Lifeward Ltd. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operation should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and with our audited consolidated financial statements included in our Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and amended on May 1, 2023 (the “2022 Form 10-K”). In addition to historical condensed financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. For a discussion of factors that could cause or contribute to these differences, see “Special Note Regarding Forward-Looking Statements” above. Overview We are a medical device company that is designing, developing, and commercializing innovative technologies that enable mobility and wellness in rehabilitation and daily life for individuals with neurological conditions. Our initial product offerings were the SCI Products. These devices are robotic exoskeletons that are designed for individuals with paraplegia that use our patented tilt-sensor technology and an onboard computer and motion sensors to drive motorized legs that power movement. These SCI Products allow individuals with spinal cord injury the ability to stand and walk again during everyday activities at home or in the community. In March 2023, we received 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) for the ReWalk Personal 6.0 with stair and curb functionality which adds usage on stairs and curbs to the indication for use for the device in the U.S. The clearance permits U.S. customers to participate in more walking activities in real-world environments in their daily lives where stairs or curbs may have previously limited them when using the exoskeleton for its intended, FDA indicated uses. This feature has been available in Europe since initial CE Clearance, and real-world data from a cohort of 47 European users throughout a period of over seven years and consisting of over 18,000 stair steps was collected to demonstrate the safety and efficacy of this feature and support the FDA submission. We have sought to expand our product offerings beyond the SCI Products through internal development and distribution agreements. We have developed our ReStore Exo-Suit device, which we began commercializing in June 2019. The ReStore is a powered, lightweight soft exo-suit intended for use during the rehabilitation of individuals with lower limb disabilities due to stroke. During the second quarter of 2020, we finalized and moved to implement two separate agreements to distribute additional product lines in the United States. We are the exclusive distributor of the MYOLYN MyoCycle FES Pro cycles to U.S. rehabilitation clinics and for the MyoCycle Home cycles available to US veterans through the U.S. Department of Veterans Affairs (“VA”) hospitals. In the second quarter of 2020, we also became the exclusive distributor of the MediTouch Tutor movement biofeedback systems in the United States; however, due to unsatisfactory sales performance of the MediTouch product lines, we terminated this agreement as of January 31, 2023. On August 11,2023, the Company made its first acquisition to supplement its internal growth when it acquired AlterG, a leading provider of anti-gravity system for use in physical and neurological rehabilitation. The Company paid cash purchase of approximately $19 million at closing and additional cash earnouts (in an anticipated amount of approximately $4 million in the aggregate) may be paid based upon a percentage of AlterG’s year-over-year revenue growth over the two years following the closing. The AlterG anti-gravity systems use patented, NASA-derived DAP technology to reduce the effects of gravity and allow people to rehabilitate with finely calibrated support and reduced pain. AlterG anti-gravity systems are utilized in over 4,000 facilities globally in more than 40 countries. We will continue to evaluate other products for distribution or acquisition that can broaden our product offerings further to help individuals with neurological injury and disability. 29 We are in the research stage of ReBoot, a personal soft exo-suit for home and community use by individuals post-stroke, and we are currently evaluating the reimbursement landscape and the potential clinical impact of this device. This product would be a complementary product to ReStore as it provides active assistance to the ankle during plantar flexion and dorsiflexion for gait and mobility improvement in the home environment, and it received Breakthrough Device Designation from the FDA in November 2021. Further investment in the development path of the ReBoot has been temporarily paused in 2023 pending further determination about the clinical and commercial opportunity of this device. Our principal markets are primary in the United States and Europe with some lesser sales to Asia, the Middle East and South America. The Company sells its products directly primarily in the United States, through a combination (depending on the product line) of direct sales and distributors in Germany, Canada, and Australia, and primarily through distributors in other markets. In its direct markets, the Company has established relationships with clinics and rehabilitation centers, professional and college sports teams, and individuals and organizations in the spinal cord injury community, and its indirect markets, the Company’s distributors maintain these relationships. We have offices in Marlborough, Massachusetts, Berlin, Germany, Yokneam, Israel and Fremont, California from where we operate our business. We have in the past generated and expect to generate in the future revenue from a combination of clinics and rehabilitation centers, third-party payors (including private commercial and government payors) and self-pay individuals. While a broad uniform policy of coverage and reimbursement by third-party commercial payors currently does not exist in the United States for exoskeleton technologies such as the ReWalk Personal Exoskeleton, we are pursuing various paths for coverage and reimbursement and support fundraising efforts by institutions and clinics, such as the VA policy that was issued in December 2015 for the evaluation, training, and procurement of ReWalk Personal exoskeleton systems for all qualifying veterans suffering from SCI across the United States. We have also been pursuing updates with the Centers for Medicare and Medicaid Services (“CMS”), to clarify the Medicare coverage category (i.e., benefit category) applicable for personal exoskeletons. In 2022, the National Spinal Cord Injury Statistical Center (“NSCISC”) reported that Medicare and Medicaid are the primary payors for approximately 56.6% of the spinal cord injury population which are at least five years post their injury date, with Medicare representing a majority of this percentage. In July 2020, following a successful submission and hearing process, a Healthcare Common Procedure Coding System (“HCPCS”) code K1007 was issued (effective October 1, 2020) for lower-limb exoskeletons, including the ReWalk Personal Exoskeleton, and which may be used for purposes of claim submission to Medicare, Medicaid, and other payors. On November 1, 2023, CMS released the Calendar Year 2024 Home Health Prospective Payment System Final Rule, CMS-1780-F (“Final Rule”), which was adopted through the notice and comment rulemaking process. The Final Rule includes a policy confirming that personal exoskeletons will be included in the Medicare brace benefit category. The Final Rule will go into effect beginning on January 1, 2024. Medicare personal exoskeleton claims with dates of service on or after January 1, 2024 that are billed using HCPCS code K1007 will be assigned to the brace benefit category. CMS reimburses items classified under the brace benefit category using a lump sum payment methodology. On November 3, 2023, CMS included the “ReWalk Personal Prosthetic Exoskeleton System” in the agenda for the upcoming HCPCS public meeting scheduled to occur on November 29, 2023, and provided a preliminary payment determination of $94,617 for HCPCS code K1007. The preliminary payment determination was made by CMS by applying a “gap filling” process, which was used in light of CMS determining that the code describing the technology has no fee schedule pricing history and that lower extremity exoskeletons incorporate “revolutionary features” that cannot be described by or considered comparable to any other existing code or combination of codes. As part of gap-filling, CMS utilizes verifiable supplier or commercial pricing information and adjusts this pricing information according to a deflation and update factor methodology. In applying this formula to the K1007 code describing the ReWalk Personal Exoskeleton, CMS says that it relied on information about average prices from 2020 market transactions for which CMS had data. 30 In the agenda describing the preliminary payment determination, CMS notes that it would welcome information on updated verifiable market transactions from ReWalk, as well as any other makers of similar bilateral, lower limb exoskeletons, to “ensure that the Medicare payment amount for this code accurately reflects the full market of devices that would be classified in this code.” ReWalk will participate in the upcoming HCPCS meeting process on November 29, 2023 to provide additional information to help ensure that the final payment determination accurately reflects current pricing information related to the market of lower-limb exoskeleton devices, including the current ReWalk Personal Exoskeleton, which received FDA clearance in March 2023 and achieved Breakthrough Device Designation by the FDA for being the only commercially available exoskeleton that includes advanced technology to enable paralyzed individuals to navigate real-world environments with stairs and curbs. A final Medicare payment determination is expected from CMS in early 2024 with an April 1, 2024, effective date. In Germany, we continue to make progress toward achieving coverage from the various government, private and worker’s compensation payors for our SCI products. In September 2017, each of German insurer BARMER GEK (“BARMER”) and national social accident insurance provider Deutsche Gesetzliche Unfallversicherung (“DGUV”), indicated that they will provide coverage to users who meet certain inclusion and exclusion criteria. In February 2018, the head office of German Statutory Health Insurance (“SHI”) Spitzenverband (“GKV”) confirmed their decision to list the ReWalk Personal Exoskeleton system in the German Medical Device Directory. This decision means that ReWalk is listed among all medical devices for compensation, which SHI providers can procure for any approved beneficiary on a case-by-case basis. During the year 2020 and 2021, we announced several new agreements with German SHIs, including TK and DAK Gesundheit, as well as the first German Private Health Insurer (“PHI”), which outline the process of obtaining our devices for eligible insured patients. We are also currently working with several additional SHIs on securing a formal operating contract that will establish the process of obtaining a ReWalk Personal Exoskeleton for their beneficiaries within their system. Additionally, to date, several private insurers in the United States and Europe are providing reimbursement for ReWalk in certain cases. Third Quarter 2023 and Subsequent Period Business Highlights • Closing of ReWalk’s acquisition of AlterG, Inc. (“AlterG”), which adds significant scale to the annual revenue base of ReWalk and AlterG’s innovative Anti-Gravity technology to the Company’s portfolio of rehabilitation solutions that facilitate mobility and wellness in rehabilitation and daily life. • Active pace of Medicare claim submission activity during Q3’23, better positioning ReWalk for reimbursement eligibility of exoskeletons by Medicare once payments are underway; • Significant progress advancing the 510(k) premarket notification for the next-generation ReWalk 7 toward submission by the end of 2023; • Subsequent to the end of Q3’23, CMS finalized the 2024 Home Health Rule which establishes the inclusion of exoskeletons in the Medicare brace benefit category, reimbursed by Medicare on a lump-sum basis, and subsequently proposed the preliminary reimbursement level for the ReWalk Personal Exoskeleton. 31 Results of Operations for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 Our operating results for the three and nine months ended September 30, 2023, as compared to the same period in 2022, are presented below. The results set forth below are not necessarily indicative of the results to be expected in future periods (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues $ 4,403 $ 886 $ 6,970 $ 3,332 Cost of revenues 3,540 665 4,960 2,100 Gross profit 863 221 2,010 1,232 Operating expenses: Research and development, net 1,262 1,065 2,830 2,928 Sales and marketing 4,088 2,588 9,076 7,119 General and administrative 3,455 2,001 7,579 5,282 Total operating expenses 8,805 5,654 19,485 15,329 Operating loss (7,942 ) (5,433 ) (17,475 ) (14,097 ) Financial (expenses) income, net 411 (1 ) 1,047 (69 ) Loss before income taxes (7,531 ) (5,434 ) (16,428 ) (14,166 ) Taxes on income — 26 66 90 Net loss $ (7,531 ) $ (5,460 ) $ (16,494 ) $ (14,256 ) Net loss per ordinary share, basic and diluted $ (0.13 ) $ (0.09 ) $ (0.28 ) $ (0.23 ) Weighted average number of shares used in computing net loss per ordinary share, basic and diluted 59,798,413 62,793,847 59,509,781 62,611,580 32 Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022 Revenues Our revenues for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) (in thousands) 2023 2022 2023 2022 Revenues $ 4,403 $ 886 $ 6,970 $ 3,332 Revenues consist of SCI Products, AlterG anti-gravity systems, ReStore and Distributed Products. Revenues increased by $3.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to the revenue contribution of AlterG following acquisition which was $2.9 million, combined with a higher sales volume of ReWalk Personal and MyoCycle units sold in the United States. Revenues increased by $3.6 million for the nine months ended September 30, 2023 mainly due to the revenue contribution of AlterG following acquisition which was $2.9 million, combined with higher sales volume of ReWalk Personal and MyoCycle devices in the United States. In the future, we expect our growth to be driven by sales of our ReWalk Personal device through expansion of coverage and reimbursement by commercial and government third-party payors, as well as sales of AlterG anti-gravity systems, Distributed Products, and the ReStore device to rehabilitation clinics and personal users. Gross Profit Our gross profit for the three and nine months ended September 30, 2023 and 2022 was as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) (in thousands) 2023 2022 2023 2022 Gross profit $ 863 $ 221 $ 2,010 $ 1,232 Gross profit was 19.6% of revenue for the three months ended September 30, 2023 compared to 24.9% for the three months ended September 30, 2022. Gross profit was 28.8% of revenue for the nine months ended September 30, 2023, compared to 37.0% for the nine months ended September 30, 2022. The decrease in gross profit as a percentage of revenue for the three months and nine months ended September 30, 2023 was driven by the impact of amortization of intangible assets and purchase accounting inventory basis from the acquisition of AlterG. Cost of revenue in the three and nine months ended September 30, 2023 included $0.6 million for purchase accounting impact on inventory and $0.5 million for amortization of intangible assets. Excluding the impact of the amortization of intangible assets and purchase accounting impact on inventory, gross profit as a percentage of revenue was 45.2% and 44.9% for the three and nine months ended September 30, 2023, respectively, up 20.2 and 7.9 percentage points from the three and nine months ended September 30, 2022, respectively. This increase in both periods was a result of a higher volume of units sold and an increase in our average selling price due to a change in sales mix for both the three- and nine-month periods. We expect gross profit and gross margin will increase in the future as we increase our revenue volumes and realize operating efficiencies associated with greater scale which will reduce the cost of revenue as a percentage of revenue. Additionally, the acquired AlterG business has historically experienced higher margins as compared to the ReWalk business before the transaction. We believe including the AlterG anti-gravity systems in our mix of products sold will help drive higher gross margin in future quarters. Improvements may be partially offset by the lower margins we currently expect from Restore and our Distributed Products as well as due to an increase in manufacturing costs. 33 Research and Development Expenses, net Our research and development expenses, net, for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Research and development expenses, net $ 1,262 $ 1,065 $ 2,830 $ 2,928 Research and development expenses, increased by $197 thousand, or 18.5%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and decreased by $98 thousand, or 3.4%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. AlterG contributed $323 thousand of research and development spending to both the three and nine months ended September 30, 2023. Excluding the impact of the acquisition of AlterG, research and development declined by $127 thousand, or 11.8%, and $422 thousand or 14.4%, for the three and nine months ended September 30, 2023, respectively. The decrease for the three and nine months ended September 30, 2023 is attributable to the gradual reduction of spend on the ReWalk 7 development project as it approaches conclusion. We intend to focus our research and development expenses mainly on our current product support, as well as to advance the FDA submission for clearance of the ReWalk 7 next generation exoskeleton model. Additionally, AlterG has several ongoing product development programs, including a program to develop a new entry level model of AlterG anti-gravity system aimed to improve the affordability to price-conscious customers of an AlterG anti-gravity system. Sales and Marketing Expenses Our sales and marketing expenses for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Sales and marketing expenses $ 4,088 $ 2,588 $ 9,076 $ 7,119 Sales and marketing expenses increased by $1.5 million, or 58.0%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and $2.0 million, or 27.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Sales and marketing expenses for the three and nine months ended September 30, 2023 included $215 thousand of amortization of intangible assets from the acquisition of AlterG. AlterG contributed $674 thousand of sales and marketing expenses to both the three and nine months ended September 30, 2023. Excluding the impact of the acquisition of AlterG, sales and marketing expenses increased $611 thousand, or 23.6%, and $1.1 million, or 15.0%, for the three and nine months ended September 30, 2023, respectively. The increase was primarily driven by higher consulting expenses related to the CMS reimbursement process and greater promotional and tradeshow activity. In the near term, our sales and marketing expenses are expected to be driven by our efforts to expand the reimbursement coverage of our ReWalk Personal device, to integrate and unify the combined sales and marketing resources of the ReWalk and AlterG organizations, and to support our current commercial activities. 34 General and Administrative Expenses Our general and administrative expenses for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) General and administrative expenses $ 3,455 $ 2,001 $ 7,579 $ 5,282 General and administrative expenses increased by $1.4 million, or 72.6%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and $2.3 million, or 43.5% for the nine months ended September 30, 2023 compared to the nine months ended September, 2022. General and administrative expenses for the three and nine months ended September 30, 2023 included $1.3 million and $2.3 million M&A-related expenses, respectively. And $37 thousand amortization of intangible assets from the acquisition of AlterG. AlterG contributed $178 thousand of general and administrative expenses to both the three and nine months ended September 30, 2023. Excluding the impact of the acquisition of AlterG, general and administrative expenses decreased $75 thousand, or 6.5%, and $218 thousand, or 4.1%, for the three and nine months ended September 30, 2023, respectively. The decrease was primarily driven by lower professional services expenses related to the proxy process. Financial Expenses (Income), Net Our financial expenses (income), net, for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Financial (expenses) income, net $ 411 $ (1 ) $ 1,047 $ (69 ) Financial income, net, increased by $412 thousand for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and increased by $1.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to a change in cash management practices to move cash balances to accounts that pay a higher interest rate and yield greater interest income, as well as exchange rate fluctuations. Income Taxes Our income tax for the three and nine months ended September 30, 2023 and 2022 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands) (in thousands) Taxes on income $ — $ 26 $ 66 $ 90 Income taxes decreased by $26 thousand, or 100%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and decreased by $24 thousand for the nine months ended in September 30, 2023, or 26.7% compared to the nine months ended September 2022, was mainly due to deferred taxes and timing differences in our subsidiaries. 35 Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our condensed financial statements requires us to make estimates, judgments and assumptions that can affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates, judgments and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our condensed financial statements and related disclosures. See Note 2 to our audited consolidated financial statements included in our 2022 Form 10-K for a description of the significant accounting policies that we used to prepare our consolidated financial statements. There have been no material changes to our critical accounting policies or our critical judgments from the information provided in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” of our 2022 Form 10-K, except for the updates provided in Note 3 of our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements” of this quarterly report . Recent Accounting Pronouncements See Note 3 to our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements” of this quarterly report for information regarding new accounting pronouncements. Liquidity and Capital Resources Sources of Liquidity and Outlook Since inception, we have funded our operations primarily through the sale of certain of our equity securities and convertible notes to investors in private placements, the sale of our ordinary shares in public offerings and the incurrence of bank debt. During the nine months ended September 30, 2023, we incurred a consolidated net loss of $16.5 million and have an accumulated deficit in the total amount of $230.2 million. Our cash and cash equivalents as of September 30, 2023, totaled $32.6 million and our negative operating cash flow for the nine months ended September 30, 2023, was $16.2 million. We have sufficient funds to support our operations for more than 12 months following the issuance date of our condensed consolidated unaudited financial statements for the nine months ended September 30, 2023. We expect to incur future net losses and our transition to profitability is dependent upon, among other things, the successful development and commercialization of our products and product candidates, the establishment of contracts for the distribution of new product lines, or the acquisition of additional product lines, any of which, or in combination, would contribute to the achievement of a level of revenues adequate to support our cost structure. Until we achieve profitability or generate positive cash flows, we will continue to need to raise additional cash from time to time. We intend to fund future operations through cash on hand, additional private and/or public offerings of debt or equity securities, cash exercises of outstanding warrants or a combination of the foregoing. In addition, we may seek additional capital through arrangements with strategic partners or from other sources and we will continue to address our cost structure. Notwithstanding, there can be no assurance that we will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations. 36 Our anticipated primary uses of cash are (i) sales, marketing and reimbursement expenses related to market development activities for our ReWalk Personal device and AlterG anti-gravity system, broadening third-party payor and CMS coverage for our ReWalk Personal device and commercializing our new product lines added through distribution agreements; (ii) development of future generation designs for our spinal cord injury device, new AlterG products utilizing DAP technology, and our lightweight exo-suit technology for potential home personal health utilization for multiple indications; (iii) routine product updates; (iv) potential acquisitions of businesses, such as our recent acquisitions of AlterG, for a purchase price of approximately $19.0 million in cash, plus two potential earnout payments based on AlterG’s revenue growth during the two consecutive trailing twelve-month periods following Closing (see Note 10 to our unaudited condensed consolidated financial statements set forth in “Part I, Item 1. Financial Statements”); and (v) general corporate purposes, including working capital needs. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending on research and development efforts, the attractiveness of potential acquisition candidates, and international expansion. If our current estimates of revenue, expenses or capital or liquidity requirements change or are inaccurate, we may seek to sell additional equity or debt securities or arrange for bank debt financing. There can be no assurance that we will be able to raise such funds at all or on acceptable terms. Equity Raises Use of Form S-3 Beginning with the filing of our Form 10-K on February 17, 2017, we were subject to limitations under the applicable rules of Form S-3, which constrained our ability to secure capital with respect to public offerings pursuant to our effective Form S-3. These rules limit the size of primary securities offerings conducted by issuers with a public float of less than $75 million to no more than one-third of their public float in any 12-month period. At the time of filing our 2022 Form 10-K, on February 23, 2023, we were subject to these limitations, because our public float did not reach at least $75 million in the 60 days preceding the filing of our 2022 Form 10-K. We will continue to be subject to these limitations for the remainder of the 2023 fiscal year and until the earlier of such time as our public float reaches at least $75 million or when we file our next annual report for the year ended December 31, 2023, at which time we will be required to re-test our status under these rules. If our public float is below $75 million as of the filing of our next annual report on Form 10-K, or at the time we file a new Form S-3, we will continue to be subject to these limitations, until the date that our public float again reaches $75 million. These limitations do not apply to secondary offerings for the resale of our ordinary shares or other securities by selling shareholders or to the issuance of ordinary shares upon conversion by holders of convertible securities, such as warrants. We have registered up to $100 million of ordinary shares warrants and/or debt securities and certain other outstanding securities with registration rights on our registration statement on Form S-3, which was declared effective by the SEC in May 2022. Share Repurchase Program In June 2022, we announced that our Board had approved a program to repurchase up to $8.0 million of our ordinary shares, par value NIS 0.25 per share, subject to receipt of Israeli court approval. In July 2022, we announced that we had received approval from an Israeli court for the share repurchase program, valid through January 20, 2023. On December 19, 2022, our board of directors approved the extension of our share repurchase program, with such extension to be in the aggregate amount of up to $5.8 million. The extension was approved by an Israeli court on February 9, 2023 for a six-month period which expired on August 9, 2023. Under the program, share repurchases were made from time to time using a variety of methods, in accordance with all applicable securities laws and regulations, including restrictions relating to volume, price and timing under applicable law, including Rule 10b-18 under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of September 30, 2023, we had repurchased approximately 4.0 million of our ordinary shares for an aggregate purchase price of approximately $3.5 million under the repurchase program. The repurchase program, as extended, expired on August 9, 2023. No repurchases of ordinary shares were made by us subsequent to June 30, 2023. 37 Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022 (in thousands): Nine Months Ended September 30, 2023 2022 Net cash used in operating activities $ (16,183 ) $ (13,978 ) Net cash used in investing activities (18,070 ) (25 ) Net cash provided by financing activities (992 ) (183 ) Effect of Exchange rate changes on Cash, Cash Equivalents and Restricted Cash (24 ) (182 ) Net cash flow $ (35,269 ) $ (14,368 ) Net Cash Used in Operating Activities Net cash used in operating activities increased by $2.2 million or 15.8% primarily due to higher consulting and professional services fees primarily associated with the acquisition of AlterG and the CMS reimbursement process, as well as increased inventory purchases. Net Cash Used in Investing Activities Net cash used in investing activities increased by $18.0 million due to the acquisition of AlterG. Net Cash Provided by Financing Activities Net cash used in financing activities was $809 thousand for the nine months ended September 30, 2023 compared to $183 thousand for the nine months ended September 30, 2022. The increase is due to the repurchase of our ordinary shares under our repurchase program, which expired on August 9, 2023. Obligations and Contractual Commitments Set forth below is a summary of our contractual obligations as of September 30, 2023. Payments due by period (in dollars, in thousands) Contractual obligations Total Less than 1 year 1-3 years Purchase obligations (1) $ 2,196 $ 2,196 $ — Collaboration Agreement and License Agreement obligations (2) 56 56 — Operating lease obligations (3) 2,282 1,308 974 Earnout liability 3,647 1,906 1,741 Total $ 8,181 $ 5,466 $ 2,715 (1) We depend on one contract manufacturer, Sanmina Corporation, for both the ReStore products and the SCI Products. We place our manufacturing orders with Sanmina pursuant to purchase orders or by providing forecasts for future requirements. (2) Under the Collaboration Agreement, we were required to pay in quarterly installments the funding of our joint research collaboration with Harvard, subject to a minimum funding commitment under applicable circumstances. Our License Agreement with Harvard consists of patent reimbursement expenses payments and a license upfront fee payment. There are also several milestone payments contingent upon the achievement of certain product development and commercialization milestones and royalty payments on net sales from certain patents licensed to Harvard. All product development milestones contemplated by the License Agreement have been met as of September 30, 2023; however, there are still outstanding commercialization milestones under the License Agreement that depend on us reaching certain sales amounts, some or all of which may not occur. Our Collaboration Agreement with Harvard was concluded on March 31, 2022. (3) Our operating leases consist of leases for our facilities in the United States and Israel and motor vehicles. (4) Earnout payments based on AlterG’s revenue growth during the two consecutive trailing twelve-month periods following Closing of the transaction. 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 3.82: $1.00, and the payments due under our operating lease obligation for our German subsidiary that are to be paid in euros at a rate of exchange of €1.00: $1.06, both of which were the applicable exchange rates as of September 30, 2023. 38 Off-Balance Sheet Arrangements We had no off-balance sheet arrangements or guarantees of third-party obligations as of September 30, 2023. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to our market risk during the third quarter of 2023. For a discussion of our exposure to market risk, please see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2022 Form 10-K.