Wearable Devices Ltd. Annual Report Summary (Form 20-F for the year ended December 31, 2025)

Wearable Devices Ltd. (WLDS) is working to redefine how we interact with technology. This summary, based on the company's annual report (Form 20-F) for the fiscal year ended December 31, 2025, offers retail investors a clear and concise overview of WLDS's performance, strategic direction, and key risks. Understand the company's current position and future outlook.

Company Overview: Pioneering Neural Input Technology

Wearable Devices Ltd., an Israeli technology company founded in 2014, is at the forefront of developing innovative human-computer interaction solutions. Its core technology centers on a proprietary neural input interface – a wrist-worn device that interprets subtle nerve signals from the wrist. This technology enables intuitive, touchless control of digital devices, offering a more natural and efficient way to interact with smartphones, computers, smart TVs, and emerging platforms like augmented/virtual reality (AR/VR).

The company has moved from a research and development phase into commercialization, pursuing a two-pronged market strategy:

• Business-to-Business (B2B): Licensing its technology and developing custom solutions for industries such as AR/VR, automotive, and smart home applications.
• Business-to-Consumer (B2C): Directly offering products to end-users.

Flagship Product: The Mudra Band

WLDS's flagship B2C product is the Mudra Band, an accessory for the Apple Watch. Launched commercially in 2023, the Mudra Band allows users to control Apple devices (iPhone, Mac, Apple TV, iPad) with precise, subtle finger movements, eliminating physical contact. This hands-free interaction enhances the user experience within the Apple ecosystem, facilitating tasks like media playback, navigation, and productivity.

Key Financial Performance (Year Ended December 31, 2025)

As an early-stage technology company, WLDS prioritizes growth and product development, which leads to significant operational expenses.

• Revenue: In fiscal year 2025, the company reported revenues of approximately $1.2 million, up from $0.8 million in 2024. These revenues primarily came from initial Mudra Band sales and early B2B engagements, signaling early market penetration.
• Net Loss: WLDS reported a substantial net loss of approximately $8.5 million in 2025, an increase from $7.9 million in 2024. High research and development, marketing, and general administrative costs associated with scaling operations primarily drive these recurring losses.

Management Discussion and Analysis Highlights

WLDS's 2025 financial results reflect its ongoing investment in product development and market penetration. While modest, the revenue increase indicates initial traction for the Mudra Band and early B2B engagements. However, the company remains in a growth phase, marked by significant operating expenses.

• Results of Operations: The net loss of $8.5 million in 2025, an increase from $7.9 million in 2024, primarily stems from:
  • Research and Development (R&D) Expenses: Substantial ongoing investment in enhancing its core neural input technology, developing new Mudra Band features, and exploring new B2B applications.
  • Sales and Marketing Expenses: Increased spending on marketing campaigns to drive Mudra Band awareness and adoption, alongside efforts to expand B2B partnerships.
  • General and Administrative (G&A) Expenses: Costs associated with scaling operations, including personnel, professional fees, and public company compliance.
• Liquidity and Capital Resources: The company's ability to fund operations and execute its strategic plan highly depends on its ability to raise additional capital. Recurring operating losses and negative cash flows from operations necessitate ongoing financing efforts. Management actively explores various financing options, including equity and debt, to secure the necessary capital to continue as a going concern.

Financial Health

• Cash Position: As of December 31, 2025, the company held approximately $2.3 million in cash and cash equivalents.
• Liquidity and Going Concern: Given its current operational burn rate, this cash balance provides limited runway. The company's independent auditors have issued a "going concern" warning for both the 2024 and 2025 fiscal years. This indicates substantial doubt about WLDS's ability to continue operating for the next twelve months without securing additional capital. This doubt primarily stems from recurring operating losses and negative cash flows. Such a warning can significantly impact the company's ability to raise funds and attract investors.

Future Outlook and Strategic Direction

WLDS's strategy focuses on expanding the Mudra Band's market reach and accelerating B2B partnerships.

• B2C Expansion: The company is enhancing the Mudra Band's features, expanding compatibility beyond the Apple ecosystem, and increasing marketing efforts to drive consumer adoption.
• B2B Acceleration: The company actively pursues strategic collaborations with major players in AR/VR, automotive, and smart home sectors. It aims to integrate its neural input technology into next-generation devices and interfaces, securing significant licensing agreements and development contracts in these high-growth markets.
• Product Pipeline: WLDS invests in research for future product iterations and new applications of its core technology, including more advanced gesture recognition and integration with diverse operating systems.

Competitive Position

The human-computer interaction technology market is highly dynamic and competitive. Wearable Devices Ltd. faces competition from several types of players:

• Established Technology Giants: Large companies with significant resources that develop or have developed their own input methods, including voice control, haptics, and advanced gesture recognition for their ecosystems (e.g., Apple, Google, Meta).
• Specialized Startups: Other innovative startups focusing on alternative or niche input technologies, some of which also develop neural interfaces or advanced gesture recognition.
• Traditional Input Methods: The continued prevalence and evolution of traditional input methods (touchscreens, keyboards, mice) and conventional wearable controls.

WLDS differentiates itself through its proprietary, non-invasive neural input technology, which offers precise, subtle, and touchless control – a unique value proposition. The company believes its technology offers a more intuitive and seamless user experience, especially where traditional input is cumbersome or impossible (e.g., AR/VR, in-car controls). However, achieving widespread adoption and market share requires significant investment in R&D, marketing, and strategic partnerships to overcome the competitive landscape and establish its technology as a preferred input method.

Key Risk Factors for Investors

Investing in Wearable Devices Ltd. carries significant risks that investors should carefully consider:

1. Financial Viability and "Going Concern": The most critical risk is the company's ability to achieve profitability and generate sufficient cash flow. Recurring losses and the "going concern" warning highlight a high dependence on future financing, which may not be available on favorable terms or at all.
2. Market Adoption of Neural Input Technology: WLDS's success hinges on the widespread acceptance of wrist-based neural input as a primary control method. There is no guarantee that consumers or businesses will adopt this technology over existing or competing input methods (e.g., voice control, haptics, traditional gesture recognition, or direct touch).
3. Intense Competition: The technology market is highly competitive. WLDS faces competition from established tech giants with vast resources and smaller, innovative startups developing alternative input methods. Its ability to differentiate and protect its intellectual property is crucial.
4. Product Development and Innovation: The company must continuously innovate, improve existing products, and successfully launch new ones. Failure could lead to obsolescence and loss of market share.
5. Reliance on Third Parties: WLDS depends on a limited number of third-party suppliers and manufacturers for critical components and production. Supply chain disruptions could severely impact its ability to produce and deliver products.
6. Need for Additional Capital and Dilution Risk: To fund ongoing operations, R&D, and expansion, WLDS will likely need to raise substantial additional capital. This could occur through equity financing, diluting existing shareholders' ownership, or debt financing, increasing financial leverage.
7. Limited Operating History and Scalability: As a relatively young company, WLDS has a limited track record of commercial success and profitability. Effectively scaling production, distribution, and customer support presents significant operational challenges.
8. Concentrated Ownership and Control: A relatively small group of officers, directors, and major shareholders collectively own approximately 11.4% of the company's outstanding shares, giving them significant influence over corporate decisions.
9. Nasdaq Listing Compliance: The company must continuously meet Nasdaq's listing requirements, including minimum share price and market capitalization. Failure could result in delisting, negatively impacting liquidity and investor confidence.
10. Geopolitical Risks (Operating in Israel): Operating in Israel exposes the company to geopolitical risks, including regional instability and military conflicts (such as the ongoing Israel-Gaza war). These events could impact economic conditions, supply chains, and the ability to attract and retain talent, potentially disrupting operations, affecting sales, and hindering fundraising efforts.

Corporate Information & Share Structure

• Headquarters: Israel
• Stock Symbols: WLDS (Ordinary Shares) and WLDSW (Warrants)
• Exchange: Nasdaq Capital Market
• Shares Outstanding: As of December 31, 2025, 2,882,802 ordinary shares were outstanding.
• Reporting Currency: U.S. Dollars.

Important Note on Reverse Share Splits: To maintain Nasdaq listing compliance and potentially increase its share price, Wearable Devices Ltd. has executed several reverse share splits. These splits reduce the total number of outstanding shares while proportionally increasing the price per share. However, they do not inherently change the company's overall market capitalization or underlying value. The company completed a 1-for-20 split on October 10, 2024, a 1-for-4 split on March 17, 2025, and a subsequent 1-for-3 split on March 11, 2026 (disclosed as a subsequent event in the 20-F). All share numbers in this report reflect adjustments for these splits up to the reporting date.