remained relatively flat, whereas the decrease in the nine month period was mainly driven by lower non-cash compensation expenses.
 
Financial Expenses, Net
 
Our financial expenses, net, for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands): 
  
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Financial expenses, net
 
$
242
   
$
360
   
$
723
   
$
1,131
 
 
Financial expenses, net, decreased $118 thousand, or 33%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Financial expenses, net, decreased $408 thousand, or 36%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease is attributable to decreased interest expenses related to the Loan Agreement with Kreos.
 
Income Taxes
 
Our income tax for the three and nine months ended September 30, 2020 and 2019 was as follows (in thousands): 
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
Taxes on income (tax benefit)
 
$
25
   
$
(2
)
 
$
85
   
$
4
 
 
Taxes on income increased $27 thousand for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Taxes on income increased $81 thousand for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The increase is due to higher tax provision in our U.S subsidiary. 


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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. 

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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 September 30, 2020, the Company had cash and cash equivalents of $18.1 million. The Company has an accumulated deficit in the total amount of approximately $179 million as of September 30, 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, continued close examination of its  operating spend and potential reduction in specific areas, 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 and nine months ended September 30, 2020 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

Our anticipated primary uses of cash are (i) sales, marketing and reimbursement expenses related to market development activities of our ReStore device and our Distributed Products as well as broadening third-party payor coverage to our SCI Products, and (ii) research and development costs related to our current products maintenance and potential expansion of 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 the Loan Agreement with 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 to Kreos on June 9, 2017 of a $3.0 million secured convertible promissory note (the “Kreos Convertible Note”). 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.

35

 
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 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 to 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 to 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 $7.50. 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 $7.50 per share. Under the exercise agreements, the Company also agreed to issue to Kreos new warrants to purchase up to 480,000 ordinary shares at an exercise price of $7.50 per share and exercise period of five years.
 
As of September 30, 2020, the outstanding principal amount under the Kreos Loan Agreement was $3.0 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 to borrow additional funds.

36


Paycheck Protection Program Loan Agreement

On April 21, 2020, RRI entered into a Note agreement evidencing an unsecured loan in the amount of $392 thousand under the PPP as part of 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.

On September 29, 2020, the Company submitted an application for loan forgiveness and on November 6, 2020 the Company received confirmation of its PPP Note forgiveness .

Equity Raises 
 
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 December 20, 2020, we may not sell in primary offerings under our Form S-3 more than approximately $9.6 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 $9.0  million in securities under our Form S-3 during the last 12 months, when we were subject to these restrictions and, therefore, we can sell securities in the amount of $0.6 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 $9.6 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 NASDAQ. Any such transactions, including the perception that we will conduct a transaction, could result in substantial dilution of shareholders’ interests.
 
37


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 a registration statement on 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 nine months ended September 30, 2019 additional pre-funded warrants and warrants to purchase an aggregate 2,048,752 ordinary shares had been exercised, for additional proceeds of $12.4 million. As compensation for their role in the offering, the Company also issued to the underwriters warrants to purchase up to 106,680 ordinary shares, which are immediately exercisable starting on November 20, 2018 until November 15, 2023 at $9.375 per share. See Note 8b (2) above for more information about the Company’s follow-on public offering.
 
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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.
 
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Equity Offerings in the Third Quarter of 2020
 
On July 6, 2020 the Company entered into a purchase agreement with certain institutional investors for the issuance and sale of 4,938,278 ordinary shares, par value NIS 0.25 per share, at $1.8225 per ordinary share and warrants to purchase up to 2,469,139 ordinary shares with an exercise price of $1.76 per share, exercisable from July 6, 2020 until January 6, 2026. Additionally, the Company issued warrants to purchase up to 296,297 ordinary shares, with an exercise price of $2.2781 per share, exercisable from July 6, 2020 until July 2, 2025, to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our July 2020 registered direct offering.
 
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, (ii) the date that is three years after a new registration statement on Form S-3 goes effective, (iii) our becoming ineligible to use Form S-3 and (iv) termination of the Equity Distribution Agreement by the parties. The Equity Distribution Agreement may be terminated by Piper Jaffray or us at any time on the close of business on the date of receipt of written notice, and by Piper Jaffray at any time in certain circumstances, including any suspension or limitation on the trading of our ordinary shares on the Nasdaq Capital Market, as further described in the Equity Distribution Agreement. We temporarily suspended use of the ATM Offering Program on February 20, 2019 to facilitate our February 2019 “best efforts” public offering. As of September 30, 2020, we had sold 302,092 ordinary shares under the ATM Offering Program for net proceeds to us of $14.5 million (after commissions, fees and expenses). Additionally, as of that date, we had paid Piper Jaffray compensation of $471 thousand and had incurred total expenses (including such commissions) of approximately $1.2 million in connection with the ATM Offering Program.
 
Subject to the limitations under Form S-3 due to our public float, we intend to continue using the at-the-market offering or similar continuous offering programs opportunistically to raise additional funds.
 
Timwell Private Placement
 
On March 6, 2018, we entered into an investment agreement with Timwell Corporation Limited, a Hong Kong corporation (“Timwell”), as amended on May 15, 2018 (the “Investment Agreement”), pursuant to which we agreed, in return for aggregate gross proceeds to us of $20 million, to issue to Timwell an aggregate of 640,000 of our ordinary shares, at a price per share of $1.25. The Investment Agreement contemplates issuances in three tranches, including $5 million for 160,000 shares in the first tranche, $10 million for 320,000 shares in the second tranche and $5 million for 160,000 shares in the third tranche.

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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, until March 2020 we continued to engage in a dialogue with Timwell (and its affiliate RealCan) on alternative pathways to allow us to commercialize our products in China through RealCan and its affiliates, and also provide for RealCan or an affiliate to invest in us.

In late March 2020, Timwell notified us that it would not invest the second and third tranches under the Investment Agreement. In response, in early April 2020, our Board of Directors also removed Timwell’s designee, who was appointed pursuant to the Investment Agreement, from the Board of Directors, due to this breach pursuant to the terms of the Investment Agreement. We continue to view China as a market with key opportunities for products designed for stroke patients, and therefore we continue to evaluate potential relationships with other groups to penetrate the Chinese market.
 
Cash Flows for the Nine Months Ended September 30, 2020 and September 30, 2019 (in thousands):
  
 
 
Nine Months Ended
September 30,
 
 
 
2020
   
2019
 
Net cash used in operating activities
 
$
(10,131
)
 
$
(11,225
)
Net cash used in investing activities
   
(73
)
   
(8
)
Net cash provided by financing activities
   
11,948
     
22,033
 
Net cash flow
 
$
1,744
   
$
10,800
 
 
Net Cash Used in Operating Activities
 
Net cash used in operating activities decreased to $10.1 million for the nine months ended September 30, 2020 compared to $11.2 million for the nine months ended September 30, 2019 primarily due to reduction in the operating costs.

Net Cash Provided by Financing Activities
 
Net cash provided by financing activities decreased to $11.9 million for the nine months ended September 30, 2020 compared to $22.0 million provided by financing activities for the nine months ended September 30, 2019, primarily due to the lower proceeds from equity raise activities in the nine months ended September 30, 2020, than the proceeds we received from equity raise activities for the nine months ended September 30, 2019, as well as increase in the loan repayments to Kreos.

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Obligations and Commercial Commitments
 
Set forth below is a summary of our contractual obligations as of September 30, 2020.
 
 
 
Payments due by period (in dollars, in thousands)
 
Contractual obligations
 
Total
   
Less than
1 year
   
1-3 years
   
3-5 years
   
More than
5 years
 
Purchase obligations (1)
 
$
871
   
$
871
   
$
   
$
   
$
 
Collaboration Agreement and License Agreement obligations (2)
   
2,364
     
1,164
     
1,200
     
     
 
Operating lease obligations (3)
   
1,933
     
669
     
1,246
     
18
     
 
Long-term debt obligations (4)
   
3,548
     
3,393
     
155
     
     
 
Total
 
$
8,716
   
$
6,097
   
$
2,601
   
$
18
   
$
 
 
(1)
The Company depends on one contract manufacturer, Sanmina, for both the ReStore products and the SCI Products. We place our manufacturing orders with Sanmina pursuant to purchase orders or by providing forecasts for future requirements. Additionally, we have purchase obligations to our raw material vendors related to the ReStore production, which began in the second quarter of 2019 following regulatory clearance.
 
(2)
Our Collaboration Agreement was originally signed for a period of six years and as of September 30, 2020 has a remaining term of approx. 2.33 years, it 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 September 30, 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 and the PPP Note. For more information, see “-Liquidity and Capital Resources” above.
 
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 3.441:$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 1.17 euro:$1:00, both of which were the applicable exchange rates as of September 30, 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 September 30, 2020.
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
There have been no material changes to our market risk during the second quarter of 2020. For a discussion of our exposure to market risk, please see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2019 Form 10-K.
 
ITEM 4. CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective such that the information required to be disclosed by us in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
 
Changes in Internal Control over Financial Reporting
 
During the quarter ended September 30, 2020 there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II - OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
There have been no material changes to our legal proceedings as described in “Part I, Item 3. Legal Proceedings” of our 2019 Form 10-K except as described in Note 5 in our condensed consolidated financial statements included in “Part I, Item 1” of this quarterly report. 

ITEM 1A. RISK FACTORS
 
There have been no material changes to our risk factors from those disclosed in “Part I, Item 1A. Risk Factors” of our 2019 Form 10-K except as noted below:
 
Risks Related to an Investment in our Ordinary Shares

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.
 
The impact of the COVID-19 pandemic 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 Germany where we have key operations, placed significant restrictions on travel, and many businesses announced extended closures.   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 outbreak has had, and a continuing outbreak or future outbreaks may have, several adverse effects on our business, results of operations and financial condition.
 
Sales.  In particular, the steps we have taken to safeguard employees and patients have curtailed direct sales activities, including our ability to train patients and rehabilitation centers on how to use our system, which has adversely impacted our revenues in 2020.  The overall impact of the limitations on our sales efforts are currently hard to determine because, in addition to the short-term impacts, we are unable to interact and test our system with potential new patients at the same levels that we have before the COVID-19 outbreak.  It may take an extended period after current restrictions end for us to engage potential new clients.  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
 
Repairs. In addition, we have been unable to repair existing systems with the result that we have had to ship temporary replacement systems in some cases.  We cannot be certain when social distancing restrictions will be fully lifted and, once they are fully lifted, whether sales of our systems will offset the revenue that we have forgone earlier in the year.  We also cannot be certain that social distancing restrictions or other measures will not be reinstated in the event of a future outbreak of COVID-19 or similar outbreak.
 
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Production and Supply Chain. Our manufacturing may 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.  In addition, given the impact of current limitations on our sales activities, it has become hard for us to effectively forecast our future requirements for systems.  Accordingly, there is a greater risk that we may overproduce or underproduce compared to sales.
 
Regulatory and clinical trials. 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.  In our postmarket study that we continue to conduct, we may face decreased ability to contact patients where a patient’s COVID-19 status is unknown. Regulatory oversight and actions regarding our products have been and may continue to be disrupted or delayed in regions impacted by COVID-19, including the United States and Europe, which have been and may continue to impact review and approval timelines for products in development and/or changes to existing products that need regulatory review and approval.
 
Negative impacts on our suppliers and employees.  COVID-19 may impact the health of our employees, directors, partners or customers, reduce the availability of our workforce or those of companies with which we do business, divert our attention toward succession planning, or create disruptions in our supply or distribution networks. The adverse effects of such events on us may include disruption to our operations, or demand for our products in the short and/or long term.
 
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.
 
We have concluded that there are substantial doubts as to our ability to continue as a going concern.
 
As of September 30, 2020, we had an accumulated deficit in the total amount of approximately $179 million and anticipate further losses in the development of our business. Those factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends upon our obtaining the necessary financing to meet our obligations and timely repay our liabilities arising from normal business operations. The financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditors also included an explanatory paragraph to their audit opinion relating to our accompanying consolidated financial statements for the fiscal year ended December 31, 2019 regarding the substantial doubts about the Company’s ability to continue as a going concern. If we are unable to secure additional capital, which might also be harder to obtain due to current market conditions and the COVID-19 pandemic, we may be required to take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. If we become insolvent, investors in our securities may lose the entire value of their investment in our business. The accompanying financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern, and it is not possible for us to predict at this time the potential success of our business. 

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We may not have sufficient funds to meet certain future capital requirements, which could impair our efforts to develop and commercialize existing and new products, and may need to take advantage of various forms of capital-raising transactions, future equity financings, strategic transactions or borrowings may also further dilute our shareholders or place us under restrictive covenants limiting our ability to operate.
 
We intend to finance operating costs over the next 12 months with existing cash on hand, continued close examination of our operating spend and potential reduction in specific areas, issuances of equity and/or debt securities, and other future public or private issuances of securities, or through a combination of the foregoing. Through equity transactions completed in 2019 and 2020 to date we have raised in the aggregate approximately $52.7 million in gross proceeds. However, we will need to seek additional sources of financing if we require more funds than anticipated during the next 12 months or in later periods, including if we cannot raise sufficient funds from equity issuances. The alternative capital-raising transactions we may seek may entail significant downsides, due to limitations on use of our Form S-3 and under our at-the-market offering program with Piper Jaffray & Co., or the ATM Offering Program. For more information on our inability to use Form S-3, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Equity Raises.
 
To raise additional capital in the public markets, including taking into account the limitations on our Form S-3 use above, we will likely be required to seek and are currently actively seeking other methods, such as a registration statement on Form S-1. The preparation of a registration statement on Form S-1 is more time-consuming and costly. We may also conduct fundraising transactions 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 Nasdaq, or other equity raise transactions such as equity lines of credit. In addition to entailing increased capital costs, any such transactions could result in substantial dilution of our shareholders’ interests, transfer control to a new investor and diminish the value of an investment in our ordinary shares.
 
We may also need to pursue strategic transactions, such as joint ventures, in-licensing transactions or the sale of our business or all or substantially all of our assets. These private financings and strategic transactions have in the past and could in the future require significant management attention, disrupt our business, adversely affect our financial results, be unsuccessful or fail to achieve the desired results. We are in discussions routinely with such possible sources of additional funding. As another alternative, 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 to borrow additional funds. Agreements governing any borrowing arrangement may contain covenants that could restrict our operations.
 
Overall, if we cannot raise the required funds, or cannot raise them on terms acceptable to us or investors, we may be forced to curtail substantially our current operations or cease operations altogether. Further, external perceptions regarding our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations or require us to obtain financing on terms that are more favorable to investors, and could result in the loss of confidence by investors and suppliers. As such, our failure to continue as a going concern could harm our business, operating results and financial position and severely affect the value of your investment.
 

46


 While we have regained compliance with the quantitative continued listing rules of the Nasdaq Capital Market, we may not be able to maintain the listing of our ordinary shares on the Nasdaq Capital Market going forward, which could adversely affect our liquidity and the trading volume and market price of our ordinary shares.
 
As previously disclosed, on March 24, 2020, we received a notification letter from Nasdaq stating that we failed to comply with the closing bid price requirement of Nasdaq Rule 5550(a) (“Rule 5550(a)”). If our closing bid price is less than $1 per share for 30 consecutive business days, we will be deficient with Rule 5550(a). On May 11, 2020, we received a notice from Nasdaq stating that we have regained compliance with Rule 5550(a) since our share price was above $1 for 10 consecutive business days and that the matter is now closed.  Our closing share price as of November 6, 2020 was $1.15 If we become non-compliant with Rule 5550(a) in the future (absent any relief, such as the temporary relief imposed by Nasdaq during the ongoing COVID-19 pandemic) and we fail to regain compliance with Rule 5550(a) during the rule’s applicable cure period, Nasdaq will notify us that our ordinary shares are subject to delisting. In the case of non-compliance, there can be no assurance that we will be able to regain compliance with the applicable rules.
 
Additionally, as previously disclosed, in October 2018, we received a notification letter from Nasdaq stating that, under Nasdaq Rule 5550(b), or Rule 5550(b), we failed to comply with the minimum $35 million market value of listed securities requirement for continued listing on the Nasdaq Capital Market as of October 26, 2018 and did not meet the rule’s alternative $2.5 million shareholders’ equity and $500,000 net income standards as of applicable balance sheet and income statement dates. We regained compliance with Rule 5550(b) in April 2019. Our shareholders’ equity was $16.8 million as of September 30, 2020. However, if our quarterly or annual report for a subsequent fiscal period does not evidence such compliance, we may become immediately subject to delisting without a cure period. For example, if we cannot maintain the requisite cash levels for a compliant amount of shareholders’ equity, our ordinary shares may be at serious risk of immediate delisting.
 
We would be permitted to appeal any delisting determination to a Nasdaq Hearings Panel, and our ordinary shares would remain listed on the Nasdaq Capital Market pending the panel’s decision after the hearing. If we do not appeal the delisting determination or do not succeed in such an appeal, our ordinary shares would be removed from trading on the Nasdaq Capital Market. Any delisting determination could seriously decrease or eliminate the value of an investment in our ordinary shares and other securities linked to our ordinary shares. While an alternative listing on an over-the-counter exchange could maintain some degree of a market in our ordinary shares, we could face substantial material adverse consequences, including, but not limited to, the following: limited availability for market quotations for our ordinary shares; reduced liquidity with respect to our ordinary shares; a determination that our ordinary shares are “penny stock” under SEC rules, subjecting brokers trading our ordinary shares to more stringent rules on disclosure and the class of investors to which the broker may sell the ordinary shares; limited news and analyst coverage, in part due to the “penny stock” rules; decreased ability to issue additional securities or obtain additional financing in the future; and potential breaches under or terminations of our agreements with current or prospective large shareholders, strategic investors and banks. The perception among investors that we are at heightened risk of delisting could also negatively affect the market price of our securities and trading volume of our ordinary shares.
 
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We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues.
 
In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships to develop our products and to pursue new geographic or product markets. Proposing, negotiating, and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products. For example, we have entered into agreements with MediTouch and Myolyn for the distribution of their products in the U.S., as well as  arrangements with Yaskawa Electric Corporation, or Yaskawa for the distribution of our products in certain Asian markets. We also collaborate with Harvard University’s Wyss Institute for Biologically Inspired Engineering for the research, design, development and commercialization of lightweight exoskeleton system technologies for lower limb disabilities, aimed to treat stroke, multiple sclerosis, mobility limitations for the elderly and other medical applications. Our arrangements with MediTouch, Myolyn, Yaskawa and Harvard, may not be as productive or successful as we hope.
 
Additionally, as we pursue these arrangements and choose to pursue other collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships in the future, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement. This could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators. Our collaborators may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. Any such disputes could result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements.
 

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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.

We have contracted with Sanmina Corporation, a well-established contract manufacturer with expertise in the medical device industry, for the manufacture of all of our products and the sourcing of all of our components and raw materials. Pursuant to this contract, Sanmina manufactures ReWalk and ReStore, pursuant to our specifications, at its facility in Ma’alot, Israel. We may terminate our relationship with Sanmina at any time upon written notice. In addition, either we or Sanmina may terminate the relationship in the event of a material breach, subject to a 30-day cure period. For our business strategy to be successful, Sanmina must be able to manufacture our products in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Increases in our product sales, whether forecasted or unanticipated, could strain the ability of Sanmina to manufacture an increasingly large supply of our current or future products in a manner that meets these various requirements. In addition, although we are not restricted from engaging an alternative manufacturer, and potentially have the capabilities to manufacture our products in-house, the process of moving our manufacturing activities would be time consuming and costly, and may limit our ability to meet our sales commitments, which could harm our reputation and could have a material adverse effect on our business.
 
We also rely on third-party suppliers, which contract directly with Sanmina, to supply certain components of our products, and in some cases we purchase these components ourselves. Sanmina does not have long-term supply agreements with most of its suppliers and, in many cases, makes purchases on a purchase order basis. Sanmina’s ability to secure adequate quantities of such products may be limited. Suppliers may encounter problems that limit their ability to manufacture components for our products, including financial difficulties or damage to their manufacturing equipment or facilities. If Sanmina fails to obtain sufficient quantities of high quality components to meet demand on a timely basis, we could lose customer orders, our reputation may be harmed and our business could suffer.
 
Our results of operations and liquidity could be adversely impacted by supply chain disruptions and operational challenges faced by our manufacturer or suppliers. Sanmina generally uses a small number of suppliers for ReWalk and ReStore. Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. Such risks are heightened in light of the interruptions in supply chains and distribution networks related to the COVID-19 pandemic. If any one or more of our suppliers ceases to provide sufficient quantities of components in a timely manner or on acceptable terms, Sanmina would have to seek alternative sources of supply. It may be difficult to engage additional or replacement suppliers in a timely manner. Failure of these suppliers to deliver products at the level our business requires would lim