ReWalk Robotics Ltd. (now identified in request metadata as Lifeward Ltd.) — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. The filing is by ReWalk Robotics Ltd.; it does not identify the registrant as Lifeward Ltd. Financial statements are unaudited and amounts below are in U.S. dollars unless noted.
Business context and key financial metrics
ReWalk designs, develops and sells powered exoskeleton systems for people with mobility impairments. Its products include ReWalk Personal for everyday use and ReWalk Rehabilitation for clinical settings; it is also developing a soft-suit exoskeleton for stroke rehabilitation and other indications.
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $1.770 million | $2.007 million | $3.349 million | $4.506 million |
| Gross profit / margin | $0.767 million / 43% | $0.741 million / 37% | $1.449 million / 43% | $1.790 million / 40% |
| Operating loss | $5.276 million | $5.367 million | $11.118 million | $11.022 million |
| Net loss | $5.798 million | $6.309 million | $12.124 million | $12.709 million |
| Basic and diluted loss per share | $0.18 | $0.37 | $0.39 | $0.75 |
- Revenue fell 12% in Q2 and 26% for the first half, primarily because fewer units were sold to the U.S. Department of Veterans Affairs. Units placed were 21 in Q2 2018 versus 31 a year earlier, and 44 for the first half versus 68.
- For the first half, research and development expense rose 44% to $4.048 million, reflecting soft-suit development and Restore study, regulatory and quality costs. Sales and marketing expense declined 29% to $4.261 million following cost reductions. General and administrative expense increased 7% to $4.258 million.
- Cash and cash equivalents were $9.094 million at June 30, down from $14.567 million at year-end 2017. Including restricted cash, period-end cash was $9.931 million. First-half operating cash use was $9.068 million; investing cash use was $3,000; financing provided $3.579 million. Total cash, cash equivalents and restricted cash declined $5.492 million.
- At June 30, current assets were $15.205 million and current liabilities were $11.071 million. Total liabilities were $18.289 million, including $13.081 million of carrying-value long-term loan obligations ($6.441 million current and $6.640 million long-term). The company reported a $1.264 million shareholders’ deficiency.
- Revenue remained concentrated: one customer represented 46.4% of first-half revenue, and 50% of trade receivables at June 30.
Material changes and financing
- Gross margin improved year over year, attributed by management to sales mix and lower product costs, despite lower revenue.
- Operating loss was broadly similar year over year: first-half loss increased slightly, while net loss narrowed partly because financial expense was lower and the prior-year period included a $313,000 debt-extinguishment loss.
- In May, Timwell Corporation purchased 4 million ordinary shares for $5 million gross proceeds; net proceeds were approximately $4.3 million. Two further tranches totaling $15 million gross for 12 million shares remained subject to closing conditions. The company said the timing of the second tranche could not be reasonably predicted.
- The company also sold 1.16 million shares through its at-the-market program during the first half for approximately $1.1 million net. It reported up to $9.4 million of remaining program capacity, subject to Form S-3 offering limits.
- Shares outstanding increased from 30.0 million at December 31, 2017 to 35.5 million at June 30, 2018. Additional Timwell issuances, ATM sales and equity awards could further dilute shareholders.
Outlook, risks and unusual items
- Going concern: Management stated that accumulated losses, anticipated further losses and financing needs raise substantial doubt about the company’s ability to continue as a going concern. It planned to fund the next twelve months with cash on hand, spending reductions, ATM sales and/or additional financing, including the remaining Timwell tranches; additional funding may be needed, and financing on acceptable terms is not assured.
- Business outlook: Management expected to continue cost-reduction efforts while pursuing reimbursement coverage, commercialization and clinical studies. It targeted commercialization of the Restore device for stroke patients in the first half of 2019. No quantified revenue or earnings guidance was provided.
- Market access and execution: Broad commercial-insurer reimbursement was not established. Management highlighted reliance on case-by-case coverage, VA sales and successful expansion of reimbursement and institutional demand.
- Regulatory and product safety: The company reported fracture-related adverse events and prior labeling/training changes. In June 2018, the FDA agreed with the company’s actions and requested regular progress reports. Further adverse events, reporting failures, required corrective actions or 510(k) review could affect sales and costs. Manufacturing and suppliers also face FDA quality-system requirements.
- Listing and financing risk: The company disclosed Nasdaq compliance concerns involving market value of listed securities and a share price below $1.00 since late June. Delisting remained a risk if requirements were not met. The Kreos loan is secured by substantially all company assets, including intellectual property; its stated interest rate is 10.75%.
- Legal contingency: Three IPO-related securities class actions remained pending. The company disputed the allegations but said it could not estimate a possible loss; no litigation reserve was recorded.
- Other commitments: Non-cancelable purchase obligations were approximately $914,000. Future minimum facility lease payments were reported at $3.765 million in the notes. IIA royalty obligations were contingent on applicable product sales, with a disclosed contingent liability of approximately $1.5 million. A Harvard collaboration/license milestone liability was recorded after a milestone was achieved; other milestone and royalty amounts were not reasonably estimable.
- The VA expanded access to qualifying veterans through designated centers and, on a case-by-case basis, private rehabilitation clinics. ReWalk Personal 6.0 was added to Germany’s medical-aids directory, and five leading stroke centers had IRB approval for the Restore clinical study.
Most important facts for investors to verify
- Whether Timwell’s second and third investment tranches close, when they close, and whether associated joint-venture, license, supply and production conditions are met.
- Cash runway and financing needs relative to operating cash use, secured debt repayments, and the company’s going-concern warning.
- Nasdaq market-value and minimum-bid-price compliance, including any subsequent notices or cure periods.
- Sales trends, VA unit volume, payer reimbursement progress, and customer concentration.
- Restore clinical-study progress and the timing and regulatory status of the planned product launch, alongside FDA follow-up on fracture-related actions.
- Developments in the pending securities litigation and any change to the company’s inability to estimate potential losses.