ReWalk Robotics Ltd. (now identified in the request as Lifeward Ltd.) — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018; filed November 8, 2018. The filing names the registrant as ReWalk Robotics Ltd. It designs and commercializes wearable exoskeleton systems, including ReWalk Personal and ReWalk Rehabilitation, and is developing the ReStore soft exo-suit.
Financial performance
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $1.617 million | $1.732 million | $4.966 million | $6.238 million |
| Gross profit (margin) | $762,000 (47%) | $708,000 (41%) | $2.211 million (45%) | $2.498 million (40%) |
| Operating loss | $4.123 million | $5.352 million | $15.241 million | $16.374 million |
| Net loss | $4.533 million | $5.846 million | $16.657 million | $18.555 million |
| Operating cash used | Not separately stated | Not separately stated | $12.174 million | $17.042 million |
For the nine months, unit placements fell to 66 from 84. Revenue declined 20%, mainly because fewer units were placed in the United States; Q3 revenue was down 7%, primarily reflecting fewer rental-to-purchase conversions. Higher gross margins reflected sales mix and lower product costs. Lower selling and marketing expenses helped reduce operating losses, while R&D expense rose 27% year over year for the nine-month period, mainly due to ReStore development and clinical work.
Financial position and liquidity
- At September 30, cash and cash equivalents were $5.230 million, versus $14.567 million at December 31, 2017. Cash, cash equivalents and restricted cash totaled $6.069 million.
- Total assets were $11.874 million and total liabilities were $17.095 million. Shareholders’ deficit was $5.221 million; accumulated deficit was $147.9 million. Current liabilities exceeded current assets by approximately $949,000.
- Debt carrying amounts were approximately $12.422 million in total: $6.978 million current and $5.444 million long term. The filing reports $12.4 million of principal and interest outstanding under the Kreos arrangements. The loan bears 10.75% annual interest and is secured by substantially all company assets.
- Nine-month financing cash flow was $2.823 million, including equity proceeds; cash and restricted cash decreased by $9.354 million. The company used $12.174 million in operating cash.
Outlook, commentary and significant risks
- Management stated that further losses were anticipated and that substantial doubt existed about the company’s ability to continue as a going concern. It planned to fund the next 12 months through cash on hand, spending reductions, ATM share sales and/or other equity or debt financing; additional funding may be required.
- Management expected near-term spending to support reimbursement and commercialization of ReWalk Personal and development of ReStore. The company had applied for CE mark clearance for ReStore and targeted commercialization for stroke patients in Q3 2019, subject to regulatory clearance and clinical progress. No quantified revenue or earnings guidance was provided.
- The Timwell investment agreement’s first $5 million tranche closed, yielding about $4.3 million net. The remaining $15 million depended on further conditions, including a China joint venture, agreements and product-production milestones. Management warned there was significant risk the remaining tranches would not close.
- Kreos deferred $500,000 of principal and interest payments until October 2, 2018; the company was discussing a possible additional deferral of up to $1 million. Repayment or refinancing remained a liquidity risk.
- Nasdaq notified the company of minimum bid-price and market-value listing deficiencies in October 2018. The company had until April 24, 2019 to regain compliance, subject to the applicable rules.
- The filing describes FDA safety and compliance exposure, including a Class II recall associated with revised use instructions and inadequate enrollment progress in the mandatory postmarket surveillance study. The company also reported an outstanding securities action; it could not estimate a possible loss. Two related Massachusetts state actions were dismissed with prejudice in November 2018, after quarter-end.
- Customer concentration was significant: Customer A represented 47.7% of nine-month revenue and 59% of trade receivables at September 30.
Most important facts for investors to verify
- Current cash runway, operating cash burn and any financing raised after September 30, 2018; also whether the going-concern uncertainty was subsequently resolved.
- Status and terms of Kreos deferrals, repayments or refinancing, and the company’s ability to meet near-term debt obligations.
- Whether the Timwell tranches and China joint venture closed, and the resulting proceeds, dilution and control implications.
- Progress toward Nasdaq listing compliance and the outcome of FDA review, recall follow-up and postmarket study enrollment.
- ReWalk and ReStore sales, reimbursement coverage, regulatory milestones and customer concentration developments.