Business context and reporting period
This is ReWalk Robotics Ltd.’s unaudited Form 10-Q for the quarter ended September 30, 2016, covering the three and nine months ended on that date. The filing identifies the registrant as ReWalk Robotics Ltd.; the request metadata names Lifeward Ltd., so investors should verify the issuer and any corporate-name history.
ReWalk develops and sells powered exoskeletons for people with mobility impairments. Revenue primarily comes from ReWalk Personal and ReWalk Rehabilitation systems. The company reported 23 devices placed in the third quarter (20 personal-use and 3 rehabilitation); 13 case-by-case insurance reimbursement decisions were favorable.
Financial results and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $1.400 million | $1.165 million | $4.278 million | $2.410 million |
| Gross profit (margin) | $0.290 million (20%) | $0.087 million (7%) | $0.868 million (20%) | $0.180 million (7%) |
| Operating loss | $(7.403) million | $(6.305) million | $(22.406) million | $(17.669) million |
| Net loss | $(7.920) million | $(6.394) million | $(23.959) million | $(17.908) million |
| Net loss per share | $(0.62) | $(0.53) | $(1.92) | $(1.48) |
Q3 revenue grew 20% year over year; nine-month revenue grew 77%. Management attributed growth to more personal-device placements, rental-to-purchase conversions, positive reimbursement decisions, and VA-related sales. Nine-month placements were 80 versus 48 in 2015, including 22 personal devices placed with the VA for clinical studies.
Operating expenses were $7.693 million in Q3 and $23.274 million year to date, rising from $6.392 million and $17.849 million, respectively, in the comparable periods. Higher R&D included Harvard collaboration costs, clinical studies, and regulatory and personnel expenses. Sales and marketing and general and administrative expenses also increased. Financial expense was $0.508 million in Q3 and $1.514 million year to date, largely reflecting Kreos loan costs and interest.
At September 30, cash and cash equivalents were $12.399 million, total current assets $18.372 million, and current liabilities $10.496 million. Total assets were $20.819 million; total liabilities were $16.117 million; shareholders’ equity was $4.702 million. The balance sheet reported loan liabilities of $5.299 million current and $5.180 million long-term. Operating cash use was $20.200 million for the nine months, versus $18.038 million in 2015; cash fell by $5.470 million to $12.399 million.
Financing provided $15.138 million in the first nine months, including a $12.0 million Kreos draw and $4.1 million net ATM proceeds, offset in part by debt costs and repayments. The Kreos facility bears 10.75% annual interest, is secured by substantially all company assets, and had up to $8.0 million of additional availability subject to its conditions. After quarter-end, the company closed a November 1 offering with $12.2 million gross and estimated $11.1 million net proceeds. Management said cash, offering proceeds, and available Kreos borrowing would cover anticipated needs for the next 12 months.
Material changes, outlook, and risks
- Gross margin improved from 7% to 20% in both comparable periods, which management attributed to unit mix, rental conversions, increased sales, and prior-period production costs associated with the P6.0 conversion.
- Losses and operating cash use increased. Management expected near-term losses to continue, R&D spending to rise, and reimbursement and market-development investment to remain significant. The filing gives no specific revenue or earnings guidance.
- Management expected future growth principally from ReWalk Personal sales through third-party payors, but broad, uniform reimbursement coverage did not exist. The VA had placed 11 units under its national policy as of September 30.
- The Harvard research and license arrangements carry a stated total payment obligation of approximately $6.3 million; $1.3 million was expensed in the first nine months. Additional royalties and milestone payments depend on future sales and development or commercialization events and were not reasonably estimable.
- Non-cancelable manufacturer purchase commitments were approximately $2.2 million. Contractual obligations totaled $26.167 million, including leases and scheduled Kreos principal and interest. The company depends on a single contract manufacturer, Sanmina, and had pledged $751,000 of bank deposits for lease-related guarantees.
- Two putative shareholder class actions filed in California in September and October 2016 allege IPO registration-statement omissions relating to regulatory controls and post-market surveillance. The company said it would defend the claims; it could not estimate a loss and recorded no reserve.
- The FDA had accepted a special 510(k) in July 2016 and stated in August that the violations cited in its 2015 warning letter had been adequately addressed. The required post-market study was ongoing; delays in reporting or unfavorable results could lead to further regulatory action or marketing limitations.
- The November offering issued 3.25 million ordinary shares and warrants to purchase up to 2,437,500 shares, with an underwriter option for additional units. This creates potential dilution. The company also identified market-acceptance, reimbursement, clinical-evidence, competition, product-liability, foreign-exchange, Israeli operating, and regulatory-compliance risks.
Important facts for investors to verify
- Confirm the registrant’s identity and relationship, if any, to Lifeward Ltd.; this filing is under ReWalk Robotics Ltd.
- Track device placements, personal-use sales, rental conversions, VA activity, and whether case-by-case reimbursement develops into broader coverage.
- Assess cash burn against post-offering net proceeds, actual availability and drawdown terms for the remaining Kreos facility, and the secured debt repayment schedule.
- Review gross-margin durability, manufacturing costs, and the company’s reliance on Sanmina and its suppliers.
- Monitor FDA study progress and reporting, the California shareholder litigation, and any associated costs or outcomes.
- Quantify dilution from the November share-and-warrant offering, potential option exercise, ATM sales after the lock-up, and outstanding equity awards.