Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should
be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this annual report.
This discussion contains forward-looking statements that are based on our management’s current expectations, estimates and projections
for our business, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking
Statements and “Part I. Item 1A. Risk Factors.”
Overview
We are a medical device company that designs, develops, and commercializes
life-changing solutions that span the continuum of care in physical rehabilitation and recovery, delivering proven functional and health
benefits in clinical settings as well as in the home and community. Our initial product offerings were the ReWalk Personal and ReWalk
Rehabilitation Exoskeleton devices for individuals with spinal cord injury (“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 (“SCI”)
the ability to stand and walk again during everyday activities at home or in the community. In March 2023, we received clearance of our
premarket notification (“510(k)”) from the U.S. Food and Drug Administration (“FDA”) for the ReWalk Personal Exoskeleton
with stair and curb functionality, which adds usage on stairs and curbs to the indication for use for the device in the United States
(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 consisting of over 18,000 stair steps was collected to demonstrate the safety and efficacy of this feature and support the
FDA submission.
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We have sought to expand our product offerings beyond the SCI Products
through internal development and distribution agreements and acquisitions. 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 Veterans Health Administration
(“VHA”) 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. We refer to the MediTouch and MyoCycle devices as our “Distributed Products.”
On August 11, 2023, we made our first acquisition to supplement our internal growth
when we acquired AlterG, Inc. (“AlterG”), a leading provider of Anti-Gravity systems for use in physical and neurological
rehabilitation. Our AlterG Anti-Gravity systems use patented, National Aeronautics and Space Administration (“NASA”) derived
differential air pressure (“DAP”) technology to reduce the effects of gravity and allow patients 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.
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 was paused in 2023 pending determination regarding
the clinical and commercial opportunity of this device.
Our principal markets are primarily in the United States and Europe
with some lesser sales in Asia, the Middle East and South America. We sell our products primarily directly in the United States, through
a combination of direct sales and distributors (depending on the product line) in Germany, Canada, and Australia, and primarily through
distributors in other markets. In markets where we sell direct to consumers, we have established relationships with clinics and rehabilitation
centers, professional and college sports teams, and individuals and organizations in the SCI community, and in markets where we do not
sell direct to consumers, our distributors maintain these relationships. We have primary offices in Marlborough, Massachusetts, Fremont,
California, Berlin, Germany and Yokneam, Israel, 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, commercial distributors, third-party payors (including private and government
payors), professional and college sports teams, 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 of reimbursement and support fundraising efforts by institutions and clinics, such as the VHA policy that
was issued in December 2015 for the evaluation, training, and procurement of ReWalk Personal Exoskeleton systems for all qualifying veterans
living with SCI across the United States.
We have also pursued updates with the Centers for Medicare &
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 CMS is the primary payor for approximately
57% of the SCI 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 code was issued for ReWalk Personal Exoskeleton, 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 are included in the Medicare brace benefit category, as
of January 1, 2024. Medicare personal exoskeleton claims with dates of service on or after January 1, 2024 that are billed using HCPCS
code K1007 are assigned to the brace benefit category. CMS reimburses items classified under the brace benefit category using a lump sum
payment methodology.
On November 29, 2023, CMS included the “ReWalk Personal Prosthetic
Exoskeleton System” in the HCPCS public meeting where it solicited feedback on 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.
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CMS solicited 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.” We participated in the 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.
A final Medicare payment determination is expected from CMS in first quarter of 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.
Components of Our Statements of Operations
Revenue
We currently rely, and in the future will rely, on sales and rentals
of our ReWalk Personal and ReWalk Rehabilitation Exoskeleton devices, sales and rentals of our AlterG Anti-Gravity systems and related
consumables and services, and sales of our ReStore exo-suit device, additional Distributed Products such as the MyoCycle, and related
extended service contracts for the SCI Products. Our revenue is generated from a combination of third-party payors, including private
and government employers, institutions, and self-payors. Payments for our products by third party payors have been made primarily through
case-by-case determinations. Third-party payors include, without limitation, private insurance plans, workers’ compensation programs,
managed care organizations, and government programs including the VHA and Medicare. We expect that third-party payors will be an increasingly
important source of revenue in the future as we increase the volume of sales of ReWalk Personal systems to Medicare-eligible beneficiaries
following establishment of a benefit category and anticipated pricing. In December 2015, the VHA issued a national policy for the
evaluation, training, and procurement of ReWalk Personal Exoskeleton systems for all qualifying veterans across the United States. The
VHA policy is the first national coverage policy in the United States for qualifying individuals who have suffered spinal cord injury.
ReWalk Personal and ReWalk Rehabilitation Exoskeleton systems are generally covered
by a five-year warranty from the date of purchase, which is included in the purchase price. The warranty covers all elements of the systems,
including the batteries, other than normal wear and tear. Our ReStore device is sold with a two-year warranty. The AlterG Anti-Gravity
systems are sold with a one-year factory warranty covering parts and services in the U.S. and a two-year factory warranty covering parts
only in the rest of the world. Warranties for our Distributed Products range between three years to ten years depending on the specific
product and part and are the responsibility of the manufacturers.
Cost of Revenue and Gross
Profit
For ReWalk and ReStore, cost of revenue consists primarily of complete
systems purchased from our outsourced manufacturer, Sanmina. For these products, cost of revenue also includes internal costs such
as salaries and related personnel costs including non-cash share-based compensation, functions that support manufacturing and inventory
management, training and inspection, service activities, freight costs, and reserves for warranty and inventory condition. The cost of
revenue also includes royalties and expenses related to royalty-bearing research and development grants.
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For our AlterG systems, which we manufacture ourselves at our facility
in Fremont, California, cost of revenue consists primarily of raw materials, direct labor, indirect labor, and other factory overhead
costs such as rent and utilities. In addition, cost of revenue also includes field service costs, shipping expenses and reserves
for warranty and inventory condition.
For Distributed Products such as the MyoCycle cost of revenue consists
primarily of complete systems purchased from MYOLYN. In addition, the cost of revenue also includes field service costs and shipping expenses.
Our gross profit and gross margin (defined as gross profit as a
percentage of revenue) are influenced by a number of factors, including the volume and price of our products sold, fluctuations in the
mix of products sold, and variability in our cost of revenue. We expect gross profit and gross margin will expand 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.
Operating Expenses
Research and Development Expenses, Net
Research and development expenses, net consist primarily of salaries
and related personnel costs including share-based compensation, supplies, materials, and consulting expenses associated with to product
design and development, clinical studies, regulatory submissions, patent costs, sponsored research and other related activities. We expense
all research and development expenses as they are incurred.
Research and development expenses are presented net of the amount
of any grants we receive for research and development in the period in which we receive the grant. We previously received grants and other
funding from the IIA. Certain of those grants require us to pay royalties on sales of certain systems, which are recorded as cost of revenue.
We may receive additional funding from these entities or others in the future. See “Grants and Other Funding” below.
Sales and Marketing Expenses
Our sales and marketing expenses consist primarily of salaries
and related personnel costs including share-based compensation for sales, sales support, marketing, and reimbursement related activities,
travel, marketing, advertisement, tradeshows and conferences, lobbying, and public relations activities.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries
and related personnel costs including share-based compensation for our administrative, finance, and general management personnel, professional
services, and insurance.
Financial Expenses (Income), Net
Financial income and expenses consist of bank commissions, foreign
exchange gains and losses, interest earned on investments in short term deposits and royalty income.
Interest income consists of interest earned on our cash and cash
equivalent balances. Interest expense consists of interest accrued on, and certain other costs with respect to any indebtedness. Foreign
currency exchange changes reflect gains or losses related to transactions denominated in currencies other than the U.S. dollar.
Taxes on Income
As of December 31, 2023, we had not yet generated taxable
income in Israel. As of that date, our net operating loss carryforwards for Israeli tax purposes amounted to approximately $242.6 million.
After we utilize our net operating loss carryforwards, we are eligible for certain tax benefits in Israel under the Law for the Encouragement
of Capital Investments, 1959. Our benefit period currently ends ten years after the year in which we first have taxable income in Israel
provided that the benefit period will not extend beyond 2024. AlterG had federal net operating loss carry forwards totalling $31.4 million
and state net operating loss carry forwards of $47.2 million, set to expire in 2025 and 2028, respectively.
Our taxable income generated outside of Israel will be subject
to the regular corporate tax rate in the applicable jurisdictions. As a result, our effective tax rate will be a function of the relative
proportion of our taxable income that is generated in those locations compared to our overall net income.
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Grants and Other Funding
Israel Innovation Authority
(formerly known as the Office of the Chief Scientist)
From our inception through December 31, 2023, we have received
a total of $2.6 million in funding from the IIA, $1.6 million of which are royalty-bearing grants, $400 thousand were received in consideration
for an investment in our preferred shares while $570 thousand was received without future obligation. Of the royalty-bearing grants
received, we have paid royalties to the IIA in the total amount of $110 thousand. The agreements with IIA require us to pay royalties
at a rate of 3% on sales of certain systems and related services up to the total amount of funding received for the development of these
systems, linked to the dollar, and bearing interest at an annual rate of LIBOR applicable to dollar deposits. If we transfer IIA-supported
technology or know-how outside of Israel, we will be liable for additional payments to IIA depending upon the value of the transferred
technology or know-how, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. As
of December 31, 2023, the aggregate contingent liability to the IIA was $1.6 million. For more information, see “Part I, Item
1A. Risk Factors-We have received Israeli government grants for certain of our research and development activities and we may receive
additional grants in the future. The terms of those grants restrict our ability to manufacture products or transfer technologies outside
of Israel and we may be required to pay penalties in such cases or upon the sale of our company.”
Results of Operations
Year Ended December 31, 2023 Compared
to Year Ended December 31, 2022
Revenue
Our revenue for 2023 and 2022 were as follows (dollars in thousands,
except unit amounts):
Years Ended December 31,
2023
2022
Revenue
$
13,854
$
5,511
Revenues consist of SCI Products, AlterG Anti-Gravity systems,
ReStore and Distributed Products.
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Revenue was $13.9 million, an increase of $8.3 million, or 51%,
during 2023 as compared to 2022. Of this increase, $7.7 million was attributable to the AlterG business, which was acquired on August
11, 2023. The remaining increase of $0.7 million was a result of a higher revenues from ReWalk Personal Exoskeletons and MyoCycles.
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, and our AlterG
Anti-Gravity systems, as well as sales of Distributed Products, and the ReStore device to rehabilitation clinics and personal users.
Gross Profit
Our gross profit for 2023 and 2022 were as follows (in thousands):
Years Ended December 31,
2023
2022
Gross profit
$
4,453
$
1,905
Gross profit was $4.5 million, or 32% of revenue, for 2023, as compared to a gross profit
of $1.9 million, or 35% of revenue for 2022. The AlterG business contributed $2.1 million of gross profit for 2023. Gross profit for 2023
also included the impact of $1.5 million for the amortization of intangible assets and purchase accounting inventory adjustments from
the acquisition of AlterG. Excluding the impact of these factors resulting from the acquisition of AlterG, gross profit was $2.4
million, or 38% of revenue for 2023, as compared to $1.9 million, or 35% of revenue for 2022. This increase was a result of a higher average
selling price in 2023 due to new features in our ReWalk Personal Exoskeleton and MyoCycles.
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. Improvements may be partially offset by the lower margins we currently expect from ReStore as well as due
to an increase in material costs.
Research and Development
Expense, Net
Our research and development expense, net for 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
2023
2022
Research and development expense, net
$
4,148
$
4,031
Research and development expense was $4.1 million in 2023, an increase
of $0.1 million, or 3%, during 2023 as compared to 2022. The AlterG business contributed $0.8 million of research and development spending
for 2023. Excluding the impact of the acquisition of AlterG, research and development declined by $0.7 million, or 17% for the year
ended December 31, 2023. The decrease is attributable to the conclusion of the stairs capability project and the gradual reduction of
spend on the ReWalk 7 development project as it approached conclusion.
We intend to focus the rest of 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. We have ongoing product development activity with our AlterG Anti-Gravity systems, including a program to develop a new entry level
model of AlterG Anti-Gravity system aimed to improve the affordability to price-conscious customers.
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Sales and Marketing Expense
Our sales and marketing expense for 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
2023
2022
Sales and marketing expense
$
13,922
$
9,842
Sales and marketing expense was $13.9 million in 2023, an increase
of $4.1 million, or 41%, during 2023 as compared to 2022. The AlterG business contributed $2.0 million of sales and marketing expenses
for 2023. Sales and marketing expenses for 2023 also included $0.6 million of amortization of intangible assets from the acquisition of
AlterG. Excluding the impact of these factors resulting from the acquisition of AlterG, sales and marketing expenses increased $1.5 million,
or 15%, for 2023. The remaining increase was primarily driven by higher consulting expenses related to the CMS reimbursement process
and market access initiatives.
In the near term our sales and marketing expense are expected to
be driven by our efforts to expand the reimbursement coverage of our ReWalk Personal Exoskeleton device, to integrate and unify the combined
sales and marketing resources of the ReWalk and AlterG organizations, and to support our current commercial product activities.
General and Administrative
Expense
Our general and administrative expense for 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
2023
2021
General and administrative
$
9,995
$
7,134
General and administrative expense was $10.0 million, an increase
of $2.9 million, or 40%, during 2023 as compared to 2022. The AlterG business contributed $1.1 million of general and administrative expenses
for 2023. General and administrative expenses also included $2.5 million of M&A-related expenses, and $0.1 million of amortization
of intangible assets from the acquisition of AlterG offset partially by $0.3 remeasurement of earn out liability. Excluding the impact
of these factors resulting from the acquisition of AlterG, general and administrative expenses decreased $0.6 million, or 7%, for 2023.
The decrease was mainly driven by lower professional services expenses.
Financial income, net
Our financial income, net for 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
2023
2022
Financial income, net
$
1,467
$
*)
Financial income, net, reflects an increase in financial income
of $1.5 million during 2023 as compared to 2022. The increase in financial income 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.
*) Represents an amount lower than $1.
Income Tax
Our income tax for 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
2023
2022
Taxes on income (benefit)
$
(12
)
$
467
Income tax decreased by $0.5 million during 2023 as compared to 2022, mainly due to
the utilization of net operation losses forward arising from the acquisition of AlterG.
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Year Ended December 31, 2022 Compared to Year Ended December 31,
2021
A discussion of changes in our results of operations in 2022 compared
to 2021 has been omitted from this annual report on Form 10-K but may be found in “Part I. Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC
on February 23, 2023, which is available free of charge on the SEC's website at www.sec.gov and at golifeward.com, and is incorporated
by reference herein.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance
with United States generally accepted accounting principles. The preparation of our financial statements requires us to make estimates,
judgments and assumptions that can affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates,
judgments and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. Materially
different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that
are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. See Note 2
to our consolidated financial statements presented elsewhere in this annual report for a description of the significant accounting policies
that we used to prepare our consolidated financial statements. The critical accounting policies that were impacted by the estimates, judgments
and assumptions used in the preparation of our consolidated financial statements are discussed below.
Revenue Recognition
Our revenue is recognized in accordance with ASC Topic 606 when
obligations under the terms of a contract with our customer are satisfied; generally, this occurs with the transfer of control of our
products or services. Revenue is measured as the amount of consideration to which we expect to be entitled in exchange for transferring
products or providing services. To achieve this core principle, we apply the following five steps:
1. identify the contract with a customer;
2. identify the performance obligations in the contract;
3. determine the transaction price;
4. allocate the transaction price to performance obligations in
the contract; and
5. recognize revenue when or as we satisfy a performance obligation.
Provisions are made at the time of revenue recognition for any
applicable warranty cost expected to be incurred. The timing for revenue recognition among the various products and customers is dependent
upon satisfaction of such criteria and generally varies from either shipment or delivery to the customer depending on the specific shipping
terms of a given transaction, as stipulated in the agreement with each customer. Other than pricing terms which may differ due to the
different volumes of purchases between distributors and end-users, there are no material differences in the terms and arrangements involving
direct and indirect customers. Our products sold through agreements with distributors are non-exchangeable, non-refundable, non-returnable
and without any rights of price protection or stock rotation. Accordingly, we consider all the distributors as end-users. We generally
do not grant a right of return for our products except in rare circumstances, and in those cases we record reductions to revenue for expected
future product returns based on our historical experience and estimates.
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For the majority of sales of ReWalk Rehabilitation Exoskeleton systems, we include insignificant training
and consider the elements in the arrangement to be a single performance obligation. Therefore, the Company recognizes revenue for the
system only when control is transferred after delivery and when the training has been completed, in accordance with the agreement terms
with the customer, once all other revenue recognition criteria have been met. For sales of ReWalk Personal Exoskeleton systems to end
users, and for sales of ReWalk Personal Exoskeleton or ReWalk Rehabilitation Exoskeleton systems to third party distributors, we do not
provide training to the end user as this training is completed by the rehabilitation centers or by the distributor that have previously
completed the ReWalk Training program.
Warranties are classified as either assurance type or service type
warranty. A warranty is considered an assurance type warranty if it provides the consumer with assurance that the product will function
as intended for a limited period of time.
SCI Products include a five-year warranty. The first two years
are considered as an assurance type warranty and the additional period is considered an extended service arrangement, which is a service
type warranty. A service type warranty is either sold with a unit or separately for a unit for which the warranty has expired. A service
type warranty is accounted as a separate performance obligation and revenue is recognized ratably over the life of the warranty.
The ReStore device is sold with a two-year warranty which is considered as assurance
type warranty.
The Distributed Products are sold with an assurance type warranty
ranging from between three years to ten years, depending on the specific part.
The AlterG Anti-Gravity systems are sold with a one-year assurance type warranty for
parts and labor in the US and with a two-year assurance type warranty for parts for distributors. We also sell extended warranties
for AlterG Anti-Gravity systems for the periods after the expiration of the original warranty. These are accounted for as separate
performance obligations from the AlterG Anti-Gravity system.
We rent our AlterG Anti-Gravity systems to customers for a fixed monthly fee over
the rental term, which typically ranges from 2 to 3 years. Rental revenues accounted for under ASC Topic 842 and are recorded as earned
on a monthly basis. We also offer for the SCI Products a rent-to-purchase model in which we recognize revenue ratably according to the
agreed rental monthly fee for a limited period prior to selling its products. For units placed, we transfer control and recognize a sale
when title has passed to our customer and rental revenue ratably according to the agreed rental monthly fee. Each unit placed is considered
an independent, unbundled performance obligation.
Income Taxes
As part of the process of preparing our consolidated financial
statements, we are required to estimate our taxes in each of the jurisdictions in which we operate. We account for income taxes in accordance
with ASC Topic 740, “Income Taxes,” or ASC Topic 740. ASC Topic 740 prescribes the use of an asset and liability method whereby
deferred tax asset and liability account balances are determined based on the difference between book value and the tax bases of assets
and liabilities and carryforward tax losses. Deferred taxes are measured using the enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. We exercise judgment and provide a valuation allowance, if necessary, to reduce
deferred tax assets to their estimated realizable value if it is more likely than not that some portion or all of the deferred tax asset
will not be realized. We have established a full valuation allowance with respect to our deferred tax assets.
ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”
provides presentation requirements to classify deferred tax assets and liabilities, along with any related valuation allowance, are classified
as non-current on the balance sheet. We account for uncertain tax positions in accordance with ASC 740 and recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position
should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accordingly,
we report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return.
We recognize interest and penalties, if any, related to unrecognized tax benefits in tax expense.
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Recently Issued and Adopted Accounting Pronouncements
A discussion of recent accounting pronouncements is included in
Note 2w, New Accounting Pronouncements, to our consolidated financial statements included elsewhere in this annual report.
Liquidity and Capital Resources
Sources of Liquidity and Outlook
Since inception, we have funded our operations primarily through
the sale of our equity securities and convertible notes to investors in private placements, the sale of our equity securities in public
offerings, cash exercises of outstanding warrants and the incurrence of bank debt.
For the full year ended December 31, 2023, we incurred a consolidated
net loss of $22.1 million and had an accumulated deficit in the total amount of $235.9 million. Our cash and cash equivalents on December
31, 2023, totalled $28.1 million. Our negative operating cash flow for the full year ended December 31, 2023, was $20.7 million. We have
sufficient funds to support our operation for more than 12 months following the approval of our consolidated financial statements for
the fiscal year ended December 31, 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 revenue 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.
Our anticipated primary uses of cash are funding (i) sales, marketing,
and promotion activities related to market development for our ReWalk Personal Exoskeleton device and AlterG Anti-Gravity system,
broadening third-party payor and CMS coverage for our ReWalk Personal Exoskeleton device and commercializing our new product lines added
through distribution agreements; (ii) development of future generation designs for our ReWalk 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 acquisition of AlterG, 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, arrange for additional bank debt financing,
or refinance our indebtedness. There can be no assurance that we will be able to raise such funds on acceptable terms.
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
this annual report, 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 this annual report. We will continue to be subject to these limitations for the remainder of the 2024 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, 2024, 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.
67
Equity Offerings and
Warrant Exercises
On February 19, 2021, the Company entered into a purchase agreement
with certain institutional and other accredited investors for the issuance and sale of 10,921,502 ordinary shares, par value NIS 0.25
per share at $3.6625 per ordinary share and warrants to purchase up to an aggregate of 5,460,751 ordinary shares with an exercise price
of $3.60 per share, exercisable from February 19, 2021, until August 26, 2026. Additionally, the Company issued warrants to purchase up
to 655,290 ordinary shares, with an exercise price of $4.578125 per share, exercisable from February 19, 2021, until August 26, 2026,
to certain representatives of H.C. Wainwright as compensation for its role as the placement agent in our February 2021 private placement
offering.
On September 27, 2021, we signed a purchase agreement with certain
institutional investors for the issuance and sale of 15,403,014 ordinary shares, pre-funded warrants to purchase up to an aggregate of
610,504 ordinary shares and ordinary warrants to purchase up to an aggregate of 8,006,759 ordinary shares at an exercise price of $2.00
per share. The pre-funded warrants have an exercise price of $0.001 per ordinary share and are immediately exercisable and can be exercised
at any time after their original issuance until such pre-funded warrants are exercised in full. Each ordinary share was sold at an offering
price of $2.035 and each pre-funded warrant was sold at an offering price of $2.034 (equal to the purchase price per ordinary share minus
the exercise price of the pre-funded warrant). The offering of the ordinary shares, the pre-funded warrants and the ordinary shares that
are issuable from time to time upon exercise of the pre-funded warrants was made pursuant to our shelf registration statement on Form
S-3 initially filed with the SEC on May 9, 2019, and declared effective by the SEC on May 23, 2019, and the ordinary warrants were issued
in a concurrent private placement. The ordinary warrants are exercisable at any time and from time to time, in whole or in part, following
the date of issuance and ending five and one-half years from the date of issuance. All of the pre-funded warrants were exercised in full
on September 27, 2021, and the offering closed on September 29, 2021. Additionally, we issued warrants to purchase up to 960,811 ordinary
shares, with an exercise price of $2.5438 per share, exercisable from September 27, 2021, until September 27, 2026, to certain representatives
of H.C. Wainwright as compensation for its role as the placement agent in our September 2021 private placement offering.
As of December 31, 2023, warrants to purchase a total of 9,814,754
ordinary shares with exercise prices ranging from $1.25 to $1.79 were exercised, for total gross proceeds of approximately $13.8 million.
During the twelve months that ended December 31, 2023, no warrants were exercised.
Share Repurchase Program
On June 2, 2022, our board of directors approved a share repurchase program to repurchase
up to $8.0 million of our ordinary shares . On July 21, 2022, we received approval from an Israeli court for the share repurchase program.
The program was scheduled to expire on the earlier of January 20, 2023, or reaching $8.0 million of repurchases. On December 22, 2022,
our board of directors approved an extension of the 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, and it expired on August 9, 2023.
As of December 31, 2023, pursuant to the share repurchase program, we had repurchased
a total of 4,022,607 of our outstanding ordinary shares at a total cost of $3.5 million.
Cash Flows
Years Ended December 31,
2023
2022
2021
Net cash used in operating activities
$
(20,667
)
$
(17,891
)
$
(11,469
)
Net cash used in investing activities
(18,149
)
(25
)
(47
)
Net cash (used in) provided by financing activities
(992
)
(2,500
)
79,512
Effect of Exchange rate changes on Cash, Cash Equivalents and
Restricted Cash
45
(79
)
—
Net cash flow
$
(39,763
)
$
(20,495
)
$
67,996
68
Year Ended December 31, 2023 to Year Ended December 31, 2022
Net Cash Used in Operating Activities
Net cash used in operating activities was $20.7 million in 2023,
an increase of $2.8 million as compared to 2022 mainly 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 to $18.1 million in 2023 as compared
to $0.03 million in 2022, primarily due to the acquisition of AlterG.
Net Cash Used in Financing Activities
Net cash used in financing activities was $0.9 million in 2023,
a decrease of $1.5 million, as compared to 2022. The decrease was due to the repurchase of our ordinary shares under our share repurchase
program, which expired on August 9, 2023.
Year Ended December 31, 2022 Compared to Year
Ended December 31, 2021
A discussion of changes in our cash flows in 2022 compared to 2021
has been omitted from this annual report on Form 10-K but may be found in “Part I. Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC
on February 23, 2023, which is available free of charge on the SECs website at www.sec.gov and at golifeward.com, and is incorporated
by reference herein.
69
Obligations and Commercial Commitments
Set forth below is a summary of our contractual obligations as of December 31,
2023:
Payments due by period (in dollars, in thousands )
Contractual obligations
Total
Less than
1 year
1-3 years
Purchase obligations (1)
$
8,551
$
8,551
$
—
Collaboration Agreement and License Agreement obligations (2)
34
34
—
Operating lease obligations (3)
2,050
1,364
686
Earnout liability (4)
3,292
576
2,716
Total
$
13,927
$
10,525
$
3,402
(1)
We depend on one contract manufacturer, Sanmina Corporation, for both the SCI products and the ReStore Products. We place our manufacturing
orders with Sanmina pursuant to purchase orders or by providing forecasts for future requirements. The AlterG Anti-Gravity systems are
produced in Fremont, California by us. Purchase orders are executed with suppliers based on our sales forecast.
(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 December 31, 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, Israel and Germany and motor vehicles in Israel.
(4)
Earnout payments based on AlterG’s revenue growth during the two consecutive trailing twelve-month periods following closing
of the acquisition.
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 3.627:$1.00, of which were the applicable exchange rate
as of December 31, 2023.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or guarantees of third-party
obligations during the periods presented.
Trend Information
For information on significant known trends, please see “Part I-Item 1. “Business
– Overview” in this annual report.
70