Business context and reporting period
This is ReWalk Robotics Ltd.’s unaudited Form 10-Q for the quarter ended March 31, 2018. The company designs and sells wearable exoskeleton systems for people with mobility impairments, and was developing a soft-suit system for additional conditions. The filing identifies the registrant as ReWalk Robotics Ltd.; the request names Lifeward Ltd.
Financial results and liquidity
Amounts are in U.S. dollars; financial statement amounts below are in millions unless otherwise noted.
| Metric | Q1 2018 | Q1 2017 / prior date |
|---|---|---|
| Revenue | $1.579 | $2.499 |
| Gross profit / margin | $0.682 / 43% | $1.049 / 42% |
| Operating expenses | $6.524 | $6.704 |
| Operating loss | $(5.842) | $(5.655) |
| Net loss | $(6.327) | $(6.400) |
| Net loss per share | $(0.21) | $(0.39) |
| Cash used in operations | $(5.026) | $(6.029) |
| Cash and cash equivalents at period-end | $8.818 | $14.567 at Dec. 31, 2017 |
Cash, cash equivalents and restricted cash totaled $9.668 million at March 31, including $0.850 million of restricted cash. Total assets were $17.720 million and total liabilities $19.219 million; shareholders’ equity was negative $1.499 million. The balance sheet showed $14.237 million of long-term loan principal, including $6.441 million classified as current. The loan bears 10.75% annual interest and is secured by substantially all company assets.
Material changes versus the prior comparable period
- Revenue fell 37%, mainly because fewer systems were sold to the U.S. Veterans’ Administration for its clinical study. Units placed declined to 23 from 37: 22 Personal and one Rehabilitation system.
- Gross profit declined with sales, while gross margin edged up to 43% from 42%.
- Research and development expense rose 50% to $2.151 million, reflecting soft-suit development and Restore clinical, regulatory and quality work. Sales and marketing expense fell 25% to $2.336 million, mainly due to lower personnel and consulting costs.
- Net loss narrowed slightly, while operating loss widened. Lower net financial expense—$0.485 million versus $0.731 million—helped reduce the net loss.
- Operating cash use improved by about $1.0 million, principally due to working-capital changes. Cash and cash equivalents declined $5.749 million from year-end.
Outlook, risks and unusual items
- Management provided no quantified revenue or earnings guidance. It said it expected near-term losses and planned to reduce spending where possible while pursuing reimbursement coverage, commercialization, clinical studies and product development. It expected growth to depend on third-party payer sales and sales of the Restore device to rehabilitation institutions.
- The company reported an accumulated deficit of $137.6 million and stated that these losses and its financing needs raise substantial doubt about its ability to continue as a going concern. Its plan included cash on hand, spending reductions, ATM share sales and other financings; it cautioned that additional funding may be needed and may not be available on acceptable terms.
- On May 15, 2018, after quarter-end, the company closed the first Timwell investment tranche: 4 million shares for $5 million gross and $4.4 million net proceeds. Two further tranches were contemplated, subject to conditions. The first tranche’s pro forma effect would raise March 31 cash to $13.218 million and equity to $2.901 million; these amounts were not the reported quarter-end balances.
- Nasdaq compliance remained uncertain. The company said it had regained compliance with the shareholders’ equity requirement but was awaiting Nasdaq’s response to its filing and did not guarantee continued compliance. The filing also cites risk from the $1.00 minimum bid-price requirement.
- Three putative securities class actions relating to the IPO remained pending. The company said it could not estimate a possible loss and recorded no litigation reserve.
- The filing describes reported falls and fractures involving ReWalk users, FDA requests for information, a voluntary correction and changes to labeling/design. The company anticipated submitting a new 510(k) for certain modifications; further adverse events or regulatory action could affect operations and sales.
- A one-time $0.200 million severance accrual for the former CFO was included in Q1 general and administrative expense. The company also recorded a Harvard-related milestone liability after achieving a milestone; the amount is not clearly stated in the filing text.
Most important facts for investors to verify
- Whether revenue can recover from the Q1 decline and whether reimbursement policies convert into sustained system placements.
- Available liquidity, cash burn, debt service and the timing and conditions of remaining Timwell tranches or other financing.
- Nasdaq’s determination on listing compliance, including shareholders’ equity and minimum bid-price requirements.
- FDA status of the postmarket study, device modifications and 510(k) submission, and any further adverse-event disclosures.
- Developments in the IPO-related lawsuits and any effect on the company’s financial position.
- Potential dilution and governance effects from future share issuances, including the Timwell agreement and ATM program.