ReWalk(RWLK) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) The company reported $4.7 million in revenue and an $8.8 million net loss for the nine months ended September 30, 2021, with cash and equivalents significantly increasing to $91.2 million Condensed Consolidated Balance Sheets As of September 30, 2021, total assets reached $98.7 million, driven by $91.2 million in cash, while shareholders' equity significantly increased to $93.0 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $91,227 | $20,350 | | Total current assets | $96,330 | $25,248 | | Total assets | $98,718 | $28,067 | | Liabilities & Equity | | | | Total current liabilities | $4,381 | $4,668 | | Total liabilities | $5,725 | $6,293 | | Total shareholders' equity | $92,993 | $21,774 | | Total liabilities and shareholders' equity | $98,718 | $28,067 | Condensed Consolidated Statements of Operations Q3 2021 revenues rose to $2.0 million with a net loss of $2.7 million, while nine-month revenues reached $4.7 million and net loss narrowed to $8.8 million Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,972 | $747 | $4,724 | $3,175 | | Gross Profit | $1,140 | $392 | $2,574 | $1,787 | | Operating Loss | ($2,662) | ($3,069) | ($8,824) | ($9,223) | | Net Loss | ($2,675) | ($3,336) | ($8,878) | ($10,031) | | Net loss per share, basic and diluted | ($0.06) | ($0.18) | ($0.21) | ($0.71) | Condensed Statements of Changes in Shareholders' Equity Shareholders' equity significantly increased to $93.0 million by September 30, 2021, primarily due to substantial capital raised from equity offerings and warrant exercises - The company raised significant capital through multiple offerings in the first nine months of 2021, including a $36.3 million 'best effort' offering, a $28.1 million 'registered direct' offering, and $15.1 million from the exercise of warrants[28][29] Condensed Consolidated Statements of Cash Flows Net cash used in operations was $8.9 million, while financing activities provided $79.8 million, resulting in a $70.9 million increase in cash for the nine months ended September 30, 2021 Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,903) | ($10,131) | | Net cash used in investing activities | ($28) | ($73) | | Net cash provided by financing activities | $79,808 | $11,948 | | Increase in cash, cash equivalents, and restricted cash | $70,877 | $1,744 | Notes to Condensed Consolidated Financial Statements The notes detail the company's exoskeleton business, COVID-19 impacts, financial position with $91.2 million cash, revenue disaggregation, and significant commitments, confirming sufficient liquidity for over 12 months - The company designs, develops, and commercializes robotic exoskeletons (ReWalk, ReStore) and distributes third-party products (MediTouch, MyoCycle) for individuals with mobility impairments[35][36] - The COVID-19 pandemic has negatively impacted sales and operations, and the company expects this to continue as long as the pandemic affects its key markets in Germany and the United States[37] - Despite a net loss of $8.8 million and an accumulated deficit of $190.3 million for the nine months ended Sep 30, 2021, the company states it has sufficient funds for more than 12 months, holding $91.2 million in cash and cash equivalents[39] Disaggregation of Revenues (in thousands) | Revenue Source | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Units placed | $1,855 | $522 | $4,310 | $2,583 | | Spare parts and warranties | $117 | $225 | $414 | $592 | | Total Revenues | $1,972 | $747 | $4,724 | $3,175 | - As of September 30, 2021, the company had non-cancelable purchase obligations of approximately $1.4 million and a contingent liability to the Israel Innovation Authority (IIA) of $1.6 million[68][75] - In September 2021, the company raised capital through a registered direct offering, selling 15.4 million ordinary shares and various warrants[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 164% Q3 2021 revenue growth, improved gross margin, increased operating expenses, and significantly enhanced liquidity with $91.2 million cash from recent equity offerings Overview and Business Highlights The company focuses on commercializing robotic exoskeletons, pursuing reimbursement, and achieved $2.0 million revenue, 58% gross margin, FDA breakthrough designation, and $91.2 million cash in Q3 2021 - The company is pursuing broader reimbursement coverage, noting a policy with the U.S. Department of Veterans Affairs (VA) and progress with German insurers (Barmer, DGUV, TK, DAK); a code for ReWalk Personal 6.0 was issued by CMS, effective October 1, 2020, which may lead to a future coverage policy[128][129][131] - Key highlights for Q3 2021 include receiving FDA breakthrough device designation for the ReBoot soft exoskeleton for home and community use by stroke patients[132] - The company strengthened its cash position to $91.2 million, which includes proceeds from a $32.5 million registered direct offering that closed in September 2021[132] Evolving COVID-19 Pandemic The COVID-19 pandemic continues to negatively impact sales, patient trials, and training, with limited but potential future effects on manufacturing and supply chains - The pandemic has negatively impacted sales by affecting the company's ability to conduct trials for new patients, access clinics, and train users on its products[134] - Manufacturing has experienced limited impact from supply chain delays and component shortages, but future disruptions are possible[134] Results of Operations Q3 2021 revenue increased 164% to $2.0 million, gross margin improved to 58%, while R&D decreased and sales/marketing and G&A expenses rose, narrowing the net loss to $2.7 million Revenue by Product Type (in thousands) | Revenue Type | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Personal unit revenues | $1,357 | $698 | $3,818 | $3,079 | | Rehabilitation unit revenues | $615 | $49 | $906 | $96 | | Total Revenues | $1,972 | $747 | $4,724 | $3,175 | - Q3 2021 revenue increased 164% YoY, driven by a higher number of personal and rehabilitation units sold in the U.S. and Germany as COVID-19 restrictions eased[140] - Gross profit margin increased to 58% in Q3 2021 from 52% in Q3 2020, mainly due to higher sales volume and higher Average Selling Price (ASP), partially offset by sales mix[142] - R&D expenses decreased by 17% for the nine months ended Sep 30, 2021, mainly due to reduced personnel and consulting costs related to the ReStore soft suit exoskeleton[145] - Sales and marketing expenses increased by 12% for the nine months ended Sep 30, 2021, driven by increased personnel-related expenses, including higher sales-driven compensation[148] Liquidity and Capital Resources The company significantly improved liquidity to $91.2 million cash by Q3 2021 through equity raises, confirming sufficient funds for over 12 months despite net loss and negative operating cash flow - As of September 30, 2021, the company had $91.2 million in cash and cash equivalents and believes it has sufficient funds to support operations for more than 12 months[157] - The company intends to fund future operations through cash on hand, additional equity/debt offerings, and warrant exercises; primary cash uses will be for sales and marketing, R&D for the 'soft suit' exoskeleton, and general corporate purposes[158][159] - The company fully repaid its loan agreement with Kreos Capital on December 29, 2020, discharging all obligations[164] - In September 2021, the company closed a registered direct offering and concurrent private placement, raising gross proceeds of approximately $32.5 million[179] Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,903) | ($10,131) | | Net cash used in investing activities | ($28) | ($73) | | Net cash provided by financing activities | $79,808 | $11,948 | Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk during the second quarter of 2021, referring to its 2020 Form 10-K for further details - There have been no material changes to the company's market risk during the second quarter of 2021[197] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[200] - No changes were identified during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[201] PART II - OTHER INFORMATION Legal Proceedings The company reports no material changes to its legal proceedings from those described in its 2020 Form 10-K - There have been no material changes to the company's legal proceedings from those disclosed in the 2020 Form 10-K[203] Risk Factors Key risks include product defects, ongoing COVID-19 impacts on sales and supply, and significant challenges with the mandatory FDA post-market surveillance study for ReWalk Personal 6.0 - Manufacturing or design defects, particularly in the software, could lead to user injury or death, resulting in recalls, negative publicity, and product liability claims; a recent correction was initiated for battery thermal runaway events[205][206] - The COVID-19 pandemic continues to adversely affect business through curtailed sales activities, inability to conduct training, repair delays, and supply chain disruptions[209][210][211] - The company faces significant risk related to its mandatory FDA post-market surveillance study; despite protocol modifications, enrollment has been substantially below requirements, and failure to satisfy the FDA could result in warning letters or require the company to stop marketing the ReWalk Personal device in the U.S.[219][222][223] - Collaborations with third parties like MediTouch, Myolyn, and Harvard University may not result in commercially viable products or significant revenues and could be terminated[216][217] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds transactions occurred that were not previously reported on a Form 8-K - No unregistered sales of equity securities or use of proceeds transactions occurred that were not previously reported on a Form 8-K[224] Exhibits This section lists exhibits filed with the Form 10-Q, including recent offering documents and officer certifications - The report includes several exhibits, such as forms of warrants and securities purchase agreements related to the September 2021 offering, and certifications by the CEO and CFO[226]