Brainsway Ltd. current report, Q1 FY2021

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Business Context and Reporting Period

This Form 6-K filing by Brainsway Ltd. (a foreign private issuer) dated January 27, 2021, serves as a Notice and Proxy Statement for the Annual General Meeting of Shareholders scheduled for March 4, 2021. The filing incorporates the proxy materials by reference and outlines five specific proposals for shareholder approval. The record date for voting eligibility is January 27, 2021.

Key Financial Metrics and Capital Structure

The filing does not contain a financial results summary, revenue, profit, or cash flow data for the current or prior periods. However, it provides specific details regarding the company's capital structure and equity compensation:

  • Outstanding Shares: As of January 27, 2021, there were 22,265,534 Ordinary Shares outstanding.
  • Authorized Share Capital: Currently 35,000,000 Ordinary Shares (par value NIS 0.04). The filing proposes an increase to 60,000,000 Ordinary Shares.
  • Available Shares: Approximately 11.2 million Ordinary Shares (equivalent to 5.6 million ADSs) were available for future issuance as of the record date.
  • Stock Price: The closing price per Ordinary Share on January 25, 2021, was $4.675 ($9.35 per ADS).
  • Outstanding Options: Approximately 1.474 million Ordinary Shares are covered by existing options granted under the 2014 and 2019 Share Incentive Plans.

Material Changes and Proposals

The filing details five material proposals to be voted upon at the Annual Meeting:

  1. Appointment of Auditors: Re-appointment of Kost Forer Gabbay & Kasierer (Ernst & Young Global) as independent auditors for 2020.
  2. Re-election of Directors: Re-election of the entire Board of Directors, including Dr. David Zacut (Chairman), Mr. Avner Hagai (Vice Chairman), and five other directors.
  3. Option Repricing: Approval of an exchange offer to reprice existing options held by independent directors. The new exercise price would be the higher of $4.675 per share or the closing price on the last trading date before shareholder approval. This addresses the fact that current option exercise prices exceed the market price.
  4. CEO Equity Grant: Approval of a grant of 180,000 Restricted Stock Units (RSUs) to CEO Christopher von Jako. This grant is in lieu of three previously committed annual grants of 60,000 RSUs each (totaling 180,000) that were subject to performance criteria. The new grant vests over four years.
  5. Increase in Authorized Capital: Increase authorized share capital by 25,000,000 shares to facilitate future capital raises, acquisitions, or equity grants.

Outlook, Risks, and Management Commentary

Management Commentary: The Board recommends voting "FOR" all proposals. Regarding the CEO's RSU grant (Proposal 4), management cites "unexpected market conditions resulting from the COVID-19 global pandemic" and the difficulty in defining appropriate performance indices as reasons for modifying the original employment agreement terms. The Board views the immediate grant as reasonable for retention purposes.

Risks and Contingencies: The filing notes that the repricing of director options (Proposal 3) is necessary because the share price has decreased over the last year, rendering existing options underwater. The increase in authorized capital (Proposal 5) is intended to ensure the company has sufficient flexibility to pursue opportunities without delay.

Unusual Items: The filing highlights a specific voting requirement for Proposal 4 (CEO RSUs). Approval requires a majority of voting power represented, provided that either (i) a majority of non-controlling shareholders without a personal interest vote in favor, or (ii) votes against the proposal by such shareholders do not exceed 2% of total voting rights.

Important Facts for Investor Verification

  • Shareholder Approval Required: Verify the outcome of the vote on the repricing of director options and the CEO's RSU grant, as these involve significant equity dilution and changes to compensation terms.
  • Capital Dilution Potential: Confirm the impact of the proposed increase in authorized shares (from 35M to 60M) on future dilution risks.
  • Financial Performance: Note that this filing contains no financial results; investors must refer to the Annual Report on Form 20-F for fiscal year 2020 financial data.
  • Meeting Date: The Annual General Meeting is scheduled for March 4, 2021.