
Report Information Form 10-K Filing Details This report is ReWalk Robotics Ltd.'s annual Form 10-K filing for the year ended December 31, 2022, with its shares traded on the Nasdaq Capital Market under the ticker RWLK - The company filed its annual report on Form 10-K for the year ended December 31, 20222 Company Securities Registered Information | Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | | :------------------ | :---------------- | :-------------------------------------- | | Ordinary Shares, par value NIS 0.25 per share | RWLK | Nasdaq Capital Market | Registrant Status and Market Value The company is classified as a non-accelerated filer and a smaller reporting company, with an aggregate market value of approximately $58.5 million of common stock held by non-affiliates as of June 30, 2022 - The company is classified as a non-accelerated filer and a smaller reporting company9 - As of June 30, 2022, the aggregate market value of common stock held by non-affiliates was approximately $58,466,80111 - As of February 23, 2023, the company had 59,480,132 ordinary shares outstanding12 Special Note Regarding Forward-Looking Statements and Risk Factors Summary Forward-Looking Statements Disclaimer This report contains forward-looking statements based on management's beliefs and assumptions regarding future operating results, business strategies, and financing plans, which are subject to uncertainties that may cause actual results to differ materially - Forward-looking statements are based on management's beliefs and assumptions, covering future operating results, business strategies, financing plans, competitive position, industry environment, growth opportunities, and market opportunities18 - Important factors may cause actual results, activity levels, performance, or achievements to differ materially from those expressed in forward-looking statements18 - Investors should not place undue reliance on forward-looking statements, and the company undertakes no obligation to update any forward-looking statements after the report date2122 Key Risk Factors Summary The company faces various key risks, including future growth, product market acceptance, third-party reimbursement, Nasdaq listing compliance, COVID-19 impact, funding needs, limited operating history, acquisition integration, clinical research, supply chain, product improvements, regulatory approvals, cybersecurity, intellectual property protection, and stock market volatility - Future growth, including the ability to increase sales in existing markets and expand into new ones - The ability to maintain and enhance product reputation and market acceptance - The ability to obtain third-party payer reimbursement or advance CMS coverage for products - The ability to regain and maintain compliance with Nasdaq Capital Market continued listing requirements - The adverse impact of the COVID-19 pandemic on business and operating results - Whether sufficient capital is available to meet future capital needs, which could impair efforts to develop and commercialize existing and new products - Limited operating history and the ability to leverage sales, marketing, and training infrastructure - The ability to achieve business growth through acquisitions of businesses, products, or technologies, and the risk of failed acquisition management or integration - Expectations regarding clinical research programs and clinical outcomes - The ability to obtain product components from third-party suppliers and ongoing support from product manufacturers - The ability to improve existing products and develop new ones - Compliance with medical device reporting regulations, reporting product-related side effects, which could lead to enforcement actions such as voluntary corrective actions or mandatory recalls - The ability to obtain and maintain regulatory approvals and comply with any post-market requirements - The risk of cybersecurity attacks or information technology system breaches severely disrupting business operations - The ability to maintain adequate intellectual property protection and avoid infringing on others' intellectual property - The impact of significant sales of company stock by certain shareholders on market price - The ability to effectively utilize proceeds from securities offerings - Significant dilution that may result from periodic issuances of ordinary shares - The impact of the market price of ordinary shares on whether the company is deemed a passive foreign investment company - Market and other conditions, including inflation or global instability, that could disrupt business operations or financial condition - Other factors discussed in "Part I. Item 1A. Risk Factors"2024 ITEM 1. BUSINESS Overview ReWalk Robotics Ltd. is a medical device company focused on designing, developing, and commercializing innovative technologies to provide mobility and health support for individuals with neurological disorders, featuring ReWalk spinal cord injury exoskeletons, ReStore stroke rehabilitation soft exoskeletons, and MyoCycle FES Pro distribution - ReWalk Robotics Ltd. designs, develops, and commercializes innovative technologies aimed at providing mobility and health support for individuals with neurological disorders25 - ReWalk Personal and ReWalk Rehabilitation exoskeleton devices: Used for spinal cord injury (SCI) patients, employing tilt-sensor technology, an onboard computer, and motion sensors to drive motorized legs, enabling paraplegic individuals to stand and walk - ReStore Exo-Suit device: A lightweight soft exoskeleton for rehabilitation of individuals with lower limb disability due to stroke, commercialization began in June 2019 - MyoCycle FES Pro cycling device: Exclusively distributed in the United States to rehabilitation clinics and Veterans Affairs (VA) hospitals - MediTouch Tutor motion biofeedback system: Previously an exclusive distribution product, the agreement was terminated on January 31, 2023, due to unsatisfactory sales performance - ReBoot: A research-stage personal soft exoskeleton for home and community use by post-stroke patients, which received FDA Breakthrough Device designation, but further investment was paused in 2023252627 - The company's primary markets are the United States and Europe, with direct sales operations in Germany and partnerships with distributors in other key countries28 - Revenue sources include third-party payers (private and government payers) and self-pay individuals, with the company actively pursuing reimbursement and insurance coverage293031 COVID-19 Pandemic Impact The COVID-19 pandemic significantly disrupted the company's operations, causing global supply chain issues, hindering new customer acquisition, delaying product trials and training, and reducing product demand due to healthcare system staff shortages, with business not yet fully recovering to pre-pandemic levels - The pandemic caused significant disruptions to the global economy, capital markets, and the company's business33 - Global suppliers, distributors, and manufacturing facilities were severely adversely affected by restrictive government and corporate measures34 - Pandemic restrictions impacted the company's ability to identify new customers through trade shows, engage with existing customers, conduct product trials, deliver and service systems, and provide training for new patients and rehabilitation centers34 - Staff shortages in the healthcare system led to decreased demand for spinal cord injury products34 - Despite the lifting of restrictions, business has not fully recovered to pre-pandemic levels and is expected to continue to be adversely affected34 ReWalk Personal and ReWalk Rehabilitation Products ReWalk Personal 6.0 and ReWalk Rehabilitation are robotic exoskeletons designed for paraplegic patients to restore standing and walking, utilizing tilt-sensor technology to provide a natural gait and demonstrating potential secondary health benefits, with approximately 20.2% of 296,000 US spinal cord injury patients being potential candidates - ReWalk Personal 6.0: A battery-powered wearable exoskeleton that uses tilt-sensor technology, sensors, and a computer control system to drive knee and hip movement, allowing users to stand, walk, sit, and, depending on local regulations, ascend and descend stairs and curbs - ReWalk Rehabilitation: Composed of a Personal 6.0 unit and multi-size adjustable components, used by clinics for training and therapy for multiple patients, and also for evaluating a patient's future ability to use ReWalk Personal - ReWalk Personal 6.0 received CE Mark in Europe in late 2012 and FDA approval in the United States in June 2014 - Clinical studies indicate ReWalk Personal can provide functional walking speeds and have reported potential secondary health benefits, including pain reduction, improved bowel and bladder function, reduced spasticity, increased range of motion, improved sleep and reduced fatigue, increased oxygen intake and heart rate, and reduced hospitalizations - Approximately 296,000 individuals in the United States have spinal cord injuries, with about 17,900 new cases annually; based on FDA restrictions, approximately 20.2% of spinal cord injury patients may be considered candidates for the ReWalk Personal exoskeleton3536384142434446 Overview of Spinal Cord Injury Spinal cord injury is a severe medical condition resulting from physical damage to spinal nerves, leading to functional loss such as mobility or sensation, categorized by completeness and level of injury - Spinal cord injury is a severe medical condition resulting from physical damage to spinal nerves, leading to loss of function such as mobility or sensation39 - Complete injury: Patients experience a complete loss of sensation and voluntary movement below the level of injury - Incomplete injury: Some function is retained below the level of injury - Injury level classification: Cervical injuries result in tetraplegia (quadriplegia), thoracic injuries result in paraplegia (paralysis of the legs), lumbar injuries result in paraplegia, and sacral injuries primarily affect bowel and bladder function, as well as sexual function3940 Market Opportunity Spinal cord injury patients face severe physical and psychological deterioration from prolonged bed rest, incurring high medical costs and reduced quality of life, with 296,000 patients in the US and 42,000 eligible veterans as of 2021 - Long-term bed rest for spinal cord injury patients can lead to severe physical and psychological deterioration, resulting in high medical costs and reduced quality of life43 - The National Spinal Cord Injury Statistical Center (NSCISC) estimates that paraplegia-related complications cost approximately $500,000 in the first year post-injury, with substantial lifetime costs43 - As of 2021, there were 296,000 individuals with spinal cord injuries in the United States, with approximately 17,900 new cases annually; the Department of Veterans Affairs (VA) has about 42,000 eligible veteran patients44 - Based on FDA restrictions, approximately 20.2% of spinal cord injury patients may be considered candidates for the ReWalk Personal exoskeleton46 Sales and Marketing activities The company shifted its commercial focus from rehabilitation centers to direct promotion of ReWalk Personal exoskeletons to patients, physicians, and physical therapists, emphasizing medical necessity, while continuing to pursue reimbursement efforts and expand commercial coverage through direct sales and distributors - The company has shifted its commercialization focus from rehabilitation centers to directly promoting the ReWalk Personal exoskeleton to patients, physicians, and physical therapists, emphasizing its necessity as a medical intervention47 - The company sells products directly in Germany and the United States, and primarily through distributors in other markets48 ReWalk Device Deployment Numbers (units) | Device Type | As of December 31, 2022 | As of December 31, 2021 | | :------- | :----------------- | :----------------- | | ReWalk Rehabilitation | 128 | 121 | | ReWalk Personal | 572 | 533 | - The company plans to continue focusing on reimbursement efforts, handling insurance claims on a case-by-case basis, and investing in expanding commercial reimbursement coverage49 Third-Party Reimbursements The company actively seeks third-party reimbursement for ReWalk products from the US Department of Veterans Affairs (VA) and German health insurance providers, with VA having a national policy and several German insurers offering coverage, while pursuing broader Medicare coverage in the US through case-by-case applications and CMS collaboration - In the United States, individuals typically obtain ReWalk Personal exoskeletons through third-party medical insurance (such as workers' compensation insurance, VA) or self-pay52 - The VA issued a national policy in December 2014, covering assessment, training, and procurement of ReWalk Personal exoskeleton systems for eligible veterans; as of December 31, 2022, 34 devices have been deployed through the VA policy, and the VA contributed 14% of total revenue in 202253 - The company is collaborating with CMS to clarify Medicare coverage categories for personal exoskeletons and obtained a unique code for the ReWalk Personal exoskeleton in July 202059 - In Germany, BARMER GEK and DGUV have indicated they will provide coverage for eligible users; the ReWalk Personal exoskeleton system has been listed in the German medical device directory, and several German statutory health insurance (SHI) and private health insurance (PHI) companies have signed agreements with the company3164 - Italy's Ministry of Labor and Social Policies issued a policy in March 2018 to provide exoskeleton systems for eligible spinal cord injury patients, with 10 devices supplied through the Italian distributor66 United States In the US, the VA issued a national policy in 2014 covering ReWalk Personal systems for eligible veterans, contributing 14% of 2022 revenue, while the company works with CMS for broader Medicare coverage amidst a lack of uniform commercial insurance policies - The VA issued a national policy in December 2014, covering assessment, training, and procurement of ReWalk Personal exoskeleton systems for eligible veterans; as of December 31, 2022, 34 devices have been deployed through the VA policy, and the VA contributed 14% of total revenue in 202253 - Commercial insurance payers in the United States do not yet have a uniform medical technology coverage and reimbursement policy for electronic exoskeletons, but reimbursement can be obtained through case-by-case determinations56 - As of December 31, 2022, 13 insurance coverage decision cases were pending in the United States57 - The company is collaborating with CMS to seek national Medicare beneficiary category designation for the ReWalk Personal exoskeleton and obtained a unique code in July 20205960 Europe In Europe, German insurers BARMER and DGUV cover ReWalk systems, which are listed in the German medical device directory, and Italy's Ministry of Labor and Social Policies also provides coverage for eligible spinal cord injury patients - German insurance companies BARMER and DGUV have indicated they will provide coverage for ReWalk systems for eligible users64 - The ReWalk Personal system has been listed in the German medical device directory, and German statutory health insurance (SHI) and private health insurance (PHI) companies have signed agreements with the company64 - As of December 31, 2022, 47 insurance cases were pending in Germany63 - Italy's Ministry of Labor and Social Policies issued a policy in March 2018 to provide exoskeleton systems for eligible spinal cord injury patients, with 10 devices supplied through the Italian distributor66 ReStore ReStore Exo-Suit is a lightweight soft exoskeleton for stroke rehabilitation, commercialized in 2019 after FDA and CE approvals, designed to improve walking speed and symmetry through flexible materials and sensors, with 33 units deployed by the end of 2022 - The ReStore Exo-Suit is a lightweight soft exoskeleton system, initially designed for rehabilitation of stroke patients, and began commercialization in June 2019 after receiving FDA approval and CE approval in May68 - ReStore provides plantarflexion and dorsiflexion assistance to the patient's ankle joint through flexible materials, sensors, and powered assistance, aiming to improve walking speed and symmetry7071 - The primary market for ReStore is rehabilitation clinics with stroke treatment programs, and the company focuses its commercial efforts in the United States and Europe72 ReStore Device Deployment Numbers (units) | Year | Deployment Quantity | | :--- | :------- | | 2022 | 33 | | 2021 | 30 | ReBoot ReBoot is a research-stage personal soft exoskeleton for post-stroke home and community use, granted FDA Breakthrough Device designation in November 2021, but further investment was temporarily paused in 2023 pending evaluation of its clinical and commercial opportunities - ReBoot is a research-stage personal soft exoskeleton for home and community use by post-stroke patients, which received FDA Breakthrough Device designation in November 20212776 - ReBoot aims to provide walking assistance for individuals with impaired ankle function due to neurological injury (such as stroke), with an estimated market size of approximately 400,000 stroke patients annually requiring walking assistance76 - In 2023, the company temporarily paused further investment in the ReBoot development pathway, pending further determination of its clinical and commercial opportunities2776 Competition The medical exoskeleton market is highly competitive and rapidly evolving, with key rivals including Ekso Bionics and Cyberdyne, and ReWalk Personal's tilt-sensor technology and FDA personal use clearance, along with ReStore's natural gait assistance and cost-effectiveness, provide competitive advantages - The medical exoskeleton market is highly competitive and rapidly changing, with competition expected to intensify77 - Key competitors: Ekso Bionics, Rex Bionics Pty, Cyberdyne, FREE Bionics, DIH, AlterG, Wandercraft, and Bioness - Alternative devices and therapies: Treadmill gait therapy, such as products offered by Hocoma, Tyromotion, AlterG, Aretech, and Reha Technology7881 - Key competitive advantages of the ReWalk Personal device include tilt-sensor technology, a more natural gait, faster walking speed, self-weight support capability, and broad user specifications, and it was the first medical exoskeleton to receive FDA clearance for personal use79 - Competitive advantages of the ReStore soft exoskeleton device include achieving a natural functional walking pattern through flexible materials, sensors, and powered assistance, and its lower cost and weight compared to rigid exoskeleton devices80 Community Engagement and Education The company dedicates significant resources to engage and educate the spinal cord injury community, promoting the benefits of SCI products and ReStore devices through collaborations with hospitals, rehabilitation centers, key opinion leaders, and patient advocacy groups to advance exoskeleton technology adoption - The company is committed to interacting with and educating the spinal cord injury community, promoting the benefits of SCI products and ReStore devices84 - Actively collaborates with hospitals, rehabilitation centers, and key opinion leaders, participating in research and development and clinical activities84 - Several advocacy groups, including the United Spinal Association and the Dana and Christopher Reeves Foundation, have publicly endorsed the ReWalk Personal device85 Services and Customer Support The company operates support centers in Marlborough, US, and Berlin, Germany, providing comprehensive customer support and product services for North America and Europe through specialized technical staff, including training for healthcare providers and direct user assistance - The company operates support centers in Marlborough, United States, and Berlin, Germany, responsible for all customer support and product service functions in North America and Europe86 - Provides training for healthcare providers and support for product users through specialized technical service personnel86 Research and Development The company maintains a robust R&D program to support existing products and develop new ones, with primary activities in Yokneam, Israel, funded partly by the Israel Innovation Authority (IIA), and collaborations with the Human-Robot Interaction (HRI) Consortium and Harvard University to advance exoskeleton technology - The company is committed to investing in a robust research and development program to support existing product lines and develop new, complementary products87 - The R&D team includes internal and external engineers, mechanics, researchers, as well as marketing, quality, manufacturing, regulatory, and clinical personnel - Primary R&D work is conducted at facilities in Yokneam, Israel - Product design improvements and expanded labeling work are underway for ReWalk Personal 6.0, with plans to introduce the ReWalk 7.0 next-generation device - Future medical indications that may be pursued include multiple sclerosis, cerebral palsy, Parkinson's disease, and assistance for the elderly8788 - As of December 31, 2022, the company had received a total of $2.3 million in R&D funding from the Israel Innovation Authority (IIA)89 Research and Development Collaborations The company collaborates with the Human-Robot Interaction (HRI) Consortium to develop advanced social robotics and with Harvard University on lightweight soft exoskeleton technology for lower limb disabilities, securing exclusive licenses for related patents - On April 1, 2022, the company entered into an R&D collaboration agreement with the Human-Robot Interaction (HRI) Consortium (part of the Israel Innovation Authority MAGNET incentive program), aimed at developing advanced robotic technologies with social capabilities to improve human-robot interaction90 - The HRI Consortium project budget is NIS 57 million, with NIS 1.745 million allocated to ReWalk-specific projects90 - On May 16, 2016, the company entered into a research collaboration agreement and an exclusive license agreement with Harvard University to jointly develop lightweight soft exoskeleton system technology for lower limb disabilities, aimed at treating conditions such as stroke, multiple sclerosis, and mobility impairment in the elderly91 - Under the Harvard license agreement, the company obtained a global, exclusive, royalty-bearing license to Harvard University's relevant patents and the right to license new inventions arising from the joint research collaboration92 Intellectual Property The company protects its intellectual property through patents, trademarks, confidentiality agreements, and trade secret laws, holding 12 US patents, 19 non-US patents, and 11 pending applications as of December 31, 2022, with ReWalk and ReStore trademarks registered in multiple regions - The company protects its intellectual property through patents, trademarks, confidentiality agreements, and trade secret laws95 - As of December 31, 2022, the company held 12 granted US patents and 19 granted non-US patents - The company has 11 pending patent applications in the United States, China, and Europe - Patents cover ReWalk's tilt-sensor technology and user-activated control methods - The ReWalk trademark is registered in the United States, Europe, Israel, and the United Kingdom - The ReStore trademark is registered in the United States, Europe, and the United Kingdom97100 - Patent terms typically last 20 years from the earliest filing date but may be slightly extended due to patent term adjustments99 Government Regulation The company's medical products and manufacturing are extensively regulated by agencies like the US FDA, EU MDR, and UKCA, covering product development, testing, manufacturing, labeling, marketing, and post-market surveillance, requiring compliance with pre-market and post-market requirements, as well as anti-kickback, false claims, and data privacy laws - The company's medical products and manufacturing operations are subject to extensive regulation by domestic and international agencies, including the U.S. FDA, EU MDR, and UKCA102119121 - Regulation covers product development, testing, manufacturing, labeling, storage, installation, servicing, advertising, promotion, marketing, distribution, import, export, and market surveillance102 - United States: Medical devices are classified into Class I, II, or III, requiring 510(k) pre-market notification, PMA approval, or a de novo classification order; ReWalk is classified as a Class II powered exoskeleton device and must comply with special controls; ReStore received 510(k) clearance - European Union: Medical devices are regulated by the EU Medical Device Regulation (MDR) 2017/745 and require CE marking - United Kingdom: Regulated by the Medical Devices Regulations 2002, with the CE Mark to be replaced by the UKCA Mark103104106108109119120121 - Post-market regulatory requirements include establishing registration and device listings, quality assurance systems, labeling regulations, UDI requirements, medical device reporting, and corrective action reporting112117 - The company must also comply with U.S. anti-kickback laws, false claims laws, HIPAA data privacy laws, and the Sunshine Act, among other healthcare fraud and abuse laws124126129130131 - Healthcare reform measures, such as the Affordable Care Act (ACA), may impact medical product pricing and reimbursement, adversely affecting the company's business144148 U.S. Regulation US medical devices are regulated by the FDA, categorized into Class I, II, or III, requiring pre-market clearance (510(k), PMA, or de novo classification), with ReWalk classified as a Class II powered exoskeleton and ReStore receiving 510(k) clearance, all subject to post-market requirements - U.S. medical devices are regulated by the FDA, categorized into Class I, II, or III, requiring pre-market clearance through 510(k) notification, PMA approval, or a de novo classification order103104106 - ReWalk received FDA "de novo" classification in June 2014, categorizing it as a Class II powered exoskeleton device subject to special controls108 - ReStore received FDA 510(k) clearance in June 2019 for stroke patient rehabilitation109 - Post-market regulatory requirements include compliance with Quality System Regulation (QSR), adverse event reporting, UDI requirements, and post-market surveillance112114117 - The FDA confirmed in May 2022 that ReWalk had completed its 522 post-market study requirements113 Regulation outside of the U.S. Medical devices in the EU are regulated by the MDR 2017/745, requiring CE marking, while post-Brexit UK regulations (Medical Devices Regulations 2002) will replace CE with UKCA marking, and other jurisdictions have their own approval processes - Medical devices in the European Union are regulated by the EU Medical Device Regulation (MDR) 2017/745 and require CE marking119120 - Following Brexit, medical devices in the United Kingdom are regulated by the Medical Devices Regulations 2002, and the CE Mark will be replaced by the UKCA Mark121 - Sales in other jurisdictions require compliance with local government regulations and approval processes122 U.S. Anti-kickback, False Claims and Other Healthcare Fraud and Abuse Laws The company is subject to US anti-kickback, false claims, and healthcare fraud laws, including HIPAA and ACA, which prohibit inducements for product purchases, false claims to the government, and mandate reporting of payments to healthcare providers under the Sunshine Act, alongside data privacy regulations - Federal and state anti-kickback laws prohibit paying or receiving kickbacks to induce the purchase or recommendation of medical products and services124 - The Civil False Claims Act (FCA) prohibits knowingly submitting false or fraudulent claims for payment to the federal government, which can result in treble damages and civil penalties126 - Federal criminal statutes, including the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA) amendments, prohibit healthcare fraud and abuse129 - The Physician Payments Sunshine Act requires medical device manufacturers to annually report payments and other transfers of value made to healthcare providers130 - The company is also subject to data privacy and security regulations, such as HIPAA, HITECH, GDPR, and CCPA131261262 Coverage and Reimbursement Commercial success hinges on obtaining adequate coverage and reimbursement from government and private third-party payers, who increasingly restrict or regulate pricing, potentially limiting product access or requiring high co-payments, making favorable CMS coverage crucial for new product launches - The commercial success of products depends on government payers (Medicare, Medicaid), private health insurance companies, and other third-party payers providing coverage and establishing adequate reimbursement levels136 - Government agencies and third-party payers are increasingly limiting or regulating the prices of medical products and services, which could result in average selling prices lower than anticipated137 - Payers may restrict coverage for specific therapeutic products or require high co-payments to control costs137142 - Obtaining favorable CMS coverage and reimbursement is often a critical issue for the successful launch of new products140 Healthcare Reform Measures Healthcare reform measures in the US and abroad, such as the ACA and Budget Control Act of 2011, aim to control healthcare spending, potentially limiting government payments for medical products and services, restricting coverage and reimbursement, and reducing product demand - The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory reforms to limit the growth of government healthcare spending143 - The Patient Protection and Affordable Care Act (ACA) significantly altered healthcare financing and had a major impact on the pharmaceutical industry144 - The Budget Control Act of 2011 resulted in a 2% reduction in Medicare payments, and the Bipartisan Budget Act of 2018 extended this cut146242 - Future healthcare reform measures may limit the amount governments pay for medical products and services, leading to restricted coverage and reimbursement, and reduced product demand150 Environmental Matters The company adheres to environmental, health, and safety regulations concerning air and water emissions, chemical management, and waste disposal, with Israeli contract manufacturers requiring poison permits and EU products complying with WEEE and RoHS directives, affirming material compliance with applicable laws - The company complies with various environmental, health, and safety laws and regulations, including those concerning air emissions, water discharges, and the use, transportation, management, and disposal of chemicals and hazardous materials151 - In Israel, contract manufacturers are required to obtain a poison permit under the Israeli Hazardous Substances Law152 - In the EU market, electrical and electronic equipment must comply with the WEEE Directive (encouraging reuse and recycling) and the RoHS Directive (restricting the use of hazardous substances)153 - The company believes it is in compliance with applicable environmental laws and regulations in all material respects153 Manufacturing The company contracts Sanmina Corporation to manufacture all its products, including ReWalk and ReStore, at its Ma'alot, Israel facility, enabling focus on technology development and commercialization with scalable production, while internally developing some software components and licensing others - The company contracts Sanmina Corporation to manufacture all its products, including ReWalk and ReStore, at its Ma'alot, Israel facility154 - This contract manufacturing relationship allows the company to focus on technology development and commercialization, and provides scalable production capacity155 - The company internally develops some software components and licenses other open-source software156 - The company produces based on internal sales forecasts, aiming to deliver products within two weeks of receiving an order156 Suppliers The company relies on Sanmina for most product components and raw materials, sourced globally, with some direct procurement; despite pandemic-driven electronic component price increases, current manufacturing and supply arrangements are deemed sufficient for foreseeable capacity needs - The company contracts Sanmina to procure all product components and raw materials, with some raw materials procured directly by the company158 - Components and raw materials are sourced from suppliers in the United States, Europe, China, and Israel158 - During the pandemic, prices for some electronic components increased158 - The company believes its manufacturing and supply arrangements are sufficient to support foreseeable capacity needs159 Human Capital As of December 31, 2022, the company employed 56 individuals primarily in sales, marketing, and R&D, adhering to local labor laws, offering competitive compensation and benefits, and fostering a diverse and inclusive work environment - As of December 31, 2022, the company had 56 employees (including full-time and hourly workers), with 24 in the United States, 17 in Israel, and 15 in Europe159 - Most employees are engaged in sales and marketing activities159 - The company complies with labor laws and regulations in the United States, Germany, and Israel, offering competitive compensation, bonuses, equity incentives, and comprehensive benefits programs160161 - The company is committed to diversity and inclusion, encouraging different perspectives and striving to create an equal opportunity workplace162 Financial Information about Geographic Areas and Significant Customer Information In 2022, the company's total revenue was $5.511 million, an 8% decrease from $5.966 million in 2021, with both the US and Europe being primary revenue sources experiencing declines, while Israel, Asia-Pacific, and Africa contributed smaller amounts Revenue by Customer Location (thousand dollars) | | 2022 | 2021 | | :--- | :--- | :--- | | Israel | 32 | — | | United States | 2,303 | 2,519 | | Europe | 3,057 | 3,381 | | Asia-Pacific | 115 | 60 | | Africa | 4 | 6 | | Total Revenue | 5,511 | 5,966 | - Total revenue in 2022 was $5.511 million, an 8% decrease from 2021, primarily due to decreased U.S. rehabilitation equipment sales and unfavorable Euro to U.S. Dollar exchange rates406 ITEM 1A. RISK FACTORS Risks Related to Our Business and Our Industry The company faces business and industry risks including global economic uncertainty, ongoing COVID-19 impacts, insufficient funding, Nasdaq delisting risk, new product development challenges, low market acceptance, reliance on a single manufacturer and limited suppliers, intense competition, non-exclusive distributors, high warranty claims, and inadequate R&D capabilities - Weak and uncertain global, regional, and local economic conditions could adversely affect demand for products and services and financial performance166 - The COVID-19 pandemic has adversely affected, and may continue to adversely affect, business, operations, and financial results168 - The company may not have sufficient capital to meet future operating needs or capital requirements, potentially necessitating dilutive equity or restrictive debt financing172 - The company does not meet all Nasdaq Capital Market listing requirements, posing a risk of delisting177 - Future growth and operating results depend on the ability to develop, obtain regulatory clearance for, and commercialize new products, as well as penetrate new markets181 - The company relies on sales of ReWalk and ReStore systems and related service contracts and extended warranties, and may not achieve or maintain market acceptance187 - The medical exoskeleton market is relatively new and unproven, and assumptions about the potential market may be inaccurate190 - The company relies on a single third-party supplier (Sanmina) for product manufacturing and a limited number of third-party suppliers for certain components, posing risks of supply chain disruptions and operational challenges216218 - The industry in which the company operates is highly competitive and rapidly changing, with competition expected to intensify221 - The independent distributors utilized by the company may sell competing products225 - The company may receive a significant number of warranty claims or ReWalk and ReStore systems may require substantial after-sales service226 - The company may not be able to enhance its product offerings through research and development efforts227 Risks Related to Government Regulation The company faces government regulatory risks such as US healthcare reform, no guaranteed fast FDA approval for breakthrough devices, marketing compliance, manufacturing and labeling regulations, QSR compliance, anti-fraud and anti-bribery laws, patient health information confidentiality, and the compliance costs and management challenges of being a US public company and medical device manufacturer - FDA Breakthrough Device designation does not guarantee regulatory clearance or a faster clearance timeline235 - U.S. healthcare reform measures and other potential legislative initiatives could adversely affect the company's business238 - The company's devices are subject to FDA marketing and promotional communication regulations, and non-compliance could lead to enforcement actions244 - The company is subject to extensive government regulations concerning the manufacturing, labeling, and marketing of its products, and non-compliance could lead to product withdrawals or recalls246 - Failure by the company or its third-party manufacturer to comply with FDA's Quality System Regulation (QSR) could lead to disruptions in manufacturing operations255 - The company is subject to various laws and regulations, including "fraud and abuse" laws and anti-bribery laws, and violations could result in substantial penalties257 - If the company is found to be in violation of laws protecting the confidentiality of patient health information, it could face civil or criminal penalties261 - Compliance with various regulations as a U.S. public company and medical device manufacturer could lead to increased administrative expenses, management distraction, and compliance challenges264 Risks Related to Our Intellectual Property and Information Technology The company's success relies partly on intellectual property protection but faces risks from patent validity uncertainty, high litigation costs, trade secret disclosure, IT system failures, and cybersecurity attacks, potentially leading to loss of competitive advantage, legal liabilities, and business disruptions - The company relies on computer and telecommunications systems that it does not own or control, and system failures or cybersecurity attacks could severely disrupt business operations or lead to the disclosure of sensitive customer information269 - The company's success is partly dependent on obtaining and maintaining protection for intellectual property related to its products274 - The patent landscape for robotic and exoskeleton inventions is highly uncertain, and patent laws and interpretations may change, potentially weakening patent value or narrowing the scope of protection275 - Intellectual property litigation can be time-consuming and expensive, potentially leading to patent invalidation or narrow interpretation276 - The company relies on trademark protection to distinguish its products, but trademarks may be challenged or infringed upon289 - The company may face claims from employees or other companies regarding the improper use or disclosure of former employers' trade secrets290 Risks Related to Ownership of Our Ordinary Shares Ownership of the company's ordinary shares carries multiple risks, including potential dilution from large stock sales or warrant exercises, future equity incentive plans, failure to meet analyst expectations, reduced investor appeal as a 'smaller reporting company,' internal control compliance costs, adverse tax consequences if deemed a PFIC, and stock price volatility - Significant sales of ordinary shares by the company or major shareholders, or large exercises of warrants by holders, could adversely affect the value of ordinary shares291 - Future grants of ordinary shares to employees, non-employee directors, and consultants under equity incentive plans, or sales of shares by these individuals in the open market, could result in substantial dilution295 - If the company fails to meet the expectations of equity research analysts, or if analysts cease publishing research reports or issue unfavorable comments, the stock price could decline297 - The company's status as a "smaller reporting company" and its simplified reporting requirements may reduce the attractiveness of its ordinary shares to investors300 - The company faces ongoing costs and risks in determining whether its existing internal control over financial reporting system complies with Section 404 of the Sarbanes-Oxley Act, and failure to maintain adequate internal controls could materially adversely affect financial performance and reputation302 - If the company is deemed a passive foreign investment company (PFIC), U.S. holders of ordinary shares may face adverse U.S. tax consequences306 - The price of the company's ordinary shares may fluctuate, and investors could lose all or part of their investment313 Risks Related to Our Incorporation and Location in Israel The company's Israeli operations face risks from political and military instability, employee military service, boycotts, termination of tax benefits, government funding restrictions on technology transfer, and employee invention claims, while Israeli law and articles of association may hinder M&A, and US court judgments may be difficult to enforce - The company's technology development and quality headquarters, as well as its contract manufacturer's facilities, are located in Israel; therefore, economic restrictions and political and military instability in Israel could adversely affect the company's business315 - Military service obligations for Israeli citizens could disrupt the operations of the company and its contract manufacturer318 - Boycotts against Israel could adversely affect the sales of the company's products319 - Tax benefits available to the company require meeting various conditions and may be terminated or reduced in the future, increasing costs and taxes320 - The company has received funding from the Israeli government for its R&D activities, and the terms of these grants restrict the company's ability to manufacture products or transfer technology outside of Israel, or may require penalty payments if the company is sold321 - The company may face claims from employees regarding their rights to compensation or royalties for service inventions325 - Provisions of Israeli law and the company's articles of association may delay, prevent, or otherwise hinder mergers or acquisitions of the company326 - Judgments rendered against the company, its officers, and directors in U.S. courts may be difficult to enforce in Israel, or it may be difficult to assert U.S. securities law claims or serve process in Israel333 General Risks The company faces profitability risks from currency exchange rate fluctuations (USD, EUR, NIS), changes in international trade and anti-bribery laws, fiscal and tax policy adjustments, IT system disruptions, and challenges in managing growth, while also being highly dependent on senior management and potentially impacted by US federal government shutdowns - Fluctuations in exchange rates between the U.S. Dollar, Euro, and New Israeli Shekel could adversely affect the company's profitability339 - The company is subject to various regulatory regimes that may affect international operations, and failure to comply with applicable laws and regulations could harm its reputation and lead to fines and increased costs344 - Changes in fiscal and tax policies could have a significant impact on the company's business and result in potential negative or unexpected tax consequences346 - If the company is deemed a controlled foreign corporation (CFC), U.S. holders of ordinary shares may face adverse U.S. tax consequences348 - Significant disruptions to information technology systems could adversely affect the company's business, financial condition, and results of operations350 - If the company fails to properly manage anticipated growth, its business could be harmed352 - The company is highly dependent on the knowledge and skills of its senior management, and failure to attract and retain highly qualified personnel may prevent successful implementation of business strategies353 - A U.S. federal government shutdown could severely harm the company's business and financial condition355 ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments in this report - There are no unresolved staff comments in this report356 ITEM 2. PROPERTIES The company's headquarters are in Yokneam, Israel, with US operations in Marlborough and European operations in Berlin, Germany; all facilities are leased, totaling approximately 24,297 square feet, and are considered sufficient for current needs - The company's headquarters are located in Yokneam, Israel, its U.S. headquarters in Marlborough, Massachusetts, and its European headquarters in Berlin, Germany - All facilities are leased, and the company does not own any real estate - The company believes its facilities are sufficient to meet current needs357358 Leased Property Area (approximate, square feet) | Location | Area (square feet) | | :--- | :--------------- | | Marlborough, Massachusetts | 11,850 | | Yokneam, Israel | 11,500 | | Berlin, Germany | 947 | | Total | 24,297 | ITEM 3. LEGAL PROCEEDINGS The company is occasionally involved in various legal claims, lawsuits, and regulatory investigations arising in the ordinary course of business, for which it accrues losses when probable and estimable, but does not believe any pending or threatened matters will materially adversely affect its consolidated operating results, liquidity, or financial condition - The company is occasionally involved in various legal claims, lawsuits, and regulatory investigations, most of which arise in the ordinary course of business359 - The company accrues for losses when they are probable and the amount can be reasonably estimated359 - The company does not believe that any pending or threatened legal matters will have a material adverse effect on its consolidated operating results, liquidity, or financial condition360 ITEM 4. MINE SAFETY DISCLOSURES Not applicable - Not applicable362 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The company's ordinary shares began trading on the Nasdaq Global Market on September 12, 2014, transferred to the Nasdaq Capital Market on May 25, 2017, and had approximately 278,511 registered shareholders as of February 23, 2023 - The company's ordinary shares began trading on the Nasdaq Global Market on September 12, 2014, and transferred to the Nasdaq Capital Market on May 25, 2017365 - As of February 23, 2023, the company had approximately 278,511 registered shareholders365 Dividend Policy The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, planning to retain future earnings to fund operations and business expansion, with dividend distributions restricted by Israeli law to retained earnings or court approval - The company has never declared or paid any cash dividends and does not expect to do so in the foreseeable future366 - The company plans to retain any future earnings to fund operations and business expansion366 - Dividend distributions are restricted by Israeli law, allowing distribution only from retained earnings or with Israeli court permission366 Israeli Taxes Applicable to U.S. Holders Non-Israeli residents selling shares in Israeli public companies are generally exempt from Israeli capital gains tax under certain conditions, while dividends paid to non-Israeli residents are typically subject to 25% or 30% Israeli income tax, potentially reduced by tax treaties, with US residents possibly eligible for federal income tax credits - Capital gains derived by non-Israeli residents from the sale of shares in Israeli public companies are generally exempt from Israeli tax, provided certain conditions are met, such as the shares not being held through a permanent establishment in Israel367 - Dividends paid to non-Israeli residents are generally subject to Israeli income tax at a rate of 25% or 30%, with the specific tax rate potentially reduced by applicable tax treaties371 - Under the U.S.-Israel tax treaty, dividends paid to U.S. residents are subject to a maximum Israeli withholding tax rate of 25%, which may be reduced to 15% or 12.5% in certain circumstances371 - U.S. residents may be entitled to a U.S. federal income tax credit after paying Israeli withholding tax371 - Israeli individuals with annual income exceeding a certain threshold (NIS 663,240 in 2022) are subject to an additional 3% tax372 Recent Sales of Unregistered Equity Securities All sales of unregistered equity securities during the reporting period have been disclosed in Form 8-K or Form 10-Q quarterly reports - All sales of unregistered equity securities during the reporting period have been disclosed in Form 8-K or Form 10-Q quarterly reports373 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The company initiated a stock repurchase program in June 2022, with board approval to repurchase up to $8 million of ordinary shares, extended by an additional $5.8 million in December 2022, resulting in the repurchase of approximately 2.9 million ordinary shares for a total cost of $2.6 million as of December 31, 2022 - The company initiated a stock repurchase program in June 2022, with the Board of Directors approving the repurchase of up to $8 million of ordinary shares, and further approving an extension of the repurchase program by an additional $5.8 million in December 2022374376459460 Q4 2022 Stock Repurchase Activity (thousand dollars) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Value of Shares That May Yet Be Purchased Under the Plan | | :----------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------- | :------------------------------------------------------------- | | October 1 - October 30, 2022 | 529,319 | $0.90 | 529,319 | $7,330 | | November 1 - November 30, 2022 | 1,056,776 | $0.94 | 1,056,776 | $6,317 | | December 1 - December 31, 2022 | 1,162,484 | $0.80 | 1,162,484 | $5,358 | | Quarter Total | 2,748,579 | $0.87 | 2,748,579 | $5,358 | - As of December 31, 2022, the company had repurchased approximately 2.9 million ordinary shares at a total cost of $2.6 million462 - Between January 1 and January 20, 2023, the company repurchased an additional 730,350 ordinary shares under the repurchase program for a total consideration of $628,477376 ITEM 6. [RESERVED] This item is reserved and contains no content ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The company is a medical device firm developing mobility and health technologies for neurological disorders, featuring ReWalk SCI exoskeletons, ReStore stroke exoskeletons, and MyoCycle distribution, primarily targeting US and European markets with revenue from third-party payers and self-pay individuals, while ReBoot soft exoskeleton development is paused - The company designs, develops, and commercializes innovative technologies aimed at providing rehabilitation and daily living mobility and health support for individuals with neurological disorders379 - Primary products: ReWalk Personal and ReWalk Rehabilitation exoskeleton devices (for spinal cord injury), ReStore Exo-Suit device (for stroke rehabilitation) - Distributed products: MYOLYN MyoCycle FES Pro cycling device (exclusive U.S. distribution), MediTouch Tutor motion biofeedback system (distribution terminated) - Products in development: ReBoot (personal soft exoskeleton for post-stroke home and community use), which received FDA Breakthrough Device designation, but further investment was paused in 2023379380381 - Primary markets are the United States and Europe, with revenue derived from third-party payers (including private and government payers) and self-pay individuals382383 - The company is actively pursuing coverage and reimbursement from Medicare and German health insurance385386 Components of Our Statements of Operations This section details the company's statement of operations components, including revenue from product sales, leases, service contracts, and extended warranties, cost of revenue and gross profit, operating expenses (R&D, S&M, G&A), net financial expenses (income), income taxes, and government grants - Revenue primarily derives from sales and leases of ReWalk Personal and ReWalk Rehabilitation exoskeleton devices, sales of ReStore exoskeleton devices, sales of distributed products, and related extended service contracts - Revenue sources include third-party payers (private and government employers, institutions) and self-pay individuals, with third-party payers expected to become an increasingly important revenue source - Cost of revenue primarily includes the cost of systems procured from outsourced manufacturer Sanmina, internal personnel costs, manufacturing and inventory management, training and inspection, warranty and service activities, freight, and inventory impairment provisions - Gross profit and gross margin are affected by product sales volume, pricing, product mix, and fluctuations in cost of revenue, and are expected to expand in the future with revenue growth and economies of scale - Research and development expenses primarily include personnel costs, materials, consulting fees, clinical research, regulatory filings, and patent costs, net of R&D grants received - Sales and marketing expenses primarily include personnel costs related to sales, marketing, and reimbursement, travel, advertising, trade shows, lobbying, and public relations activities - General and administrative expenses primarily include administrative, finance, and management personnel costs, professional service fees, and insurance premiums - Net financial expenses (income) include b