Business context and reporting period
ReWalk Robotics Ltd. (now identified in the request as Lifeward Ltd.) filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2017. The company develops and sells wearable exoskeleton systems for people with mobility impairments, including ReWalk Personal and Rehabilitation devices. The filing reports U.S. GAAP figures in U.S. dollars; financial amounts below are in millions unless stated otherwise.
Financial and operating performance
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $1.732 | $1.400 | $6.238 | $4.278 |
| Gross profit / margin | $0.708 / 41% | $0.290 / 21% | $2.498 / 40% | $0.868 / 20% |
| Operating expenses | $6.060 | $7.693 | $18.872 | $23.274 |
| Operating loss | $(5.352) | $(7.403) | $(16.374) | $(22.406) |
| Net loss | $(5.846) | $(7.920) | $(18.555) | $(23.959) |
| Net loss per share, basic and diluted | $(0.27) | $(0.62) | $(1.00) | $(1.92) |
Q3 revenue rose 24%; nine-month revenue rose 46%. Higher sales mix, VA study-related placements and conversions of rental devices to purchases supported revenue and gross margin. Units placed were 16 in Q3 (15 Personal, one Rehabilitation), versus 23 a year earlier; year-to-date placements were 84 versus 80. The company attributed lower operating expenses to cost-reduction measures. Reduced losses per share also reflect a higher weighted-average share count.
For the nine months, operating cash use was $17.072 million, investing cash use was $0.019 million and financing cash provided was $6.341 million; cash decreased $10.750 million. Cash and equivalents were $12.928 million at September 30, 2017, down from $23.678 million at year-end 2016. Current assets were $19.396 million and current liabilities $9.617 million. Total assets were $21.484 million, total liabilities $20.144 million and shareholders’ equity $1.340 million.
Reported loan principal carrying value was approximately $15.666 million: $5.663 million current and $10.003 million long term. Contractual long-term debt payments, including interest, totaled $19.288 million. The Kreos loan bears 10.75% annual interest and is secured by company assets, including intellectual property. Total contractual obligations were $28.583 million, including leases and Harvard collaboration/license commitments.
Material changes versus the prior comparable period
- Revenue and gross margin improved, while net loss narrowed year over year in both Q3 and the first nine months.
- Nine-month operating cash use fell to $17.1 million from $20.2 million, but cash declined more than in the prior-year period, when it fell $5.5 million, partly reflecting lower financing proceeds.
- ATM sales issued 5.38 million shares in the first nine months at an average $1.76 per share, generating $9.0 million net. Issued and outstanding shares rose to 21.82 million from 16.34 million at December 31, 2016.
- In June, $3.0 million of Kreos debt was exchanged into a convertible note, with potential conversion into up to 2,523,660 shares at $1.268 per share. The transaction generated a $0.313 million debt-extinguishment loss.
Outlook, commentary, risks and unusual items
- Management set a 2017 goal to reduce operating expenses by up to 30% versus 2016. It expects continued losses and negative operating cash flow in the near term and gave no specific revenue or earnings forecast.
- Management stated that the $125.1 million accumulated deficit and expected further losses raise substantial doubt about the company’s ability to continue as a going concern. It planned to fund the next 12 months through existing cash, spending reductions and further financing. Form S-3 rules limited remaining primary offering capacity to $4.3 million as of September 30, 2017, increasing the risk of constrained or dilutive fundraising.
- Reimbursement remains a key commercial dependency. The VA had placed 16 devices under its national policy; Barmer confirmed coverage for qualifying German beneficiaries, and DGUV supported case-by-case provision. The company reported seven favorable case-by-case reimbursement decisions and 218 pending U.S. and German claims.
- Management targeted a Restore soft-suit clinical trial in early 2018 and potential commercialization in Europe and the U.S. in late 2018 or early 2019, subject to clinical progress and regulatory clearances. The company had not yet applied for those clearances.
- The mandatory FDA postmarket surveillance study remained a significant regulatory risk: as of November 1, 2017, three centers were enrolling, with seven patients enrolled and four active; the FDA had characterized progress as inadequate. Further FDA action could restrict U.S. marketing.
- Three IPO-related securities class actions remained pending as of November 1, 2017. The company said it could not estimate a possible loss and recorded no litigation reserve. It also disclosed FDA requests for information concerning reports of falls or fractures involving users.
- Customer concentration is notable: one customer represented 42.6% of revenue in the filing’s major-customer disclosure; the table’s precise comparative period is not clear. The company also depends on one contract manufacturer.
- Other material risks include loan repayment, share dilution, Nasdaq listing compliance, reimbursement and product adoption, and execution of expense reductions. The company disclosed no off-balance-sheet arrangements.
Most important facts for investors to verify
- Cash runway, expected operating burn, debt repayment schedule and ability to raise capital within the remaining Form S-3 capacity.
- Whether reported reimbursement approvals translate into sustained device orders, collections and broader coverage; check customer concentration and VA-related sales mix.
- FDA study enrollment and status, any protocol changes or agency actions, and the effect on U.S. marketing.
- Progress and regulatory timing for the Restore soft suit and other development programs, alongside the costs and commitments involved.
- Updates on the three pending class actions, potential exposure and insurance coverage.
- Share dilution from ATM issuance, equity awards, warrants and possible conversion of the Kreos note.