Lifeward Ltd.

NOTE 1:- GENERAL

The Company has sought to expand its product offerings beyond the SCI Products through internal development and distribution agreements. In the past, the Company developed the ReStore Exo-Suit device (“ReStore”), a powered, lightweight soft exo-suit intended for use during the rehabilitation of individuals with lower limb disabilities due to stroke. The Company is no longer actively commercializing the ReStore product. The Company distributes the MYOLYN MyoCycle FES Pro cycles to U.S. rehabilitation clinics and the MyoCycle Home cycles available to U.S. veterans through VA hospitals on a non-exclusive basis.

In August 2023, the Company acquired AlterG, Inc., a provider of anti-gravity systems. AlterG’s systems utilize patented, NASA-derived Differential Air Pressure (“DAP”) technology designed to reduce the effects of gravity and enable patients to rehabilitate with calibrated support and reduced pain. Following the Company’s rebranding, AlterG, Inc. was renamed LCAI and operates as a wholly owned subsidiary of the Company.

The Company markets and sells its products directly to institutions and individuals and through third-party distributors. The Company sells its products directly primarily in the United States, through a combination (depending on the product line) of direct sales and distributors in Germany, Canada, and Australia, and primarily through distributors in other markets. In its direct markets, the Company has established relationships with clinics and rehabilitation centers, professional and college sports teams, individuals and organizations in the spinal cord injury community, and in its indirect markets, the Company’s distributors maintain these relationships.

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The Company depends on one contract manufacturer to manufacture the AlterG products in its portfolio, Cirtronics Corporation. Reliance on this vendor makes the Company vulnerable to possible capacity constraints and reduces control over component availability, delivery schedules, manufacturing yields and costs.

The Company expects to continue to generate operating losses and negative operating cash flows in the foreseeable future and will require additional funding to support its planned operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date that these consolidated financial statements are issued.

Management intends to raise additional capital through one or more financings in the near term in order to meet the Company’s cash requirements for the next 12 months. As described in Note 15 – Subsequent Events, in January 2026 the Company entered into agreements with Oramed Pharmaceuticals, Inc. and its subsidiary Oratech Pharma, Inc. which include a potential strategic transaction and related financing arrangements. On March 12, 2026, the Company’s shareholders approved the transaction. However, the closing of the transaction remains subject to the satisfaction of customary closing conditions, and there can be no assurance that the transaction will be completed or that the Company will receive the anticipated funding. If completed, the transaction is expected to provide the Company with additional liquidity to support its operations.

If the Company is unable to obtain additional capital, management may implement measures intended to manage cash expenditures and preserve liquidity. These measures may include prioritizing research and development activities, delaying certain product development initiatives, and reducing discretionary operating expenses such as marketing, travel and other non-essential costs.

Accordingly, the Company has concluded that substantial doubt exists about its ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.

The consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that might result should the Company be unable to continue as a going concern. Such adjustments could be material.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in with U.S. generally accepted accounting principles, applied on a consistent basis, as follows:

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

On an ongoing basis, the Company’s management evaluates estimates, including those related to inventories, fair values of share-based awards, derivatives, contingent liabilities, goodwill impairment, provision for warranty, allowance for credit losses, revenue recognition, and deferred taxes. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

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The functional currency is the currency that best reflects the economic environment in which the Company and its subsidiaries operate and conduct their transactions. Most of the Company’s revenues and costs are incurred in U.S. dollar. In addition, the Company’s financing activities are incurred in U.S. dollars. The Company’s management believes that the dollar is the primary currency of the economic environment in which the Company and each of its subsidiaries operate. Thus, the dollar is the Company’s and its subsidiary's functional and reporting currency.

Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are remeasured into U.S. dollars in accordance with ASC 830 “Foreign Currency Matters.” All transaction gains and losses of the remeasured monetary balance sheet items are reflected in the consolidated statements of operations as financing income or expenses as appropriate.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances have been eliminated upon consolidation.

Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, at the date acquired.

Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence.

The Company periodically evaluates the ability to realize the value of inventory based on a combination of factors, including the quantities on hand relative to historical, current, and projected sales volume. Purchasing requirements and alternative usage are explored within these processes to mitigate inventory exposure. Based on this evaluation, an impairment charge is recorded when required to write-down inventory to its net realized value. Any write-off is recognized in the consolidated statements of operations as cost of revenues.

Cost is determined as follows:

Finished products - based on raw materials and manufacturing costs on an average basis.

Work in process - based on raw materials, labor, and applicable manufacturing overhead on an average cost basis.

Raw materials - The weighted average cost method.

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Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:

The Company accounts for business combinations in accordance with ASC 805, “Business Combinations” (“ASC 805”). For business combinations accounted for under the acquisition method, ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at their fair values as of that date. The Company determines the recognition of intangible assets based on the following criteria: (i) the intangible asset arises from contractual or other rights; or (ii) the intangible asset is separable or divisible from the acquired entity and capable of being sold, transferred, licensed, returned or exchanged.

The excess of the fair value of the purchase price over the fair values of the identifiable assets and liabilities is recorded as goodwill. Determining the fair value of the identifiable assets and liabilities requires management to use significant judgment and estimates including the forecasted revenue and revenues growth rates, discount rates, customer contract renewal rates and customer attrition rates. The process of estimating the fair values requires significant estimates, especially with respect to intangible assets. Management’s determination of fair value of assets acquired and liabilities assumed at the acquisition date is based on the best information available in the circumstances and incorporates management’s own assumptions and involves a significant degree of judgment.

Acquisition related costs include legal fees, consulting and success fees, and other non-recurring integration related costs. Acquisition-related costs are expensed as incurred.

For business combinations, the purchase prices are allocated to the tangible assets and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates, with the remaining unallocated purchase prices recorded as goodwill.

The Company has no indefinite-lived intangible assets other than goodwill. Acquired identifiable finite-lived intangible assets include identifiable acquired technology, customer relationships, trademarks and backlog and are amortized on a straight-line basis over the estimated useful lives of the assets. The Company routinely reviews the remaining estimated useful lives of finite-lived intangible assets.

Goodwill is not amortized and is tested for impairment at least annually.

The Company operates as one reporting unit and the fair value of the reporting unit is estimated using quoted market prices of the Company’s stock in active markets. The Company tests goodwill for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.

When testing goodwill for impairment, the Company may first perform a qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. The Company may elect to bypass the qualitative assessment and proceed directly to performing a quantitative analysis. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company recognizes an impairment of goodwill for the amount of this excess.

As a result of this assessment, the Company recorded a goodwill impairment of $2.8 million during the year ended December 31, 2025. During the year ended December 31, 2024, no impairments of goodwill have been recognized.

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The Company’s long-lived assets, including right-of-use (“ROU”) assets and identifiable intangible assets that are subject to amortization, are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets (or asset group) to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairment charges to long-lived assets during the year ended December 31, 2025.

During the year ended December 31, 2024, the Company recorded an impairment charge in the amount of $9.8 million

Other long-term assets include long-term prepaid expenses and restricted cash deposits for offices and cars leasing based upon the term of the remaining restrictions.

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The Company repurchased its ordinary shares and holds them as treasury shares. The Company presents the cost to repurchase treasury shares as a reduction of shareholders’ equity.

The Company generates revenues from sales of products. The Company sells its products directly to end customers and through distributors. The Company sells its products to clinics and rehabilitation centres, professional and college sports teams, private individuals (who finance the purchases by themselves, through fundraising or reimbursement coverage from insurance companies), and distributors.

The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition” when, or as, control of the promised good or service is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company applies the following five steps:

The Company generally considers a purchase order or a signed quote to be a contract with a customer. In evaluating the contract with a customer, the Company analyses the customer’s intent and ability to pay the amount of promised consideration and considers the probability of collecting substantially all of the consideration.

Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the products or services either on their own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products and services is separately identifiable from other promises in the contract.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. Determining the transaction price requires of level judgment, which is discussed by revenue category in further detail below.

The Company does not offer extended payment terms beyond one year to customers and has chosen to apply the practical expedient, opting not to evaluate payment terms of one year or less for the existence of a significant financing component.

Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. Certain arrangements with customers contain multiple distinct performance obligations. For these arrangements, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price (SSP). The Company generally establishes SSPs based on observable selling prices.

Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control either transfers over time or at a point in time, which affects when revenue is recorded.

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Disaggregation of Revenue (in thousands):

Product revenue

The Company offered to its customers five products: (1) ReWalk Personal, (2) ReWalk Rehabilitation, (3) AlterG Anti-Gravity system, (4) MyoCycle, and (5) ReStore.

Revenue from Products sold to rehabilitation facilities and end users is recognized at a point in time once the customer has obtained control of the products usually upon delivery.

The Company generally does not grant a right of return for its products.

With the recent establishment of a Medicare reimbursement pathway for the ReWalk product, the Company includes variable consideration in the form of implicit price concessions if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company reassesses variable consideration at each reporting period and, if necessary, these estimates are adjusted to reflect the anticipated amounts to be collected when those facts and circumstances become known.

For contracts with Medicare, the Company determines the amount of variable consideration that should be included at the transaction price, using contractual agreements and historical reimbursement experience with Medicare. The Company applies constraint to the transaction price, such that revenue is recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in the future. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect revenue in the period such adjustments become known.

Payment terms between the Company and its payors typically range between 30 to 45 days, depending on the type of payer, country of sale, and the products or services offered. However, for CMS, payments may take up to twelve months.

Lease revenue

A portion of the Company's sales of products to customers are made through lease arrangements which typically include AlterG Anti-Gravity systems.

Revenue for the lease of AlterG Anti-Gravity systems is accounted for under ASC Topic 842, Leases. AlterG Anti-Gravity systems being utilized under service agreements, accounted for in accordance with ASC 842 as an operating lease. Revenues are recognized ratably over the lease term. See Note 2y for more additional information.

Service and warranties

The Company provides product assurance warranties for periods of 1-10 years (usually 2 years) that cover the compliance of the products with agreed-upon specifications. A provision is recorded for estimated warranty costs based on the Company's experience.

A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended for a limited period of time. An assurance type warranty is not accounted for as a separate performance obligation under the revenue model.

In certain contracts, the company also provides a service-type warranty. Service-type warranty is accounted for as a separate performance obligation, and revenue is recognized ratably over the service period as the customer consumes the benefit over the service term.

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Contract balances (in thousands):

Deferred revenue is composed primarily of unearned revenue related to service type warranty obligations, multi-year services contracts, as well as other advances and payments which the Company received from customers prior to satisfying the performance obligation, for which revenue has not yet been recognized.

The Company's unearned performance obligations as of December 31, 2025 and the estimated revenue expected to be recognized in the future amounts to $2.3 million, which will be fulfilled over one to five years.

The Company accounts for share-based compensation in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC 718”). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an Option-Pricing Model (“OPM”). The value of the award is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards. The Company accounts for forfeitures as they occur.

The Company selected the Black-Scholes-Merton option pricing model as the most appropriate fair value method for its share-option awards. The option-pricing model requires a number of assumptions, of which the most significant are the fair market value of the underlying ordinary share, expected share price volatility and the expected option term. Expected volatility is calculated based on actual historical stock price movements over the most recent periods ending on the grant date, equal to the expected term of the options. The expected option term is determined based on the simplified method, as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

The fair value of Restricted Stock Units (“RSUs”) granted is determined based on the price of the Company’s ordinary shares on the date of grant.

The Company elects the straight-line recognition method for awards subject to graded vesting based only on a service condition

The Company accounts for options granted to consultants and other service providers under ASC 718. The fair value of these options was estimated using a Black-Scholes-Merton option-pricing model.

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During the twelve-month ended December 31, 2025, the Company issued warrants to acquire up to 513,930 ordinary shares. There were no issued warrants during the twelve months ended December 31, 2024. Refer to Note 8f for additional information.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, are indexed to the Company’s own shares and whether the warrants are eligible for equity classification under ASC 815-40. This assessment is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.

Warrants that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter.

Research and development costs are charged to the consolidated statement of operations as incurred and are presented net of the amount of any grants the Company received for research and development in the period in which the grant was received.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), using the liability method whereby deferred tax assets and liability account balances are determined based on the differences between financial reporting and the tax basis for assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely-than-not to be realized.

ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits in its taxes on income.

As of December 31, 2025, and 2024, the Company did not identify any significant uncertain tax positions.

For assurance-type warranty, the Company records a provision for the estimated cost to repair or replace products under warranty at the time of sale. Factors that affect the Company’s warranty reserve include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair.

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Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade receivables.

The Company’s cash and cash equivalents are deposited in major banks in Israel, the United States and Germany. Such deposits in the United States may be in excess of insured limits and are not insured in other jurisdictions. The Company maintains cash and cash equivalents with diverse financial institutions and monitors the amount of credit exposure to each financial institution. The bank deposits are held in financial institutions which management believes are institutions with high credit standing, and accordingly, minimal credit risk from geographic or credit concentration exists with respect to these deposits.

The below table reflects the concentration of credit risk for the Company’s current customers as of December 31, 2025 and 2024, to which substantial sales were made.

Concentration of credit risk with respect to trade receivable is primarily limited to a customer to which the Company makes substantial sales.

The allowance for credit losses is based on the Company's assessments of the collectability of accounts. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors, including an assessment of the current customer's aging balance, the nature and size of the customer, the financial condition of the customer, and the amount of any receivables in dispute. The Company does not have any off-balance sheet credit exposure related to its customers. As of December 31, 2025, and 2024 trade receivables are presented net of allowance for credit losses in the amount of $192 thousand and $160 thousand respectively.

Pursuant to Israel’s Severance Pay Law, Israeli employees are entitled to severance pay equal to one month’s salary for each year of employment, or a portion thereof. All of the employees of the LL elected to be included under section 14 of the Severance Pay Law, 1963 (“section 14”). According to this section, these employees are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with section 14 release the Company from any future severance payments (under the above Israeli Severance Pay Law) in respect of those employees; therefore, related assets and liabilities are not presented in the balance sheet.

Total Company’s expenses related to severance pay amounted to $146 thousand, $126 thousand and $114 thousand for the years ended December 31, 2025, 2024 and 2023, respectively.

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a three -tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The three -tiers are defined as follows:

The carrying amounts of cash and cash equivalents, short term deposits, trade receivables and trade payables approximate their fair value due to the short-term maturity of such instruments.

The following tables present information about the Company’s financial assets and liabilities that are measured in fair value on a recurring basis as of December 31, 2025 and December 31, 2024 (in thousands):

The Company classifies Money market funds within Level 1, because the Company uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair values.

The estimated fair value of the earnout is determined using Level 3 inputs. Inherent in a Monte Carlo simulation analysis are assumptions related to projected revenues, expected term, volatility, annual revenue yield and interest rate. The interest rate is based on the U.S. Technology B bond yield.

The estimated fair value of the derivative liability is using the Black-Scholes option-pricing model, which is a Level 3 fair value measurement. The model requires the use of several key assumptions, including the stock price, exercise price, expected term, expected volatility, risk-free interest rate, and expected dividend yield.

The following table provides the inputs used for Level 3 fair value measurements of derivative liability:

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The following table summarizes the earnout liability activity as of December 31, 2025 (in thousands):

As part of the acquisition of AlterG Inc., the Company was obligated to pay an earnout based on the performance of the acquired entity, LCAI. The earnout consists of two potential payments:

1. A cash payment equal to 65% of the amount, if any, by which LCAI’s revenue for the first 12-month period following the acquisition exceeds a predefined revenue target (“First Earnout Payment”).

2. A cash payment equal to 65% of the amount, if any, by which LCAI’s revenue for the subsequent 12-month period exceeds its respective revenue target.

At the acquisition date, management estimated the fair value of the total earnout liability at approximately $3.6 million, based on the actual performance of LCAI to date and the assessed probability of meeting the revenue targets. The earnout liability is recognized in the consolidated financial statements and is remeasured at each reporting period, with changes in fair value recorded through the consolidated statement of operations.

LCAI did not meet the first and the second revenue targets, and therefore, no payment was made.

During the year ended December 31, 2025, the Company recognized a change in fair value of the earnout of approximately $608 thousand, which was recorded under general and administrative expenses in the consolidated statement of operations.

Derivative liability at fair value

The following table summarizes the derivative liability activity as of December 31, 2025 (in thousands):

The estimated fair value of the asset group, is part of an impairment assessment, is determined using Level 3 inputs, by applying both a market and cost approach, which we believe most accurately reflects a market participant's viewpoint in assessing its value.

The goodwill impairment recorded during fiscal year 2025 was estimated using the Company's stock price, a Level 1 input, adjusted for an estimated control premium. Refer to Note 5 for additional information.

The Company applies ASC 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”). In accordance with ASC 470-20 the Company first allocates the proceeds to freestanding liability instrument that are measured at fair value at each reporting date, based on their fair value. The remaining proceeds are allocated between the convertible debt and any bifurcated embedded derivatives.

In accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), the Company bifurcates embedded derivatives for the conversion option that require bifurcation and accounts for it separately from the convertible debt.

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The Company applies ASC 815, “Derivatives and Hedging” to all features related to convertible debt. When features meet the definition of a derivative that do not qualify for any scope exceptions within ASC 815, they are required to be accounted for separately from the debt instrument and recorded as derivative instrument liabilities. The fair value assigned to the embedded derivative instruments is marked to market in each reporting period. The Company has recorded embedded derivative liabilities related to the convertible promissory note.

For further information regarding the convertible promissory notes, see Note 9.

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of ordinary shares outstanding during the period.

Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus dilutive potential shares considered outstanding during the period.

The Company accounts for its contingent liabilities in accordance with ASC 450, “Contingencies.” A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.

Royalty and non-royalty-bearing grants from the Israeli Innovation Authority (the “IIA”) of the Ministry of Economy and Industry in Israel for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred, and are presented as a reduction from research and development expenses (see Note 7c). Research and development grants recognized during the years ended December 31, 2025, 2024 and 2023 were $27 thousand, $220 thousand and $259 thousand, respectively.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded at commencement date based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items, such as initial direct costs paid or incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company elected the practical expedient to not separate lease and non-lease components for its leases.

Lessor accounting - Operating leases

A portion of the AlterG revenues for the AlterG Anti-Gravity systems are made through lease arrangements.

AlterG products are available for lease agreements ranging from 12 to 42 months. If the customer terminates the contract during the lease period, they are required to pay a cancellation fee. The lease period may be extended by an additional period as specified in the contract.

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In determining the leases classification as a sales type or operating lease, the Company assesses, among other criteria: (i) the lease term to determine if it is for the major part of the economic life of the underlying equipment; and (ii) the present value of the lease payments to determine if they are equal to or greater than substantially all of the fair market value of the equipment at the inception of the lease of AlterG Anti-Gravity systems. When these criteria are not met, the lease accounted for as operating leases and revenues are recognized over the term of the lease.

Under these arrangements, when the Company acts as the lessor for its product line, the Company accounted for the lease arrangements as operating leases in accordance with ASC 842, “Lease” (“ASC 842”).

The total lease revenue for the AlterG Anti-Gravity Products has amounted to $751 thousand for the year ended December 31, 2025 and $719 thousand for the year ended December 31, 2024.

Recently Implemented Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

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The components of prepaid expenses and other current assets are as follows (in thousands):

NOTE 4:- INVENTORIES

The components of inventories are as follows (in thousands):

During the twelve months ended December 31, 2025, 2024, and 2023, the Company recognized, at cost of revenues, reserves for excess and obsolete in the amount of $539 thousand, $981 thousand, and $398 thousand, respectively.

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NOTE 5:- GOODWILL

The changes in the carrying amount of goodwill:

The Company periodically analyses whether any indicators of goodwill impairment have occurred. In the second quarter of 2025, the Company experienced a decline in its stock price resulting in its market capitalization being less than the carrying value of its one reporting unit. Thus, the Company performed quantitative assessments of the Company’s reporting unit. The fair value was determined based on the market approach. The market approach utilizes the Company's market capitalization plus an appropriate control premium. In calculating the goodwill impairment charges, the Company estimated the fair value of its single reporting unit based on its market capitalization and an appropriate control premium. Market capitalization is determined by multiplying the number of shares of common stock outstanding by the market price of its common stock. The control premium, or the amount paid by a new controlling shareholder for the benefits resulting from synergies and other potential benefits derived from controlling the acquired company, is determined by utilizing data from publicly available premium studies for similarly situated public company transactions. A goodwill impairment loss was recognized for the difference between the carrying value of the reporting unit and the fair value.

As a result of this assessment, the Company recorded a goodwill impairment of $2.8 million during the year ended December 31,2025.

Long-lived assets:

The Company evaluates the recoverability of long-lived assets, including property and equipment and intangible assets subject to amortization for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. Such events and changes may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.

The carrying intangible assets were fully impaired as of December 31, 2024.

NOTE 6:- PROPERTY AND EQUIPMENT, NET

The components of property and equipment, net are as follows (in thousands):

Depreciation expenses amounted to $333 thousand, $494 thousand, and $239 thousand for the years ended December 31, 2025, 2024 and 2023, respectively.

In the fourth quarter of 2024, the Company recorded an impairment charge of $305 thousand related to the closure of its Fremont, California site. The impairment was due to the reduction in the expected future use of the assets at this location. No impairment charges were recorded for the year ended December 31, 2025.

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NOTE 7:- COMMITMENTS AND CONTINGENT LIABILITIES

The Company has contractual obligations to purchase goods from its contract manufacturer as well as raw materials from different vendors. Purchase obligations do not include contracts that may be cancelled without penalty. As of December 31, 2025, non-cancellable outstanding obligations amounted to approximately $6.0 million.

The Company’s future lease payments for its facilities and cars, which are presented as current maturities of operating leases and non-current operating leases liabilities on the Company’s consolidated balance sheets as of December 31, 2025 are as follows (in thousands):

Total lease expense under the Company’s operating leases for the years ended December 31, 2025, 2024 and 2023 were $0.8 million, $1.3 million, and $1.0 million, respectively.

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The Company’s research and development efforts are financed, in part, through funding from the IIA. Since the Company’s inception through December 31, 2025, the Company received funding from the IIA in the total amount of $2.8 million. Out of the $2.8 million in funding from the IIA, a total amount of $1.6 million were royalty-bearing grants, $400 thousand was received in consideration of 209 convertible preferred A shares, which converted after the Company’s initial public offering in September 2014 into ordinary shares in a conversion ratio of 1 to 1, while $806 thousand was received without future obligation. The Company is obligated to pay royalties to the IIA, amounting to 3% of the sales of the products and other related revenues generated from such projects, up to 100% of the grants received. The royalty payment obligations also bear interest at the SOFRPR rate. The obligation to pay these royalties is contingent on actual sales of the applicable products and in the absence of such sales, no payment is required.

As of December 31, 2025, the Company paid royalties to the IIA in the total amount of $117 thousand.

Royalties expenses in cost of revenue were $8 thousand, $2 thousand and $17 thousand, for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, the contingent liability to the IIA amounted to $1.6 million. The Israeli Research and Development Law provides that know-how developed under an approved research and development program may not be transferred to third parties without the approval of the IIA. Such approval is not required for the sale or export of any products resulting from such research or development. The IIA, under special circumstances, may approve the transfer of IIA-funded know-how outside Israel, in the following cases:

(a) the grant recipient pays to the IIA a portion of the sale price paid in consideration for such IIA-funded know-how or in consideration for the sale of the grant recipient itself, as the case may be, which portion will not exceed six times the amount of the grants received plus interest (or three times the amount of the grant received plus interest, in the event that the recipient of the know-how has committed to retain the R&D activities of the grant recipient in Israel after the transfer);(b) the grant recipient receives know-how from a third party in exchange for its IIA-funded know-how; (c) such transfer of IIA-funded know-how arises in connection with certain types of cooperation in research and development activities; or (d) If such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient.

LCAI earns royalties under a license agreement with a third party and is recognized as earned. Royalty payments for the year ended December 31, 2025 and 2024, were $0 and $55 thousand, respectively.

As part of the Company’s restricted cash and other long-term assets, as of December 31, 2025, an amount of $410 thousand has been pledged as security in respect of a guarantee granted to a third party. Such deposit cannot be pledged to others or withdrawn without the consent of such third party.

Occasionally, the Company is involved in various claims such as product liability claims, lawsuits, regulatory examinations, investigations, and other legal matters arising, for the most part, in the ordinary course of business. While the outcome of any pending or threatened litigation and other legal matters is inherently uncertain, the Company does not believe the outcome of any of the matters will have a material adverse effect on the Company’s consolidated results of operation, liquidity or financial condition.

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NOTE 8:- SHAREHOLDERS’ EQUITY

Upon the effectiveness of the reverse share split, every seven shares were automatically combined and converted into one ordinary share. Appropriate adjustments were also made to all outstanding derivative securities of the Company, including all outstanding equity awards and warrants.

No fractional shares were issued in connection with the reverse share split. Instead, all fractional shares (including shares underlying outstanding equity awards and warrants) were rounded down to the nearest whole number.

On February 24, 2026, the Company effected theone-for-twelve reverse share split of its ordinary shares. As a result of the reverse share split, every twelve issued and outstanding ordinary shares were automatically combined and converted into one ordinary share. The number of the Company’s issued and outstanding ordinary shares was reduced from 18,339,098 pre-split shares to 1,528,207 post-split shares. Concurrently, the total authorized number of ordinary shares under the Company’s Articles of Association increased from 75,000,000 ordinary shares to 100,000,000 ordinary shares.

Appropriate adjustments were also made to all outstanding derivative securities of the Company, including warrants, pre-funded warrants and stock options, such that the number of ordinary shares underlying such securities and the applicable exercise prices were proportionately adjusted in accordance with their terms and the Company’s equity incentive plans.

No fractional shares were issued in connection with the reverse share split and fractional shares were rounded down to the nearest whole share.

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During the three and twelve months ended December 31, 2025, the Company sold 114,008 and 289,903 ordinary shares, respectively, under the ATM program at an average price of $7.62 and $9.67 per share, respectively, for total gross proceeds of approximately $0.9 million and $2.8 million. The Company paid aggregate fees and commissions of $0.1 million to HCW and incurred other expenses of approximately $0.2 million, resulting in net proceeds of approximately $2.5 million. The Company’s ATM program expired on November 16, 2025.

The warrants issued in the January 2025 private placement and the June 2025 public offering are considered freestanding instruments. As the warrants are indexed to the Company's ordinary shares and meet the criteria for equity classification, they are recorded in shareholders’ equity on the Company’s consolidated balance sheets.

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On August 1, 2025, the Company’s shareholders approved the Lifeward Ltd. 2025 Incentive Compensation Plan (the “2025 Plan”), which became effective on the same date. The 2025 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), cash-based awards and other stock-based awards to the Company’s and its affiliates’ respective employees, non-employee directors and consultants. All share and per share amounts presented in this note have been retroactively adjusted to reflect the Company’s 1-for-12 reverse share split effected on February 24, 2026.

The Company’s prior Lifeward Ltd. 2014 Incentive Compensation Plan (the “2014 Plan”) expired on August 19, 2024, and no further grants may be made under it. Certain awards granted under the 2014 Plan remain outstanding and continue to be governed by its terms.

As of December 31, 2025, the Company had reserved 39,851 ordinary shares available for issuance to employees, directors, officers and non-employees of the Company. As of December 31, 2024, no ordinary shares remained reserved, as the Company’s Plan expired on August 19, 2024.

RSUs have been granted to non-employee directors and employees under the 2025 Plan. An RSU award represents a right to receive the Company’s ordinary shares upon vesting.

Options to purchase ordinary shares have been granted to employees and non-employee directors under the Company’s equity incentive plans.

Any options or RSUs that are forfeited or canceled before expiration become available for future grants under the 2025 Plan, as applicable.

Equity awards granted under the Company’s equity incentive plans generally vest over four years, with certain awards granted to non-employee directors vesting quarterly over one year.

No stock options were granted during the year ended December 31, 2024. The fair value of stock options granted during the year ended December 31, 2025 was estimated on the grant date using the Black-Scholes-Merton option pricing model based on the following assumptions:

A summary of the Company’s stock options activity for the year ended December 31, 2025 is as follows:

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Options were granted during the year ended December 31, 2025. No options were granted during the years ended December 31, 2024 and 2023. The weighted average grant date fair values of options granted during the fiscal year ended December 31, 2025, were $10.31. During fiscal years ended December 31, 2024 and 2023 no options were granted. 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 who hold options with positive intrinsic value exercised their options on the last day of the fiscal year. During the years ended December 31, 2025, 2024 and 2023, no options were exercised. A summary of the Company’s RSU activity for the year ended December 31, 2025 is as follows:

The weighted average grant date fair values of RSUs granted during the fiscal year ended December 31, 2025, 2024 and 2023, were $8.69, $57.60 and $55.44, respectively.

The total fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $0.9 million, $1.4 million, and $1.3 million, respectively. As of December 31, 2025, there was $1.4 million of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized as expense over a period of approximately 2.1 years.

The number of options and RSUs outstanding as of December 31, 2025 is presented below, with options separated by range of exercise prices:

No equity awards were granted to non-employees consultants during the year ended December 31, 2025. The Company granted 391 RSUs during the fiscal year ended December 31, 2024, to non-employee consultants. As of December 31, 2025, no RSUs were outstanding.

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The Company recognized share-based compensation expense in the consolidated statements of operations as follows (in thousands):

The following table summarizes information about warrants outstanding and exercisable as of December 31, 2025:

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On November 14, 2025, the Company entered into a Secured Promissory Note (the ”Note”) with Oramed Ltd. (“Oramed”), pursuant to which the Company issued a secured promissory note in the principal amount of $3.0 million. The loan bears interest at a rate of 15% per annum and is secured by a lien on the Company’s cash. The loan matures on May 14, 2026.

The principal and interest under the Note are convertible into ordinary shares at $5.40 per share, subject to limitations described therein. The conversion price reflects the Company’s one-for-twelve reverse share split effected on February 24, 2026. The note contains customary representations, covenants and events of default for transactions of this type, including limitations on additional indebtedness, liens, guarantees, mergers, asset sales, investments and related party transactions. Following an event of default, Oramed may accelerate all obligations, impose a default interest rate and exercise other rights and remedies available under the note or applicable law. As of December 31, 2025, no events of default had occurred. In addition, under certain circumstances described in the Note, the Company may be required to pay Oramed a termination fee of $500 thousand.

The Company has evaluated the Note for embedded derivatives required to be bifurcated and concluded that the conversion features and the redemption features should be bifurcated from the debt host since they are not clearly and closely related to the debt host, meet the definition of derivative instruments, and do not qualify for a scope exception under ASC 815. Thus, the embedded features were bifurcated from the debt host and are accounted for at fair value through earnings. The derivative liability is remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.

The Company allocated the proceeds between the conversion option (recorded as a derivative liability) and the debt host based on their respective fair values, with the remaining proceeds allocated to the debt host. The debt host is measured at its amortized cost using the effective interest method. As of the date of the transaction, the amount allocated to the debt host and the derivative liability was $1.4 million and $1.6 million, respectively. As of December 31, 2025, the amortized cost of the debt host was $1.4 million. For the year ended December 31, 2025, the Company recognized total interest expense of $442 thousand related to the Note, which includes the amortization of the debt discount.

NOTE 10:- INCOME TAXES

The Company’s subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.

Presented hereunder are the tax rates relevant to the Company in the years 2023-2025:

The Israeli statutory corporate tax rate and real capital gains were 23% in the years 2023-2025.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets as of December 31, 2025 and 2024 are derived from temporary differences.

In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.

Undistributed earnings of certain subsidiaries as of December 31, 2025 were immaterial. The Company intends to reinvest these earnings indefinitely in the foreign subsidiaries. As a result, the Company has not provided for any deferred income taxes.

The net changes in the total valuation allowance for each of the years ended December 31, 2025, 2024 and 2023, are comprised as follows (in thousands):

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A reconciliation of the Company’s theoretical income tax expense to actual income tax expense after the adoption of ASU 23-09 is as follows (in thousands):

A reconciliation of the Company’s theoretical income tax expense to actual income tax expense before the adoption of ASU 23-09 is as follows (in thousands):

Taxable income of LI and LCAI was subject to tax at the rate of 21% in 2025, 2024 and 2023.

Taxable income of LG was subject to tax at the rate of 30% in 2025, 2024, and 2023.

LL has had final tax assessments up to and including the 2020 tax year. LG has had final tax assessments up to and including the 2019 tax year.

LI and LCAI file income tax returns in the United States and in various U.S. states. The returns for the years ended December 31, 2022, and later are generally subject to federal tax examination, while the returns for the years ended December 31, 2021, and later are generally subject to state tax examination. However, net operating losses and tax credits generally remain subject to tax examination and adjustment until they are utilized on a future tax return and the statute of limitations closes for that year. Therefore, tax attributes generally remain open to both federal and state tax examination and adjustment.

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As of December 31, 2025, LL has carry-forward losses amounting to approximately $279.9 million, which can be carried forward for an indefinite period.

As of December 31, 2025, the Company had approximately $49.5 million of U.S. federal net operating loss (“NOL”) carry forwards, and $35.3 million of state NOL carry forwards, which will begin to expire in 2027 and 2028, respectively. The federal net operating losses from years beginning after January 1, 2018, of approximately $20.0 million may be carried forward indefinitely and losses prior to January 1, 2018 of approximately $29.5 million expire beginning in 2027 under prior law.

Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation") on the amount of taxable income which can be offset by NOL carry forwards after a change in control (generally greater than 50% change in the value of the stock owned by 5% shareholders during the testing period) of a loss corporation. California has similar rules. On August 11, 2023, AlterG was involved in an equity transaction that constitutes a Section 382 change in ownership. The change in ownership limits the ability to utilize net operating loss carry forwards in future years. The 382-limitation impact on NOLs has been included in the current period provision. The Company may have had earlier Section 382 changes in ownership. This will be assessed upon realization of tax attributes.

We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table which presents income taxes paid (net of refunds received) is as follows (in thousands):

NOTE 11:- FINANCIAL (EXPENSES) INCOME, NET

The components of financial (expenses) income, net were as follows (in thousands):

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NOTE 12:- REPORTABLE SEGMENT

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment and unit and derives revenues mainly from products, lease revenues and warranty and services (see Note 1 for a brief description of the Company’s business and Note 2l for details on the Company's revenue recognition).

The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the CODM, which is the Company’s chief executive officer, who reviews financial information and annual operating plans presented on a consolidated basis, for purposes of making operating decisions, evaluating financial performance, and allocating resources. There is no expense or asset information, that are supplemental to those disclosed in these consolidated financial statements, that are regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss as shown in our consolidated statements of operations. The CODM considers net loss in the annual forecasting process and reviews actual results when making decisions about allocating resources. Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.

NOTE 13:- GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER AND PRODUCT DATA

Total revenues from external customers on the basis of the Company's geographical areas are as follows (in thousands):

Major customers data as a percentage of total revenue:

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NOTE 14:- BASIC AND DILUTED NET LOSS PER SHARE

The following table sets forth the computation of the Company’s basic and diluted net loss per ordinary share (in thousands, except share and per share data):

(*) Reflects one-for-seven reverse share split that became effective on March 15, 2024. See Note 8a to the consolidated financial statements. All share and per share amounts presented in this note have been retroactively adjusted to reflect the Company’s 1-for-12 reverse share split effected on February 24, 2026.

Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of ordinary shares and warrants outstanding would have been anti-dilutive.

For the twelve months ended December 31, 2025, 2024 and 2023 the total number of ordinary shares related to the outstanding warrants, share option plans and convertible notes aggregated to 759,547,198,772 and 228,816, respectively. The amount was excluded from the calculations of diluted loss per ordinary share since it would have an anti-dilutive effect.

NOTE 15:- SUBSEQUENT EVENTS

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