Wearable Devices Announces $10 Million Standby Equity Purchase Agreement

Rhea-AI Summary

Wearable Devices announced a $10 million Standby Equity Purchase Agreement with YA II PN, , managed by Yorkville Advisors Global.

The agreement allows YA to purchase the company's ordinary shares over a three-year period at a 3% discount of the lowest daily volume-weighted average price during a three-day trading period. The company received an initial $2 million pre-paid advance and can request more up to $3 million.

Funds raised will be used for working capital and general corporate purposes. The company is not obligated to use the full $10 million, and YA cannot hold more than 4.99% of the company’s share capital at any time.

Positive

• Up to $10 million available for working capital and general corporate purposes.
• Initial $2 million pre-paid advance received, providing immediate liquidity.
• Flexibility to draw funds based on needs with no obligation to use full $10 million.
• 3% discount on share price offers favorable terms for equity sales.

Negative

• Potential dilution of shares impacting existing shareholders' value.
• Dependence on market price for actual amount of funds raised.
• Immediate commitment to repay pre-paid advances from proceeds.
• to 4.99% ownership cap for YA, affecting the scale of investment.

Insights

Financial Analyst

Wearable Devices Ltd. has entered into a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd., managed by Yorkville Advisors. This agreement allows the company to raise up to $10 million over three years by selling its shares at a discounted rate. A SEPA is essentially a financing arrangement providing companies flexibility to access capital as needed. By securing this agreement, Wearable Devices ensures additional liquidity, which can be important for small-cap companies in a growth phase, like those specializing in emerging technologies. However, it's essential to consider the dilution effect on existing shareholders. The issuance of new shares may decrease the value of existing shares, potentially impacting share prices negatively. The 3% discount on share price could also signal to the market that the company is willing to accept lower valuations to secure capital, which might not be perceived positively. Retail investors should keep an eye on the company's utilization of this facility and its impact on the share price.

Market Research Analyst

The company's decision to leverage a Standby Equity Purchase Agreement highlights its strategy to maintain operational flexibility while exploring growth opportunities. In the AI-powered touchless sensing wearable market, innovation and rapid development are key. The flexible capital from this agreement can be a double-edged sword. On one hand, it provides the necessary funds to innovate and compete effectively. On the other, repeated issuance of shares can lead to market saturation and reduce investor confidence. This financing strategy shows the management's focus on short-term liquidity over potential long-term share value appreciation. Investors should watch how the company balances these aspects and whether it translates into increased market share or product advancements.

YOKNEAM ILLIT, ISRAEL, June 07, 2024 (GLOBE NEWSWIRE) -- Wearable Devices Ltd. (the “Company” or “Wearable Devices”) (Nasdaq: WLDS, WLDSW), a technology growth company specializing in artificial intelligence (“AI")-powered touchless sensing wearables, announced that it has entered into a Standby Equity Purchase Agreement (the “SEPA”), with YA II PN, Ltd. (“YA”), a fund managed by Yorkville Advisors Global, LP. Pursuant to the terms of the SEPA, YA is committed to purchase up to $10 million (the “Commitment Amount”), of the Company’s ordinary shares at any time during the three-year period following the execution date of the SEPA. The purchase price of the ordinary shares sold to YA will be at a 3% discount of the lowest daily volume weighted average price of the Company’s ordinary shares during the three consecutive trading day period commencing on the trading day of the delivery of an advance notice by the Company.

Subject to certain conditions, the Company may request pre-paid advances of the Commitment Amount, in an amount up to $3 million, which will be evidenced by one or more promissory notes. The Company requested, and has received, an initial pre-paid advance of $2 million in connection with the execution of the SEPA.

The Company will have the sole right in its discretion to sell shares to YA from time to time by issuing advance notices to YA following the effectiveness of a registration statement with the Securities and Exchange Commission registering the ordinary shares issuable pursuant to the SEPA and the satisfaction of other customary conditions.

The Company intends to use the proceeds from the potential offering of the ordinary shares pursuant to the SEPA for working capital and other general corporate purposes, and to repay any pre-paid advances.

The Company is not obligated to utilize any of the $10 million available under the SEPA and there are no minimum commitments or minimum use penalties. The total amount of funds that ultimately can be raised under the SEPA over the three-year term will depend on the market price for the ordinary shares and the number of ordinary shares actually sold. The SEPA does not impose any restrictions on the Company’s operating activities. YA is subject to a beneficial ownership cap which cannot result in YA holding more than 4.99% of the share capital of the Company at any time.

The securities described herein have not been registered under the Securities Act of 1933, as amended, and may not be sold in the United States absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

About Wearable Devices Ltd.

Wearable Devices Ltd. is a growth company developing AI-based neural input interface technology for the B2C and B2B markets. The Company’s flagship product, the Mudra Band for Apple Watch, integrates innovative AI-based technology and algorithms into a functional, stylish wristband that utilizes proprietary sensors to identify subtle finger and wrist movements allowing the user to “touchlessly” interact with connected devices. The Company also markets a B2B product, which utilizes the same technology and functions as the Mudra Band and is available to businesses on a licensing basis. Wearable Devices Is committed to creating disruptive, industry leading technology that leverages AI and proprietary algorithms, software, and hardware to set the input standard for the Extended Reality, one of the most rapidly expanding landscapes in the tech industry. The Company’s ordinary shares and warrants trade on the Nasdaq market under the symbol “WLDS” and “WLDSW”, respectively.

Forward-Looking Statement Disclaimer

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “should,” “could,” “seek,” “intend,” “plan,” “goal,” “estimate,” “anticipate” or other comparable terms. For example, we are using forward-looking statements when we discuss the intended use of proceeds and the Company’s ability to access additional capital as needed under the SEPA. All statements other than statements of historical facts included in this press release regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our use of proceeds from the offering; the trading of our ordinary shares or warrants and the development of a liquid trading market; our ability to successfully market our products and services; the acceptance of our products and services by customers; our continued ability to pay operating costs and ability to meet demand for our products and services; the amount and nature of competition from other security and telecom products and services; the effects of changes in the cybersecurity and telecom markets; our ability to successfully develop new products and services; our success establishing and maintaining collaborative, strategic alliance agreements, licensing and supplier arrangements; our ability to comply with applicable regulations; and the other risks and uncertainties described in our annual report on Form 20-F for the year ended December 31, 2023, filed on March 15, 2024 and our other filings with the SEC. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Investor Relations Contact

Walter Frank
IMS Investor Relations
203.972.9200
wearabledevices@imsinvestorrelations.com

FAQ

What is the Standby Equity Purchase Agreement announced by Wearable Devices (WLDS)?

It's an agreement allowing YA II PN, to purchase up to $10 million of Wearable Devices' ordinary shares over three years.

How much initial funding has Wearable Devices (WLDS) received from the SEPA?

Wearable Devices received an initial pre-paid advance of $2 million.

What are the terms of the share purchase price under the SEPA for Wearable Devices (WLDS)?

The purchase price is at a 3% discount of the lowest daily volume-weighted average price during a three-day trading period.

How will Wearable Devices (WLDS) use the funds from the SEPA?

The funds will be used for working capital, general corporate purposes, and to repay pre-paid advances.

Is Wearable Devices (WLDS) obligated to use the entire $10 million from the SEPA?

No, Wearable Devices is not obligated to utilize the full $10 million available under the SEPA.