Business context and reporting period
ReWalk Robotics Ltd. (Nasdaq: RWLK; now identified in the request as Lifeward Ltd.) filed this Form 10-K for the fiscal year ended December 31, 2020. The company develops and commercializes robotic exoskeletons: ReWalk devices for people with spinal cord injury, ReStore for stroke rehabilitation, and, beginning in 2020, U.S. distribution of MediTouch and MYOLYN products. Its main markets are the United States and Europe. The audited financial statements are presented in U.S. dollars.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $4.393 million | $4.873 million |
| Gross profit / gross margin | $2.189 million / 50% | $2.726 million / 56% |
| Operating expenses | $14.193 million | $16.774 million |
| Operating loss | $12.004 million | $14.048 million |
| Net loss | $12.976 million | $15.551 million |
| Net loss per share, basic and diluted | $0.82 | $2.70 |
| Cash used in operating activities | $12.589 million | $14.815 million |
| Cash and cash equivalents at year-end | $20.350 million | $16.253 million |
Q4 2020 revenue was approximately $1.2 million, broadly unchanged from Q4 2019. At year-end, current assets were $25.248 million and current liabilities were $4.668 million. Total liabilities were $6.293 million; the Kreos loan had been repaid in full, leaving no loan principal outstanding. Operating lease liabilities were $1.583 million. Shareholders’ equity was $21.774 million.
Changes versus the prior comparable period
- Revenue declined 10% year over year, principally due to COVID-19-related limits on customer access, demonstrations, training and clinic activity. Personal-unit revenue was $4.220 million versus $4.674 million.
- Gross margin fell to 50% from 56%, reflecting lower volume and inventory write-offs for older designs, partly offset by a higher average selling price. Inventory write-offs were $215,000 in 2020.
- Operating expenses decreased 15%, with lower R&D, sales and marketing, and general and administrative expenses. R&D fell 35% to $3.459 million; management cited reduced personnel, consulting and ReStore development and clinical-study costs.
- Net loss narrowed by about 17%, while operating cash use decreased by $2.226 million. Financing activities provided $16.724 million, including equity and warrant proceeds, partly offset by $6.965 million of loan repayments.
- Weighted-average shares increased to 15.765 million from 5.763 million, reflecting substantial equity issuance and warrant exercises; the smaller per-share loss should therefore be considered alongside dilution.
Outlook, management commentary and risks
- Management expected continued losses and negative operating cash flow in the near term. It stated that year-end cash, together with approximately $13.2 million of warrant-exercise proceeds received in early 2021, was sufficient to fund operations for more than 12 months after financial-statement issuance. The filing provides no quantified revenue or earnings guidance.
- Management identified commercialization of ReStore and distributed products, broader reimbursement for ReWalk Personal, product maintenance and development, and the FDA-mandated postmarket study as priorities. It expects higher sales volume to support margins, but noted that new products may initially carry lower margins and parts costs could rise.
- COVID-19 disrupted sales, training, repairs, clinical recruitment and customer budgets, and created supply-chain and forecasting risks. The duration and financial effect remained uncertain. The company reduced personnel and other costs and used remote engagement and training.
- ReWalk Rehabilitation production ended in December 2020. The company had placed 492 Personal units, 119 Rehabilitation units and 21 ReStore units by year-end; ReStore placements were 16 a year earlier.
- A CMS HCPCS Level II code for ReWalk Personal became effective October 1, 2020, but does not itself establish reimbursement coverage or payment rates. The VA policy covered qualifying veterans, and the VA accounted for 10% of 2020 revenue. German payer agreements expanded, but cases remained subject to eligibility and approval.
- The FDA-required ReWalk Personal postmarket study remained a material regulatory risk. As of year-end, 12 subjects had enrolled, three had completed the study, and only two sites had enrolled patients. FDA approved a modified protocol in March 2020 incorporating real-world evidence; COVID-19 also disrupted study activity. The FDA could impose further restrictions if requirements are not met or results are unfavorable.
- The company reported prior serious-injury reports involving ReWalk Personal, including fractures, and a voluntary correction classified by FDA as a Class II recall; FDA considered that recall terminated in November 2019. Product safety, regulatory compliance and liability remain risks.
- Other significant risks include reliance on a single manufacturer, limited and uncertain reimbursement, a nascent and competitive market, future financing needs and dilution, potential Nasdaq listing noncompliance, foreign-exchange exposure, and operations in Israel. Timwell declined to fund its remaining $15 million investment tranches in 2020.
- The auditor issued an unqualified opinion on the financial statements. Management concluded internal control over financial reporting was effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether post-year-end warrant proceeds were received as disclosed, and the resulting basic and fully diluted share count, warrant overhang and potential dilution.
- Whether cash burn and operating results support management’s stated funding runway, particularly if sales recovery or additional financing is delayed.
- Whether CMS or other payers adopt actual coverage and payment policies; coding alone is not reimbursement.
- Progress and compliance with the FDA postmarket study, including enrollment, real-world evidence collection and any subsequent FDA action.
- Whether COVID-related sales constraints ease, and whether ReStore and distributed products gain clinic and customer adoption sufficient to offset weak SCI product sales.
- Inventory quality and future write-offs, gross-margin recovery, and the effects of ending Rehabilitation production.