Business context and reporting period
The filing is ReWalk Robotics Ltd.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2019. The company develops and commercializes robotic exoskeletons, including ReWalk devices for people with spinal cord injury and ReStore, a soft exo-suit for stroke rehabilitation. The filing identifies the issuer as ReWalk Robotics Ltd.
Key financial metrics
Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $1.234m | $1.617m | $3.692m | $4.966m |
| Gross profit / margin | $0.649m / 53% | $0.762m / 47% | $2.010m / 54% | $2.211m / 45% |
| Operating loss | $(3.031)m | $(4.123)m | $(10.841)m | $(15.241)m |
| Net loss | $(3.389)m | $(4.533)m | $(11.976)m | $(16.657)m |
| Net loss per share, basic and diluted | $(0.46) | $(3.19) | $(2.27) | $(12.70) |
- Revenue declined 24% in Q3 and 26% in the first nine months year over year. Management attributed the declines mainly to fewer unit placements with the VA for its ongoing clinical study.
- Gross margin rose to 53% in Q3 and 54% for the nine-month period, attributed mainly to sales mix and fewer inventory write-offs.
- Operating expenses were $3.680m in Q3, down from $4.885m, and $12.851m for nine months, down from $17.452m. The company cited lower development and clinical-study costs, personnel and consulting costs, and prior-year severance and China-related legal expenses.
- At September 30, 2019, cash and cash equivalents were $20.410m; restricted cash was $0.737m. Current assets were $25.137m and current liabilities $9.459m. Total assets were $28.426m and total liabilities $14.311m.
- Long-term loan debt was $7.426m, comprising $4.443m current and $2.983m non-current maturities. Debt is secured by a first-priority interest over company assets, including intellectual property, and bears 10.75% annual interest under the disclosed loan terms.
- For the first nine months, operating cash use was $11.225m, investing cash use $0.008m, and financing cash inflow $22.033m, producing a $10.800m increase in cash, cash equivalents and restricted cash.
Material changes and developments
- The company raised capital through 2019 equity and warrant transactions. Financing cash inflows were substantially higher than in the prior-year period; share count also increased materially. The company effected a 1-for-25 reverse share split on April 1, 2019, and financial share and per-share data were retrospectively adjusted.
- ReStore began commercialization in June 2019 after receiving CE mark and FDA clearance. The filing reports six ReStore units placed in the first nine months, compared with none in the prior-year period.
- Operating lease accounting adoption in January 2019 added $2.099m of right-of-use assets and $2.249m of lease liabilities at adoption; the company reported no material effect on operating results or cash flows.
- The remaining $15m of contemplated Timwell investment was uncertain: management said it no longer expected to reach agreement on the original terms and saw significant risk that alternative arrangements with Timwell’s affiliate would not be reached.
Outlook, risks, contingencies and unusual items
- Management expected to fund operations over the next 12 months with cash on hand, reduced spending and future equity or debt financing, or a combination. It provided no quantified revenue, earnings or cash-flow guidance. Further losses were anticipated.
- The filing states that the accumulated deficit was approximately $165m and operating cash flow was negative, raising substantial doubt about the company’s ability to continue as a going concern. Additional financing may be needed; management cautioned that acceptable financing might not be available.
- Form S-3 capacity restrictions constrained near-term public equity issuance. The filing said the company could not then use its Form S-3 for primary offerings and was exploring alternatives, including Form S-1 offerings and private placements, which could be costly and dilutive.
- The mandatory FDA post-market surveillance study for ReWalk Personal had enrollment shortfalls: 12 subjects had enrolled, two had completed the study, and the FDA characterized progress as inadequate. The filing warns that further FDA action could restrict labeling or U.S. marketing. The company also reported prior fracture-related adverse-event reports and a Class II corrective action; in November 2019, after quarter-end, the FDA concluded that the recall was terminated.
- One IPO-related shareholder lawsuit remained on appeal; the company said it could not estimate a possible loss and had recorded no litigation reserve. Other contingencies include $1.5m of contingent IIA royalty obligations, royalties on applicable product sales, and $1.628m of non-cancelable purchase commitments.
- Management expected gross margin to remain near current levels and potentially improve with higher volume and lower manufacturing costs, with possible offsets from lower initial ReStore margins and increased component costs. It planned to prioritize ReStore commercialization, broader ReWalk reimbursement coverage and continued product development.
Most important facts for investors to verify
- Reconcile the unit-placement disclosure: the business highlights say “7 units,” but the detailed table reports 17 total units in Q3 (12 Personal and 5 ReStore).
- Track cash burn, financing availability, the going-concern uncertainty, and the company’s ability to meet loan repayments and other obligations.
- Monitor FDA study enrollment, regulatory communications and any effect on U.S. ReWalk sales.
- Assess revenue trends, reimbursement progress, ReStore adoption and whether margin improvement is sustainable.
- Review potential dilution from outstanding warrants, future capital raises and the increased authorized share capital, as well as Nasdaq continued-listing compliance.