Business Context and Reporting Period
This Form 8-K Current Report was filed by ReWalk Robotics Ltd. on July 23, 2018. The filing provides preliminary, unaudited financial results for the three and six months ended June 30, 2018, alongside updates on regulatory developments, reimbursement policies, and a strategic investment agreement.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 |
|---|---|---|---|---|
| Revenue | $1.8 million | $3.4 million | $2.0 million | $4.5 million |
| Units Placed | 21 | 44 | 31 | 68 |
| Cash and Cash Equivalents | $9.1 million (as of June 30, 2018) | |||
| Pending Insurance Claims | 250 (as of June 30, 2018) |
Geographic Revenue Mix (Six Months Ended June 30, 2018): United States (68%), Europe (30%), Latin America and Asia Pacific (2%).
Profit, Margins, and Debt: The filing text does not provide clear values for net profit, operating margins, or specific debt balances.
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by approximately 10% year-over-year for the quarter ($1.8M vs. $2.0M) and by approximately 24% for the six-month period ($3.4M vs. $4.5M).
- Unit Volume Decline: Units placed dropped 32% in the quarter (21 vs. 31) and 35% in the six-month period (44 vs. 68) compared to the prior year.
- Liquidity Reduction: Cash and cash equivalents decreased significantly from $16.3 million as of June 30, 2017, to $9.1 million as of June 30, 2018.
- Geographic Shift: Revenue reliance on the U.S. market decreased from 76% to 68% over the six-month period, while European revenue share increased from 24% to 30%.
Guidance, Outlook, and Material Events
Reimbursement and Regulatory Updates
- U.S. VA Policy: In June 2018, the U.S. Department of Veterans Affairs revised its policy to expand access to training for the ReWalk device. There are now 142 certified training centers (VA and private) across the U.S. and Canada.
- German Medical Aid: As of June 2018, the ReWalk Personal device was included in the official list of medical aids by the German National Association of Statutory Health Insurance Funds, enabling statutory health insurance beneficiaries to apply for coverage.
- FDA Reporting: The company reported incidents of falls and fractures to the FDA. In August 2017, a voluntary correction was initiated regarding use instructions. The FDA agreed with the company's actions in June 2018 but requires regular status reports. The company anticipates submitting a new 510(k) premarket notification due to labeling and design modifications.
Timwell Investment Agreement
The company agreed to issue 16,000,000 shares to Timwell Corporation Limited for $20.0 million. The first tranche ($5.0 million) closed in May 2018. The Second Tranche ($10.0 million), originally due by July 1, 2018, was delayed due to jurisdictional and administrative issues regarding the formation of a joint venture in China. The company expects to move forward with the closing.
Risks and Contingencies
- Going Concern: Management and auditors have previously expressed substantial doubt regarding the company's ability to continue as a going concern.
- Regulatory Enforcement: Future adverse events could trigger FDA enforcement actions, including mandatory recalls or warning letters.
- Investment Dilution: There is a risk of substantial dilution from the Timwell issuance and the possibility that remaining tranches may fail to close.
Investor Verification Checklist
- Verify the final audited financial statements for the quarter ended June 30, 2018, to confirm preliminary revenue and cash figures.
- Monitor the status of the Timwell Second Tranche closing and the formation of the China joint venture.
- Track the submission and approval status of the anticipated new 510(k) filing with the FDA.
- Assess the impact of the revised VA policy and German medical aid listing on future unit sales and reimbursement rates.
- Review the company's cash burn rate given the decline in cash reserves to $9.1 million and the "going concern" warning.