Business context and reporting period
ReWalk Robotics Ltd. (the registrant named in this filing; the request identifies Lifeward Ltd.) filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2017. The company sells ReWalk Personal and Rehabilitation exoskeleton systems and is developing lightweight “soft suit” technology. Its commercial strategy depends significantly on reimbursement by third-party payors.
Financial results and liquidity
Dollar amounts below are in millions unless otherwise noted.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Revenue | $2.007 | $0.817 | $4.506 | $2.878 |
| Gross profit / margin | $0.741 / 37% | $0.085 / 10% | $1.790 / 40% | $0.578 / 20% |
| Operating expenses | $6.108 | $8.673 | $12.812 | $15.581 |
| Operating loss | $(5.367) | $(8.588) | $(11.022) | $(15.003) |
| Net loss | $(6.309) | $(9.117) | $(12.709) | $(16.039) |
| Net loss per share | $(0.37) | $(0.74) | $(0.75) | $(1.30) |
- Q2 revenue increased 146% year over year; first-half revenue increased 57%. Growth principally reflected Personal device sales, including commercial-insurance coverage, rental-to-purchase conversions and VA study sales. The company placed 31 devices in Q2 versus 25 a year earlier.
- For the first six months, operating cash use was $11.231 million, compared with $13.513 million in 2016; investing cash use was $0.022 million, versus $0.395 million. Financing provided $3.830 million, versus $11.725 million. Cash declined $7.423 million to $16.255 million.
- At June 30, current assets were $22.043 million and current liabilities were $11.813 million. Total liabilities were $20.918 million; shareholders’ equity was $3.403 million. The balance sheet lists $7.441 million of current and $8.537 million of long-term loan obligations.
- The company reported an accumulated deficit of $119.212 million and stated that recurring losses and financing needs raise substantial doubt about its ability to continue as a going concern.
Material changes versus the prior comparable period
- Revenue and gross margin improved substantially, while net losses narrowed in both the quarter and first half.
- Operating expenses fell 30% in Q2 and 18% in the first half. Lower spending reflected cost-reduction measures; the Q2 2016 R&D comparison also included a one-time $1.1 million Harvard collaboration and license charge. Management had targeted reducing 2017 operating expenses by up to 30% versus 2016.
- First-half financial expenses rose to $1.364 million from $1.006 million, mainly due to interest on the Kreos loan. A $0.313 million debt-extinguishment loss was recorded following the loan amendment.
- Shares outstanding increased from 16.338 million at December 31, 2016 to 20.109 million at June 30, 2017. The company sold 3.702 million shares through its at-the-market program in the first half, for net proceeds of $6.134 million.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance was provided. Management expected near-term growth to depend on broader third-party reimbursement and continued Personal device sales; it also expected gradual gross-margin improvement from higher volume and lower manufacturing costs.
- Management planned to fund the next 12 months with cash on hand, spending reductions and further equity or debt financing. The Form S-3 limits left capacity for up to $7.3 million of primary offerings during the 12 months following February 17, 2017, while the company remained subject to the limitation. Additional capital may dilute shareholders or be unavailable on acceptable terms.
- On June 9, 2017, $3.0 million of Kreos debt was exchanged into a secured convertible note, convertible at $1.268 per share into up to 2,365,931 shares and maturing June 2020. The debt bears 10.75% interest; the company recorded the $0.313 million extinguishment loss. Kreos holds a first-priority security interest over company assets, subject to permitted interests.
- The FDA postmarket surveillance study remained a material regulatory risk. As of August 2, 2017, three centers were active, with six patients enrolled and three active patients; the filing says the FDA considered progress inadequate. Further FDA action could restrict labeling or U.S. marketing.
- Three securities class actions relating to the IPO remained pending. The company said it could not estimate a possible loss and recorded no litigation reserve.
- Other exposures include reliance on one contract manufacturer, $1.169 million of non-cancelable purchase commitments, a $0.896 million contingent royalty obligation to the Israel Innovation Authority, and customer concentration. The filing’s customer-revenue table reports Customer A at 51.7% versus 33.3%, but its period headings are unclear in the supplied text.
Important facts for investors to verify
- Confirm the registrant and issuer identity: this supplied filing is for ReWalk Robotics Ltd., despite the request naming Lifeward Ltd.
- Assess cash runway against operating cash burn, scheduled Kreos repayments, and the company’s stated going-concern uncertainty.
- Track reimbursement decisions, pending claims, device placements, customer concentration and whether improved gross margins persist.
- Monitor progress and FDA feedback on the postmarket surveillance study, including any protocol changes or regulatory restrictions.
- Review remaining financing capacity, potential share dilution from ATM sales and convertible debt, and the outcome of the pending lawsuits.