Lifeward Ltd. 10-Q

ITEM 1A. RISK FACTORS Except as set forth below, and as disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and our Quarterly Report on Form 10-Q for the three months ended June 30, 2023, there have been no material changes to our risk factors from those disclosed in “Part I, Item 1A. Risk Factors” of our 2022 Form 10-K: Risks Related to Our Business and Our Industry We may fail to realize the benefits expected from our acquisition of AlterG, which could adversely affect the price of our ordinary shares. As previously disclosed, on August 11, 2023, we acquired AGI and AGI became an indirect and wholly owned subsidiary of the Company. The anticipated benefits from our acquisition of AGI are based on projections and assumptions about the combined businesses of ReWalk and AGI, which may not materialize as expected or which may prove to be inaccurate. The value of our ordinary shares could be adversely affected if we are unable to realize the anticipated benefits from the acquisition on a timely basis or at all. Achieving the benefits of the acquisition will depend, in part, on our ability to integrate the business, operations and products of AGI successfully and efficiently with ReWalk’s business. The process of integrating the operations of ReWalk and AGI could encounter unexpected costs and delays, which include: the loss of key personnel; the loss of key customers; the loss of key suppliers; inability to properly identify, acquire or obtained required regulatory approvals; and unanticipated issues in integrating sales, marketing and administrative functions. In addition, the acquired AGI business, products and technologies may not achieve anticipated revenues and income growth. Further, the integration of AGI may involve a number of additional risks, including diversion of management’s attention away from the ReWalk business, which could adversely affect our results of operations. In addition, our failure to identify or accurately assess the magnitude of certain liabilities we assumed in the acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. If we do not realize the expected benefits or synergies of the acquisition, such as revenue gains or cost reductions, there could be a material adverse effect on our business, results of operations, and financial condition. We face economic and political risks associated with doing business in Taiwan, particularly due to the geopolitical tension between Taiwan and China that could negatively affect our business and hence the value of your investment. Currently, we rely on third party supplies in Taiwan for a portion of the components we use in our products. Accordingly, our business, financial condition and results of operations and the market price of our securities may be affected by changes in governmental policies, taxation, growth rate, inflation rate or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan. In particular, the unique political status of Taiwan and its internal political movement cause sustained tension between China and Taiwan. Past developments related to the interactions between China and Taiwan, especially in relation to trade activities such as bans on exports of goods from time to time, have on occasions depressed the transactions and business operations of certain Taiwanese companies and overall economic environment. We cannot predict whether there will be escalation of the tensions between China and Taiwan which would lead to new bans or tariffs on exports or even conflict. Any conflict which threatens the military, political or economic stability in Taiwan could have a material adverse effect on our current or future business and financial conditions and results of operations. 40 We do not satisfy all listing requirements for the Nasdaq Capital Market. We can provide no assurance that we will be able to comply with the continued listing requirements over time and that our common stock will continue to be listed on the Nasdaq Capital Market. As previously disclosed, on October 10, 2022, we received a notification letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company did not satisfy the requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a) (“Rule 5550(a)”) to maintain a minimum bid price of $1 per share for the 30 consecutive business days prior to such date. On April 11, 2023, we received a second notification letter from Nasdaq indicating that we had been provided with an additional period of 180 calendar days, or until October 9, 2023, to regain compliance with Rule 5550(a)(2). The bid price of our ordinary shares did not close at $1.00 per share or more for a minimum of 10 consecutive business days prior to October 9, 2023 and on October 6, 2023 we were notified by Nasdaq that, based upon the Company’s non-compliance Rule 5550(a), as of October 5, 2023, our securities were subject to delisting unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). We participated in a hearing with the Panel, which granted us an extension until January 31, 2024 to regain compliance with Rule 5550(a), including by implementing a reverse stock split should such action be necessary to regain compliance. If we are not successful in regaining compliance with Rule 5550(a) during such extension period, our ordinary shares will be removed from trading on the Nasdaq Capital Market. Any delisting determination could seriously decrease or eliminate the value of an investment in our ordinary shares and other securities linked to our ordinary shares. While an alternative listing on an over-the-counter exchange could maintain some degree of a market in our ordinary shares, we could face substantial material adverse consequences, including, but not limited to, the following: limited availability for market quotations for our ordinary shares; reduced liquidity with respect to our ordinary shares; a determination that our ordinary shares are “penny stock” under SEC rules, subjecting brokers trading our ordinary shares to more stringent rules on disclosure and the class of investors to which the broker may sell the ordinary shares; limited news and analyst coverage, in part due to the “penny stock” rules; decreased ability to issue additional securities or obtain additional financing in the future; and potential breaches under or terminations of our agreements with current or prospective large shareholders, strategic investors and banks. The perception among investors that we are at heightened risk of delisting could also negatively affect the market price of our securities and trading volume of our ordinary shares. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements. Risks Related to Our Incorporation and Location in Israel Conditions in Israel, including Israel’s war against Hamas and other terrorist organizations in the Gaza Strip and a potential escalation of the conflict on Israel’s northern border, may materially and adversely affect our business and results of operations. In early October 2023, Hamas terrorists based in the Gaza Strip attacked cities and villages inside Israel, murdering approximately 1,400 Israelis, wounding thousands and abducting more than 200. The attack was accompanied by numerous rocket attacks on central and southern Israel. These rocket attacks continue through the date of this filing. Israel called up substantial numbers of reservists and responded with extensive aerial attacks and a broad ground attack on terrorist targets in Gaza. In parallel, the Hezbollah terrorist group fired rockets and initiated other attacks on Israel’s northern border with Lebanon and Syria, and Israel has responded with aerial attacks against targets in Lebanon and Syria. Terrorist groups have also attacked U.S. military targets in the Middle East. These clashes have recently intensified and may escalate into a greater regional conflict. 41 Although we continue to monitor the situation closely, to date our operations in Israel – consisting primarily to the legacy ReWalk business and some finance functions – have continued without material interruption. In 2022, sales to customers in Israel accounted for less than 1% of our total revenues, and as of the date of this filing, approximately 80% of our employees are located outside of Israel. With the acquisition of AGI in August 2023 and the anticipated shift in our sources of revenue in connection therewith, our Israel operations have become a less significant portion of our consolidated ReWalk operations. Our Israeli facilities are based in northern Israel, in an area that to date has seen minor disruptions from rocket attacks. None of our Israeli employees have been mobilized for emergency military service. We cannot predict whether there will be further mobilization of reservists and any further mobilization could further impact our employees, including employees who serve in critical roles in our company, which could adversely affect our ability to operate and our results of operations. Sanmina Corporation, a well-established contract manufacturer with expertise in the medical device industry, manufactures all of our legacy ReWalk products at its facility in northern Israel. There has been no disruption to date to Sanmina’s business. If this facility were to be damaged or destroyed, or if Sanmina were otherwise unable to operate this facility, this could affect the supply of our legacy ReWalk products, and our business and our operating results would be negatively affected. This is a rapidly changing situation, and we cannot predict how events will develop over the coming weeks and months. There can be no assurance that a significant expansion or worsening of the war will not have a material adverse effect on our ongoing development efforts, our business and our operating results.