Lifeward Ltd. (then ReWalk Robotics Ltd.) — Q1 2021 Form 10-Q
Business context and period. The filing is for the three months ended March 31, 2021, compared with the same period in 2020. The company designs and commercializes robotic exoskeletons and related rehabilitation products, including ReWalk Personal and Rehabilitation, ReStore, and distributed MyoCycle and MediTouch products. Financial statement amounts below are in U.S. dollars; unless otherwise stated, figures are in millions.
Financial results and position
- Revenue: $1.316 million, up 73% from $0.760 million. Management attributed the increase primarily to higher ReWalk Personal 6.0 sales in the United States and Germany. Personal-use revenue was $1.308 million versus $0.714 million; rehabilitation revenue was $0.008 million versus $0.046 million.
- Gross profit and margin: $0.707 million and 54%, compared with $0.373 million and 49%. Management cited higher unit volume as the main driver of margin improvement.
- Operating expenses: $3.728 million, down from $3.975 million. Research and development was $0.795 million (down 19%), sales and marketing $1.671 million (roughly flat), and general and administrative $1.262 million (down 4%).
- Loss: Operating loss was $3.021 million versus $3.602 million; net loss was $3.062 million versus $3.840 million. Basic and diluted loss per share was $0.08 versus $0.37; the weighted-average share count rose to 36.2 million from 10.4 million.
- Cash flow: Operating cash use was $3.173 million, improved from $4.341 million. Investing cash use was $0.009 million. Financing provided $50.236 million, primarily from the February 2021 private placement and warrant exercises. Cash, cash equivalents and restricted cash rose by $47.054 million to $68.108 million, including $67.411 million of unrestricted cash and cash equivalents.
- Liquidity and obligations: Current assets were $71.919 million and current liabilities $4.022 million. Total liabilities were $5.542 million, including operating lease liabilities; the Kreos loan had been repaid in December 2020, and the PPP loan was forgiven in November 2020. Contractual obligations totaled $4.950 million, including purchase commitments of $1.150 million, Harvard collaboration/license obligations of $2.144 million, and lease obligations of $1.656 million.
- Equity and dilution: February’s private placement issued 10.9 million ordinary shares and warrants for up to 5.46 million shares, raising approximately $36.4 million net. Exercises of existing warrants generated approximately $13.8 million in the quarter. Outstanding shares increased from 25.3 million at December 31, 2020 to 46.1 million at March 31, 2021; 10.55 million warrants remained outstanding at quarter-end.
Material changes versus the prior period
- Revenue, gross profit and gross margin improved year over year, while operating expenses and net loss declined.
- Operating cash burn decreased, but the cash balance increase was principally financed through equity issuance and warrant exercises rather than operations.
- Financial expenses shifted from $0.246 million of expense to $0.004 million of net income, mainly because the Kreos debt had been fully repaid.
- Customer concentration shifted: no customer represented 10% or more of revenue in Q1 2020, while three customers represented 15%, 10% and 10% in Q1 2021. Several customers also individually represented at least 10% of receivables at quarter-end.
Outlook, commentary and risks
- Management said available funds were sufficient to support operations for more than 12 months after issuance of the interim financial statements. It nevertheless expects future losses and stated that additional funding may be needed until profitability or positive operating cash flow is achieved. No quantified revenue or earnings guidance was provided.
- Management expects growth to depend on ReWalk Personal sales and expanded third-party-payer coverage, as well as ReStore and other product sales. It expects higher volume could improve gross profit, but noted potential margin pressure from new product launches and higher component costs.
- COVID-19 continued to constrain patient trials, clinic access, product demonstrations, training and customer activity; management said the duration and scale of the effects remained uncertain. Supply-chain disruption and customer payment delays could also affect results.
- The company relies on Sanmina as its sole manufacturer. The filing highlights product safety risks, including two complaints involving battery thermal runaway; the company submitted reports to regulators and was implementing a correction with clarified use and storage instructions.
- The FDA-required ReWalk Personal 6.0 postmarket study had significant enrollment shortfalls: 12 subjects enrolled, three completed the study, and one was using the device when study sites closed. The company planned to submit study and real-world data; failure to satisfy FDA requirements could lead to restrictions on U.S. marketing.
- Other relevant exposures include reimbursement uncertainty, reliance on a limited number of suppliers and customers, and $1.6 million of contingent royalty liability to the Israel Innovation Authority. The company reported no material litigation then pending and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether revenue growth and improved gross margin persist, and how much growth comes from ReWalk Personal versus rehabilitation and distributed products.
- How quickly cash is being consumed relative to the stated runway, and whether further financing will be required.
- The potential dilution from the 10.55 million outstanding warrants and the effect of the sharp increase in shares outstanding.
- FDA feedback and the outcome of the postmarket surveillance submission, including any impact on U.S. sales or marketing authorization.
- Whether COVID-related restrictions, reimbursement progress, product safety issues, or dependence on Sanmina materially affect sales and operating costs.