SHAREHOLDERS' EQUITY | NOTE 8:- SHAREHOLDERS’ EQUITY a. Ordinary shares: The ordinary shares of the Company confer on the holders thereof voting rights, rights to receive dividends and rights to participate in distribution of assets upon liquidation after any outstanding preferred shares receive their preference amount. b. Equity raise: 1. At-the-market offering program: On May 10, 2016, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Piper Jaffray, pursuant to which it may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $25 million, through Piper Jaffray acting as its agent. Subject to the terms and conditions of the Equity Distribution Agreement, Piper Jaffray will use its commercially reasonable efforts to sell on the Company’s behalf all of the ordinary shares requested to be sold by the Company, consistent with its normal trading and sales practices. Piper Jaffray may also act as principal in the sale of ordinary shares under the Equity Distribution Agreement. Sales may be made under the Company’s Form S-3, in what may be deemed “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “ATM Offering Program”). Sales may be made directly on or through the NASDAQ Capital Market, the existing trading market for the Company’s ordinary shares, to or through a market maker other than on an exchange or otherwise, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law, including in privately negotiated transactions. Piper Jaffray is entitled to compensation at a fixed commission rate of 3.0% of the gross sales price per share sold through it as agent under the Equity Distribution Agreement. Where Piper Jaffray acts as principal in the sale of ordinary shares under the Equity Distribution Agreement, such rate of compensation will not apply, but in no event will the total compensation of Piper Jaffray, when combined with the reimbursement of Piper Jaffray for the out-of-pocket fees and disbursements of its legal counsel, exceed 8.0% of the gross proceeds received from the sale of the ordinary shares. The Company is not required to sell any of its ordinary shares at any time. The Company may raise up to $25 million under its ATM Offering Program pursuant to the terms of its agreement with the sales agent. However, due to limitations under the rules of Form S-3, which have applied to the Company since it filed its annual report on Form 10-K, in February 2017, as of the date of this annual report we may only issue up to approximately $13.7 million in primary offerings under our effective registration statement on Form S-3 (the “Form S-3”), including our ATM Offering Program, during any 12-month period while we remain subject to these limitations. Because we have already sold $15.7 million in the ATM Offering Program since its inception, we may only raise up to a remaining $9.3 million using the program, subject to the $13.7 million cap during any rolling 12-month period. During the 12 months after the Company became subject to these rules, the Company issued and sold 1,247,172 ordinary shares at an average price of $1.09 per share under its ATM Offering Program. The gross proceeds to the Company were $1.4 million, and the net aggregate proceeds after deducting commissions, fees and offering expenses in the amount of $236 thousand were $1.1 million. As a result, from the inception of the ATM Offering Program in May 2016 until December 31, 2018, the Company had sold 7,552,318 ordinary shares under the ATM Offering Program for gross proceeds of $15.7 million and net proceeds to the Company of $14.5 million (after commissions, fees and expenses). Additionally, as of that date, the Company had paid Piper Jaffray compensation for the fixed commission rate of 3.0% in the aggregated amount of $471 thousand and had incurred total expenses of approximately $1,171 thousand in connection with the ATM Offering Program. 2. Follow-on offering In November 2017, the Company entered into the Underwriting Agreement with National Securities Corporation (“National”), in connection with the Company’s follow-on public offering of 6,857,000 ordinary shares. Each ordinary share was sold to the public at a price of $1.05 per share. On November 22, 2017 National exercised in full its option to purchase 1,028,550 additional ordinary shares at the public offering price of $1.05 per share, less the underwriting discount. The Company’s gross proceeds were $8.3 million. The Company’s net aggregate proceeds, after deducting underwriting discounts, commissions and expenses, were $7.2 million . In November 2018, the Company entered into the Underwriting Agreement with H.C. Wainwright & Co., LLC (“H.C. wainwright”), in connection with the Company’s follow-on public offering of 12,401,390 units, each consisting of one ordinary share and one warrant to purchase one ordinary share with an exercise price of $0.30 per warrant. Each unit was sold to the public at a price of $0.30 per unit. On November 18, 2018, H.C. wainwright exercised in full its option to purchase 5,799,108 ordinary shares for $0.29 per share and/or common warrants to purchase up to an additional 5,799,108 ordinary shares for $0.01 per warrant, in each case, less underwriting discounts and commission. Additionally the company issued and sold 26,259,332 pre-funded units, each unit was sold to the public at a price of $0.29 per unit. Each unit containing one pre-funded warrant with an exercise price of $0.01 per share and one warrant to purchase one ordinary share with an exercise price of $0.30 per warrant. The total gross proceeds received from the follow-on public offering, before deducting commissions, discounts and expenses, were $13.1 million (including proceeds from the exercise of 2,267,284 pre-funded warrants at the closing of the offering). As of December 31, 2018, additional pre-funded warrants to purchase an aggregate 14,061,666 ordinary shares had been exercised, for additional proceeds of $140,617. As compensation for their role in the offering, the Company also issued to the Underwriters warrants to purchase up to 2,667,590 ordinary shares, which are immediately exercisable starting on November 20, 2018 until November 15, 2023 at $0.375 per share. 3. Investment agreement On March 6, 2018, the Company entered into an investment agreement with Timwell Corporation Limited, a Hong Kong corporation (“Timwell”), as amended on May 15, 2018 (the “Investment Agreement”), pursuant to which the Company agreed to issue to Timwell, in three different tranches, an aggregate of 16,000,000 ordinary shares in return for aggregate gross proceeds of $20 million. The closing of each tranche is subject to certain closing conditions. The closing of the first tranche (the “First Tranche Closing”) took place on May 15, 2018, upon which Timwell received 4,000,000 ordinary shares for an aggregate purchase price of $5,000,000, and Timwell and the Company signed a registration rights agreement in the form attached to the Investment Agreement. The net aggregate proceeds of the First Tranche Closing after deducting fees and other related expenses in the amount of approximately $705 thousands were approximately $4.3 million. The remaining investment is to occur in two tranches, including $10 million for the issuance to Timwell of 8,000,000 ordinary shares (the “Second Tranche”) and $5 million for the issuance to Timwell of 4,000,000 ordinary shares (the “Third Tranch”). The closing of the second and third tranches is subject to specified closing conditions, including, with respect to the second tranche, the signing of a license agreement and a supply agreement and the formation of the China JV (the “China JV”) based on the JV Framework Agreement, and, with respect to the third tranche, the successful production of certain ReWalk products by the China JV. The second tranche closing was initially expected to occur by July 1, 2018 and the third tranche closing was initially expected to occur by December 31, 2018 and no later than April 1, 2019. In light of the positions taken by Timwell during the negotiations on definitive joint venture and license agreements, we no longer believe that agreement can be reached on the basis of the original understandings reflected in our Investment Agreement with Timwell. We remain in dialogue with RealCan, Timwell’s affiliate, and we are discussing with RealCan various alternative pathways to commercialize our products in China. Due to the various delays in the process and other barriers to closing we currently see a significant risk that we will not reach agreement with RealCan on a modification of the original agreement. As we continue to view China as a market with key opportunities for products designed for stroke patients, we are also evaluating potential relationships with other groups to penetrate the Chinese market. In May 2018, the Company entered into a fee and release agreement with Canaccord Genuity LLC (“Canaccord Genuity”) requiring the Company to pay to Canaccord Genuity, in connection with a settlement, in addition to certain cash amounts, (i) $125 thousand in ordinary shares of the Company after the closing of the First Tranche of the Timwell transaction and (ii) $225 thousand in ordinary shares of the Company after the closing of the Second Tranche of the Timwell transaction (or such lower amount if the Second Tranche Closing is less than $10.0 million). The price per share used for calculation of the number of ordinary shares issued by the Company to Canaccord Genuity is based on the volume weighted average price of the Company’s ordinary shares as reported on the Nasdaq Capital Market for the five consecutive trading days prior to the date of issuance. The Company is also obligated to pay $100 thousand in cash following the closing of the Third Tranche of $5.0 million (or such lower amount if the Third Tranche Closing is less than $5.0 million). Following the closing of the first tranche of the Timwell transaction in May 15, 2018, the Company issued 117,891 ordinary shares to Canaccord Genuity. In connection with the First Tranche Closing, on May 15, 2018, the Company also amended its exclusive distribution agreement with Yaskawa Electric Corporation (“Yaskawa”), dated September 24, 2013, to terminate the distribution rights granted to Yaskawa in China (including Hong Kong and Macau), as required by the Investment Agreement. c. Share Option Plans: On March 30, 2012, the Company’s board of directors adopted the ReWalk Robotics Ltd. 2012 Equity Incentive Plan. On August 19, 2014, the Company’s board of directors adopted the ReWalk Robotics Ltd. 2014 Incentive Compensation Plan or the “Plan”. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-based awards, other stock-based awards and dividend equivalents to the Company’s and its affiliates’ respective employees, non-employee directors and consultants. Starting in 2014, the Company grants to directors and employees Restricted Stock Units (“RSUs”) under this Plan. An RSU award is an agreement to issue shares of the company’s ordinary shares at the time the award is vested. As of December 31, 2018 and 2017, the Company had reserved 1,535,634 and 1,301,521 shares of ordinary shares, respectively, available for issuance to employees, directors, officers and non-employees of the Company. The share reserve pool will increase on January 1 of each calendar year during the term of the 2014 Plan in an amount equal to the lesser of: (x) 972,000, (y) 4% of the total number of shares outstanding on December 31 of the immediately preceding calendar year, and (z) an amount determined by the Company’s board of directors. The options generally vest over four year, with certain options granted to non-employee directors during the fiscal year ended December 31, 2018, vesting over one year. Any option that is forfeited or canceled before expiration becomes available for future grants under the Plan. A summary of employee share options activity during the fiscal year ended 2018 is as follows: Number Average exercise price Average remaining contractual life (years) Aggregate intrinsic value (in thousands) Options outstanding at the beginning of the year 1,277,726 $ 2.69 6.33 $ 8 Granted 662,427 1.09 Exercised — — Forfeited (122,894 ) 5.54 Options outstanding at the end of the year 1,817,259 $ 1.91 6.37 $ — Options exercisable at the end of the year 1,033,602 $ 2.39 4.25 $ — A summary of employee RSUs activity during the fiscal year ended 2018 is as follows: Number of shares underlying outstanding RSUs Weighted- average grant date fair value Unvested RSUs at the beginning of the year 569,071 3.13 Granted 510,803 1.09 Vested (1) (342,820 ) 2.74 Forfeited (84,304 ) 2.59 Unvested RSUs at the end of the year 652,750 1.80 (1) During the fiscal year ended December 31, 2018, the aggregate number of ordinary shares that were issued pursuant to RSUs that became vested on a net basis was 340,367 ordinary shares. The weighted average grant date fair values of options granted during the fiscal year ended December 31, 2018, 2017 and 2016 were $0.61, $1.02 and $4.75 respectively. The weighted average grant date fair values of RSUs granted during the fiscal year ended December 31, 2018, 2017 and 2016, were $1.07, $1.44 and $9.28, respectively. The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders, which hold options with positive intrinsic value, exercised their options on the last date of the exercise period. Total intrinsic value of options exercised for the year ended December 31, 2017 and 2016 were $29 thousand and $844 thousand, respectively. During the year ended December 31, 2018 no options were exercised. Total fair value of shares vested during the year ended December 31, 2018, 2017 and 2016 were $2,918 thousand, $3,785 thousand and $3,626 thousand respectively. As of December 31, 2018, there were $1.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2012 and 2014 Plans. This cost is expected to be recognized over a period of approximately 2.0 years. The number of options and RSUs outstanding as of December 31, 2018 is set forth below, with options separated by range of exercise price: Range of exercise price Options and RSUs Outstanding as of December 31, 2018 Weighted average remaining contractual life (years) (1) Options Exercisable as of December 31, 2018 Weighted average remaining contractual life (years) (1) RSUs only 652,750 — — — $0.82 19,764 2.03 19,764 2.03 $1.32 980,355 7.38 322,928 3.42 $1.47-$2.10 718,800 5.04 597,093 4.35 $6.80-$8.99 66,941 7.05 63,000 7.06 $9.22-$10.98 14,046 7.32 13,577 7.33 $19.62-$20.97 17,353 5.97 17,240 5.97 2,470,009 6.37 1,033,602 4.25 (1) Calculation of weighted average remaining contractual term does not include the RSUs that were granted, which have an indefinite contractual term. On September 6, 2017, the Company commenced a one-time equity award exchange program (the “Equity Exchange Program”), offering to certain eligible employees, executive officers and consultants the opportunity to cancel certain outstanding “underwater” stock options issued under the 2014 Plan, in exchange for the grant under such plan of a lesser number of RSUs. The Company’s non-employee directors and retirees were not eligible to participate in the Equity Exchange Program. The Company conducted the Equity Exchange Program as a “value-for-value” exchange, pursuant to which the Company issued new RSUs with a value approximately equal to the value of the options that are surrendered, in accordance with the terms approved by the Company’s shareholders at the annual meeting of shareholders held on June 27, 2017. The primary purpose of the Equity Exchange Program was to restore the intended retention and incentive value of certain employee and consultant equity awards. Participation in the Equity Exchange Program was voluntary. The Company used the 52-week high closing price of its ordinary shares (as measured at the commencement of the Equity Exchange Program) as a threshold for options eligible to be exchanged. On the Equity Exchange Program’s expiration date of October 4, 2017, 46 holders tendered options to purchase an aggregate of 945,416 ordinary shares, representing 96.4% of all options eligible for exchange, and on October 5, 2017, the Company granted to these holders an aggregate of 251,872 new RSUs. 180,167 of these new RSUs were granted to the Company’s executive officers and “named executive officers” (as defined in Item 402 of Regulation S-K of the SEC). Unless the Company’s compensation committee accelerates their vesting, the new RSUs vest over a three-year period, with one-third vesting on the first anniversary of the date of grant and one-third vesting on each of the next two successive anniversaries. Additionally, the forfeiture terms of the new RSUs are substantially the same as those that apply generally to previously-granted RSUs granted under the 2014 Plan. The modification was analyzed under ASC No. 718 to determine if the new vesting condition remain probable, as the original. Since the modification also increased the fair value of the Equity Exchange Program, the Company decided to implement one of the two acceptable methods and recognize the incremental compensation amounted to $159 thousand over the new service period, while the unrecognized compensation cost remaining from the original grant will be recognized over the remainder of the original requisite service period. The stock options exchanged pursuant to the Exchange Program were canceled and the ordinary shares underlying such options became available for issuance under the 2014 Plan. d. Equity compensation issued to consultants: The Company granted 3,454 options to a non-employee consultant on March 12, 2007, which were exercised during the fiscal year ended December 31, 2018. The Company granted 89,148 fully vested RSUs during the fiscal year ended December 31, 2018 to non-employee consultants. As of December 31, 2018, there are no outstanding options or RSUs held by non-employee consultants. e. Warrants to purchase ordinary shares During the fiscal year ended December 31, 2018, 16,328,950 warrants were exercised into ordinary shares. The following table summarizes information about warrants outstanding and exercisable as of December 31, 2018: Issuance date Warrants outstanding Exercise price per warrant Warrants exercisable Exercisable through (number) (number) December 30, 2015 (1) (4) 119,295 $ 0.30 119,295 See footnote (1) November 1, 2016 (2) 2,437,500 $ 4.75 2,437,500 November 1, 2021 December 28, 2016 (3) (4) 47,717 $ 0.3 47,717 See footnote (1) November 20, 2018 (5) 44,459,830 $ 0.3 44,459,830 November 20, 2023. November 20, 2018 (6) 2,667,590 $ 0.375 2,667,590 November 15, 2023 November 20, 2018 (7) 9,930,382 $ 0.01 9,930,382 November 20, 2023. 59,662,314 59,662,314 (1) Represents warrants for ordinary shares issuable upon an exercise price of $9.64 per share, which were granted on December 31, 2015 to Kreos Capital V (Expert) Fund Limited, or Kreos, in connection with a loan made by Kreos to us and are currently exercisable (in whole or in part) until the earlier of (i) December 30, 2025 or (ii) immediately prior to the consummation of a merger, consolidation, or reorganization of us with or into, or the sale or license of all or substantially all the assets or shares of us to, any other entity or person, other than a wholly-owned subsidiary of us, excluding any transaction in which our shareholders prior to the transaction will hold more than 50% of the voting and economic rights of the surviving entity after the transaction. None of these warrants had been exercised as of December 31, 2018. (2) Represents warrants issued as part of our follow-on offering in November 2016. The exercise price and the number of ordinary shares into which the warrants may be exercised are subject to adjustment upon certain corporate events, including stock splits, reverse stock splits, combinations, stock dividends, recapitalizations, reorganizations and certain other events. Our board of directors may also determine to make such adjustments to the exercise price and number of ordinary shares to be issued upon exercise based on similar events, including the granting of stock appreciation rights, phantom stock rights or other rights with equity features. At any time, the board of directors may reduce the exercise price of the warrants to any amount and for any period of time it deems appropriate. (3) Represents warrants in the amount of 47,717 ordinary shares that were issued as part of the $8.0 million drawdown under the Loan Agreement which occurred on December 28, 2016. See footnote 1 for exercisability terms. (4) On November 20, 2018, Kreos and the Company entered into the First Amendment to the Warrant to Purchase Shares (the “Kreos Warrant Amendment”), which amended the exercise price of the warrant to purchase 167,012 ordinary shares currently held by Kreos from $9.64 to $0.30. See note 6. (5) Represents warrants in the amount of 44,459,830 ordinary shares that were issued as part of our follow-on offering in November 2018. (6) Represents warrants to purchase up to 2,667,590 ordinary shares that were issued to the underwriters as compensation for their role in our follow-on offering in November 2018. (7) Represents 26,259,332 pre-funded warrants with an exercise price of $0.01 per share. As of December 31, 2018, pre-funded warrants to purchase an aggregate 16,328,950 ordinary shares had been exercised. f. Share-based compensation expense for employees and non-employees: The Company recognized non-cash share-based compensation expense in the consolidated statements of operations as follows: Year Ended December 31, 2018 2017 2016 Cost of revenues $ 16 $ 62 $ 108 Research and development, net 435 508 559 Sales and marketing, net 467 963 811 General and administrative 1,848 2,121 1,920 Total $ 2,766 $ 3,654 $ 3,398 |