Wearable Devices Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP; amounts below are U.S. dollars.
Business context
Wearable Devices develops wrist-worn neural input technology that translates subtle finger and hand movements into device commands. In 2023, it began shipping its first consumer product, the Mudra Band, an Apple Watch accessory. The company remains at an early commercialization stage, with revenue from consumer sales, development kits, and B2B pilot transactions. As of March 13, 2024, it had not signed a technology licensing agreement.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $82,000 | $45,000 |
| Cost of revenue | $62,000 | $10,000 |
| Gross profit / margin | $20,000 / approximately 24% | $35,000 / approximately 78% |
| Research and development, net | $3.316 million | $2.271 million |
| Sales and marketing, net | $2.008 million | $1.370 million |
| General and administrative | $2.882 million | $1.948 million |
| Operating loss | $8.186 million | $6.458 million |
| Net and comprehensive loss | $7.814 million | $6.496 million |
| Net cash used in operating activities | $8.434 million | $5.714 million |
Revenue increased 82%, primarily from Mudra Band sales, but remained very small relative to operating costs. The gross margin comparison reflects the low revenue base and product mix; 2023 cost of revenue rose with consumer-product manufacturing.
At December 31, 2023, cash and cash equivalents were $810,000 and short-term bank deposits were $4.045 million; total current assets were $6.752 million and current liabilities were $1.788 million. Total liabilities were $2.066 million, including $575,000 of lease liabilities; the filing reports no outstanding financial credit-facility balance. The company reported accumulated losses of $21.2 million and a going-concern explanatory paragraph. Management said available cash, including the November 2023 offering proceeds, was expected to support working capital and capital expenditures through June 2024, and stated that further financing would be required.
Material changes versus FY2022
- Revenue rose by $37,000, while net loss widened by approximately $1.3 million, or 20%.
- Operating cash use increased by $2.720 million. Inventory rose from $6,000 to $1.032 million as production began.
- Research and development, sales and marketing, and general and administrative expenses increased by approximately 46%, 47%, and 48%, respectively, reflecting staffing, product production, marketing, public-company costs, insurance, and professional services.
- Cash and cash equivalents fell from $10.373 million to $810,000, while short-term deposits reached $4.045 million. Cash used in investing included $4.054 million placed into deposits.
- Shares outstanding increased from 15.05 million to 20.39 million, including 4.44 million shares issued in the November 2023 offering and 724,139 shares issued on warrant exercises.
Outlook, risks, and unusual items
- Financing and going concern: Recurring losses and operating cash outflows make the company dependent on external funding. Financing may be unavailable or dilutive; management identified possible reductions or delays to development and commercialization if funding is insufficient.
- Commercial execution: B2B integrations may take three to five years from initial introduction to licensing, with no license agreements signed as of March 13, 2024. The company reported more than 1,000 Mudra Band deliveries since September 2023.
- Product plans and developments: Management targeted a fourth-quarter 2024 launch for the Mudra XR wristband. In February 2024, the company announced a collaboration with Qualcomm related to XR experiences; the filing does not report associated revenue or a licensing contract.
- Nasdaq listing: The company received a minimum-bid-price deficiency notice in October 2023 and had until April 22, 2024 to regain compliance, with a possible additional compliance period. It said it might consider a reverse stock split. The filing does not establish the outcome after that deadline.
- Israel and supply chain: The filing said the Israel-Hamas war had not materially affected operations as of the report, but escalation, employee reserve duty, transport interruptions, and supplier disruptions could cause delays. Products depend on limited or single-source manufacturers.
- Government grants: IIA grants carry contingent royalties, generally 3%–3.5% of relevant sales plus interest; the reported maximum obligation at year-end was approximately $2.2 million plus interest. Manufacturing abroad may increase royalty rates or total repayment obligations, and transfers of funded know-how require approval.
- Other risks: Competition includes established device makers and alternative input technologies; product quality, privacy and cybersecurity, intellectual property, and consumer adoption are significant uncertainties. Management concluded internal control over financial reporting was effective at year-end; the auditor did not provide an internal-control attestation. No cybersecurity attack was reported as experienced as of the filing date.
Investor verification priorities
- Verify cash, deposits, subsequent financing, and actual cash runway after the stated June 2024 estimate; assess whether the going-concern uncertainty was resolved.
- Check subsequent Nasdaq compliance status and any reverse split or other listing action.
- Track recognized revenue, unit deliveries, returns, product margins, and inventory conversion for Mudra Band.
- Confirm whether any B2B pilots converted into commercial licenses, purchase orders, or recurring revenue, and review the terms and status of the Qualcomm collaboration.
- Review potential dilution from future fundraising, warrants, and employee options, alongside IIA royalty and manufacturing obligations.