Business context and reporting period
ReWalk Robotics Ltd. (the filing’s registrant; the request metadata says Lifeward Ltd.) reported unaudited results for the three months ended March 31, 2020. The company develops and commercializes wearable robotic exoskeletons, including ReWalk devices for spinal cord injury and ReStore for stroke rehabilitation. It delayed filing because COVID-19-related closures and remote work disrupted financial reporting preparation.
Key financial metrics
Amounts below are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $0.760 | $1.581; down 52% |
| Gross profit / margin | $0.373 / 49% | $0.926 / 59% |
| Operating expenses | $3.975 | $4.501 |
| Operating loss | $(3.602) | $(3.575) |
| Net loss | $(3.840) | $(4.000) |
| Basic and diluted loss per share | $(0.37) | $(1.25) |
| Operating cash flow | $(4.341) | $(4.253) |
| Cash and cash equivalents at quarter-end | $16.602 | $16.253 at Dec. 31, 2019 |
| Total current assets / current liabilities | $21.962 / $10.351 | Working capital: $11.611 |
| Kreos loan principal outstanding | $5.7 | All presented as current maturities |
Cash, cash equivalents and restricted cash totaled $17.332 million, including $0.730 million of restricted cash. Financing activities provided $4.690 million, chiefly from the February offering and warrant exercises, partly offset by $1.266 million of loan repayments. Cash increased by $0.340 million. At March 31, total liabilities were $12.134 million and shareholders’ equity was $13.083 million.
Material changes versus the prior comparable period
- Revenue fell $0.821 million, primarily because COVID-19 delayed deliveries and fewer ReWalk Personal units were placed in Germany. Personal unit revenue was $0.714 million versus $1.546 million; rehabilitation unit revenue was $0.046 million versus $0.035 million.
- Gross margin declined 10 percentage points, mainly due to lower unit volumes.
- Research and development expense fell 30% to $0.985 million after ReStore development and clinical study costs declined. Sales and marketing expense rose 6% to $1.681 million, principally reflecting German payor-contract implementation consulting. General and administrative expense declined 13% to $1.309 million.
- Net loss narrowed modestly, while operating loss was slightly higher. Loss per share improved from $(1.25) to $(0.37); weighted-average shares increased to 10.37 million from 3.21 million, so per-share comparisons also reflect a substantially larger share base.
- The February 2020 best-efforts offering and related warrant exercises materially increased share issuance: outstanding shares rose to 12.93 million at quarter-end from 7.32 million at year-end 2019. The offering included warrants, creating potential dilution.
Outlook, risks, contingencies and unusual items
- Going concern: The company reported an accumulated deficit of $172.3 million and substantial doubt about its ability to continue as a going concern. It expects further losses and says the next 12 months’ operating costs are intended to be funded by cash on hand, expense reductions and additional equity or debt financing. No assurance is given that further funding will be available on acceptable terms.
- COVID-19: Restrictions impaired customer engagement, training, deliveries and repairs, and may disrupt clinical studies, suppliers and production. Management said the scale and duration of the effects could not be predicted. Cost measures beginning in Q2 included personnel-cost reductions, deferred subcontractor spending, reduced hours in some areas and cuts to non-critical consulting.
- Commercial outlook: Management identified broader third-party reimbursement for ReWalk Personal and clinic sales of ReStore and other products as growth drivers. It expected gross margin to benefit from higher sales volumes, potentially offset by launch-period ReStore margins and higher component costs. The filing gives no numerical revenue, earnings or cash-flow guidance.
- Financing and dilution: Timwell notified the company in late March that it would not fund the remaining $15 million of its proposed investment. The company said it was exploring alternative China relationships and other financing options. Form S-3 limits constrained further primary issuance; the filing estimated only about $0.8 million of remaining capacity under the stated limit at the filing date.
- Debt and commitments: Kreos debt bears 10.75% annual interest and is secured by company assets, including intellectual property. Reported contractual obligations totaled $12.255 million, including $6.300 million of long-term debt obligations, $2.331 million of lease payments, $1.163 million of purchase commitments and $2.461 million related to Harvard agreements.
- Regulatory and legal: The company relies on one contract manufacturer, Sanmina. Its FDA-required postmarket study had enrolled 12 subjects by March 31, 2020, well below the original protocol target; FDA approved a modified protocol in March, but COVID-19 disrupted study activity. A 2019 IPO-related shareholder lawsuit remained on appeal; the company recorded no reserve because it could not reasonably estimate potential loss. IIA royalty obligations were contingent on applicable product sales, with a disclosed contingent liability of approximately $1.6 million.
- Subsequent events: In April, a U.S. subsidiary received a $392,000 PPP loan at 1% interest, potentially forgivable subject to program requirements. The Harvard collaboration was amended in April, with revised installments and an extension. The filing also reported subsequent FDA clearance of a revised ReWalk 510(k) submission on May 27, 2020 and Nasdaq’s May 11 notice that the company had regained compliance with the $1 bid-price rule.
Important facts for investors to verify
- Whether the company can secure financing and manage cash use given its going-concern warning and quarterly operating cash outflow.
- The persistence of COVID-19 effects on deliveries, customer access, repairs, supply chain and revenue, and whether delayed sales recover.
- Reimbursement progress and commercial uptake in Germany and the United States, including the outcome of the scheduled CMS code hearing.
- Progress and FDA acceptance of evidence for the postmarket surveillance study, and any additional regulatory or product-safety developments.
- The terms, repayment and potential forgiveness of the PPP loan; Kreos debt service; and dilution from outstanding warrants and future capital raises.
- The status and potential exposure of the appealed shareholder litigation, plus the company’s customer concentration and dependence on Sanmina.