ReWalk Robotics Ltd. - Quarter Report: 2020 September (Form 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

 

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

 

For the transition period from _____ to ______

 

Commission File Number: 001-36612

ReWalk Robotics Ltd.

(Exact name of registrant as specified in charter)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 +972.4.959.0123

 

(Former name, former address and former fiscal year, if changed since last report)

 

Yes ☒     No ☐

 

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.

 

 

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 ☒

 

 

 

REWALK ROBOTICS LTD.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

 

 

		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

		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

		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

		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.

		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.

		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.

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.

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

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.

		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

		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.

b.

New Accounting Pronouncements Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. An entity should apply the standard by recording a cumulative effect adjustment to retained earnings upon adoption. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).  This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.

c.

Concentrations of Credit Risks: Concentration of credit risk with respect to trade receivable is primarily limited to a customer to which the Company makes substantial sales.

		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%

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

		September 30,				December 31,
		2020				2019
Finished products		$	2,954			$	2,394
Raw materials			753				729
		$	3,707			$	3,123

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.

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	%

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.

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.

NOTE 6:-

PAYCHECK PROTECTION PROGRAM LOAN

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

NOTE 7:-

RESEARCH COLLABORATION AGREEMENT AND LICENSE AGREEMENT

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

		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			$	—

		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

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.

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.

(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.

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

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.

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

		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

NOTE 10:-

GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA

		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	%

•

our management’s conclusion, and our independent registered public accounting firm’s statement in its opinion relating to our consolidated financial statements for the fiscal year ended December 31, 2019, that there is a substantial doubt as to our ability to continue as a going concern;

•

the current coronavirus (COVID-19) pandemic has adversely affected and may continue to affect adversely business and results of operations;

•

our ability to have sufficient funds to meet certain future capital requirements, which could impair our efforts to develop and commercialize existing and new products;

•

our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market and the risk that our ordinary shares will be delisted if we cannot do so;

•

our ability to establish a pathway to commercialize our products in China;

•      our ability to maintain and grow our reputation and the market acceptance of our products;

•      our ability to achieve reimbursement from third-party payors for our products;

•      our limited operating history and our ability to leverage our sales, marketing and training infrastructure;

•      our expectations as to our clinical research program and clinical results;

•      our expectations regarding future growth, including our ability to increase sales in our existing geographic markets and expand to new markets;

•      our ability to obtain certain components of our products from third-party suppliers and our continued access to our product manufacturers;

•      our ability to repay our secured indebtedness;

•      our ability to improve our products and develop new products;

•      the outcome of 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.

		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

		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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Gross profit		$	392			$	649			$	1,787			$	2,010

		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

		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

		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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Financial expenses, net		$	242			$	360			$	723			$	1,131

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Taxes on income (tax benefit)		$	25			$	(2	)		$	85			$	4

		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

		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.

*

Furnished herewith.

	ReWalk Robotics Ltd.
Date: November 10, 2020	By:	/s/ Larry Jasinski
		Larry Jasinski
		Chief Executive Officer
Date: November 10, 2020	By:	/s/ Ori Gon
		Ori Gon
		Chief Financial Officer
		(Principal Financial and Accounting Officer)