Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Report. See also "Cautionary Note Regarding Forward-Looking Statements."
Overview
The following discussion highlights the results of our operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our financial condition and results of operations presented herein. The following discussion and analysis is based on our audited consolidated financial statements contained in this Annual Report on Form 10-K, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Financial Highlights
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•
|
In April 2017, we sold 3,732,356 shares of our common stock and warrants to purchase 1,866,178 shares of common stock with an exercise price of $4.10 per share, or the April 2017 Warrants for aggregate net proceeds of $10.9 million.
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•
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In August 2017, we sold an aggregate of 34.0 million shares of our common stock for net proceeds of $33.7 million. In
|
connection with this offering, we repurchased the April 2017 Warrants.
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•
|
In August 2018, we announced additional purchase orders by Ford Motor Company for the EksoVest™ as part of an expanded initiative to help reduce the physical toll of repeated overhead tasks among Ford assembly line workers, in which EksoVest™ was supplied to 15 Ford assembly plants in seven countries.
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|
|
•
|
In August 2018, we entered into a Controlled Equity Offering
SM
Sales Agreement, or the ATM Agreement, under which we may issue and sell shares of our common stock, having an aggregate offering price of up to $25.0 million. In the year ended
December 31, 2018
, we sold
2.0 million
shares of our common stock under the ATM Agreement at an average price of
$2.39
per share, for aggregate proceeds of
$4.4 million
, net of commission and issuance costs, to us.
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|
|
•
|
In December 2018, we secured purchase orders for the EksoVest from two global aerospace manufacturers to create and expand pilot programs, respectively. The assistive devices will be piloted by workers on the assembly production lines of commercial and defense airplanes to enhance safety, reduce fatigue and risk of injury.
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|
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•
|
In January 2019, we entered into the China JV to develop and serve the exoskeleton market in China and other Asian markets and to create a global exoskeleton manufacturing center. In connection with the China JV, one of the Joint Venture Partner affiliates agreed to purchase an aggregate of 3,067,485 shares of our common stock at a price per share equal to $1.63, for aggregate proceeds to us of $5.0 million, which we received in February 2019. In addition, within thirty (30) business days of the China JV delivering its first batch of finished EksoGT products to a buyer, the China JV or the Joint Venture Partner are to invest a further $5.0 million in our Company in accordance with the terms of the JV Agreement.
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Business
We design, develop and sell exoskeleton technology that currently has applications in healthcare and industrial markets. Our wearable exoskeletons are worn over clothing and are mechanically controlled by a trained operator to augment human strength, endurance and mobility.
Our exoskeleton technology serves multiple markets and can be used both by able-bodied users as well as by persons with physical disabilities. We have sold and rented devices that (a) enable individuals with neurological conditions affecting gait (e.g., SCI or stroke) to rehabilitate and to walk again; and (b) allow industrial workers to perform heavy duty or repetitive work for extended periods.
In the U.S. there are about 5.9 million stroke and SCI rehabilitation sessions conducted on about 680,000 stroke and SCI patients at 16,900 facilities, according to LexisNexis Risk Solutions medical claims data.
The first step to achieving our goal is for us to focus on selling and renting our medical exoskeletons to rehabilitation centers and hospitals in the United States and Europe. Ekso Bionics began that effort with the February 2012 sale of Ekso, an exoskeleton for
SCI rehabilitation. We expanded that effort with the launch of our VariableAssist software. VariableAssist software enables users with any amount of lower extremity strength to contribute their own power for either leg to achieve self-initiated walking. Next, we introduced Ekso GT and SmartAssist which builds on the experience of Ekso and VariableAssist, allowing us to expand our sales and marketing efforts beyond SCI-focused centers to centers supporting stroke and related neurological patients. We also continue to offer rental options for Ekso GT to our customers as part of our sales strategy to familiarize customers with the device and demonstrate the value-add to their business, as well as increase adoption. All rentals or sales also include customer training, comprised of both on-line and in-person training of our customers’ physical therapists, to get our customers comfortable using our product and understanding its functionality.
We have continued to progress toward our goal with the roll out of our latest breakthrough innovation, SmartAssist. SmartAssist can aid in promoting early mobility by training patients (PreGait) to walk in an exoskeleton, which should expand access to care to more patients. SmartAssist also includes next generation VariableAssist technology that provides more freedom for healthcare providers to allow patients to power themselves (FreeGait) in the most appropriate ways possible.
Additionally, we have strengthened our competitive position as an exoskeleton manufacturer in medical rehabilitation by introducing a cloud-based software platform named EksoPulse Analytics, which gathers and transmits statistics and device information in real time during Ekso GT walking sessions. This feature enables more thorough patient care while reducing manual data entry. It also enables us to provide a higher level of service through early identification and thorough reporting of device errors, saving customers the time and expense of unnecessary on-site visits.
Most recently, we also integrated FES interface capability with our Ekso GT for use by clinicians in EMEA.
In parallel to the development and early commercialization of medical exoskeletons, we have commercialized exoskeletons for able-bodied users, specifically for industrial and construction applications.
According to a Bureau of Labor Statistics Report (2012), the U.S. spends over $21 billion per year on workplace related injuries. Our long-term goal is to build industrial products to significantly improve workforce productivity while dramatically reducing workplace related injuries and keeping workers healthy, strong, and safe. We took our first step toward this goal in 2016 with the introduction of the EksoZeroG, and in 2017, built upon that experience with the commercial rollout of the EksoVest, an upper body exoskeleton that elevates and supports a worker's arms to assist them with tasks ranging from chest height to overhead while enabling freedom of motion. In 2018, we continued to improve our industrial products while working to increase the rate of commercial adoption.
In order to build the exoskeleton industry and solidify our position as the industry leader, we will continue to act quickly and decisively with strong conviction and resolve. Our long-term goals of leadership in rehabilitation and industrial will require rapid innovation in areas where we already have strong experience, as well as parallel technologies that will enhance or accelerate our business.
Critical Accounting Policies, Estimates, and Judgments
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations.
Our EksoHealth segment revenue is primarily generated through the sale and rental of our Ekso GT and associated software (SmartAssist and VariableAssist), sale of accessories, and support and maintenance contracts (Ekso Care). Revenue from EksoHealth sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility for sales of our Ekso GT, software, and accessories. Ekso Care support and maintenance contracts extend coverage beyond our standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. We receive payment at the inception of the contract and recognize revenue over the term of the agreement. Revenue from medical device rentals is recognized over the lease term, typically over 12 months.
Our EksoWorks segment revenue is generated by the sales of our EksoVest and our EksoZeroG. Revenue from EksoWorks device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility.
Inventory valuation
Inventories are recorded at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress, or WIP. Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. We periodically evaluate the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge to the consolidated statements of operations and comprehensive loss. Our estimate of write downs for excess and obsolete inventory is based on a detailed analysis of on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of an inventory reserve.
Stock-based Compensation
We measure stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes option pricing model and recognize the fair value on a straight-line basis over the requisite service periods of the awards.
Our determination of the fair value of stock options on the date of grant using the Black-Scholes option pricing model, or the Black-Scholes Model, is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, we estimate the expected term of options granted by taking the average of the vesting term and the contractual term of the option.
We have, from time to time, modified the terms of stock options granted to our employees. We account for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value based measure of the modified award on the date of modification over the fair value of the original award immediately before the modification.
Warrant Valuation
We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash.
For warrants where there is a possibility that we may have to settle the warrants in cash, we estimate the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Binomial Lattice model, or Lattice Model, and the Black-Scholes Model. The Lattice Model provides for assumptions regarding volatility, call and put features and risk-free interest rates within the total period to maturity. The Black-Scholes Model requires inputs, such as the expected term of the warrants, expected volatility and risk-free interest rate. These values are subject to a significant degree of judgment on our part. Our common stock price represents a significant input that affects the valuation of our warrants.
Business Combinations
We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification, or ASC, 805,
Business Combinations
, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one-year from the acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.
Contingent consideration, if any, is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in our consolidated statement of operations and comprehensive loss.
The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
Going Concern
We assess our ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40,
Presentation of Financial Statements – Going Concern
. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Comparison of the year ended
December 31, 2018
to the year ended
December 31, 2017
(dollars in thousands):
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
11,332
|
|
|
$
|
7,353
|
|
|
$
|
3,979
|
|
|
54
|
%
|
Cost of revenue
|
|
7,023
|
|
|
5,284
|
|
|
1,739
|
|
|
33
|
%
|
Gross profit
|
|
4,309
|
|
|
2,069
|
|
|
2,240
|
|
|
108
|
%
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
13,827
|
|
|
13,156
|
|
|
671
|
|
|
5
|
%
|
Research and development
|
|
5,847
|
|
|
9,483
|
|
|
(3,636
|
)
|
|
(38
|
)%
|
General and administrative
|
|
11,700
|
|
|
10,715
|
|
|
985
|
|
|
9
|
%
|
Restructuring
|
|
—
|
|
|
659
|
|
|
(659
|
)
|
|
(100
|
)%
|
Change in fair value, contingent liabilities
|
|
(35
|
)
|
|
(332
|
)
|
|
297
|
|
|
(89
|
)%
|
Total operating expenses
|
|
31,339
|
|
|
33,681
|
|
|
(2,342
|
)
|
|
(7
|
)%
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(27,030
|
)
|
|
(31,612
|
)
|
|
4,582
|
|
|
(14
|
)%
|
|
|
|
|
|
|
|
|
|
Other income, net:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(600
|
)
|
|
(648
|
)
|
|
48
|
|
|
(7
|
)%
|
Gain on warrant liability
|
|
1,063
|
|
|
3,909
|
|
|
(2,846
|
)
|
|
(73
|
)%
|
Loss on repurchase of warrants
|
|
—
|
|
|
(1,067
|
)
|
|
1,067
|
|
|
(100
|
)%
|
Other (expense) income, net
|
|
(425
|
)
|
|
296
|
|
|
(721
|
)
|
|
(244
|
)%
|
Total other income, net
|
|
38
|
|
|
2,490
|
|
|
(2,452
|
)
|
|
(98
|
)%
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(26,992
|
)
|
|
$
|
(29,122
|
)
|
|
$
|
2,130
|
|
|
(7
|
)%
|
Revenue
Revenue increased
$4.0 million
, or
54%
, for the year ended
December 31, 2018
, compared to the same period of
2017
. This increase was made up of a $3.0 million increase in medical device revenue and $1.0 million increase in industrial device revenue, primarily due to a higher volume of industrial device sales and medical device rentals.
Gross Profit
Gross profit increased
$2.2 million
, or
108%
, for the year ended
December 31, 2018
compared to the same period of
2017
, primarily due to higher sales volume and average selling price of medical devices.
Operating Expenses
Sales and marketing expenses increased
$0.7 million
, or
5%
, for the year ended
December 31, 2018
, compared to the same period of
2017
. This was primarily due to $0.4 million of severance costs related to the departures of the President of our EksoWorks business unit, our Chief Marketing officer and other marketing employees, and a $0.3 million increase in clinical research activity.
Research and development expenses decreased
$3.6 million
, or
38%
, for the year ended
December 31, 2018
, compared to the same period of
2017
, primarily due to lower employment costs as a result of the company-wide reduction in workforce in May 2017.
General and administrative expenses increased
$1.0 million
, or
9%
, for the year ended
December 31, 2018
, compared to the same period of
2017
. This increase was primarily due to severance expense of $0.7 million and additional stock-based compensation expense from the modification of equity awards of $0.7 million related to the departure of the Chief Executive Officer and Chief Financial Officer and higher legal expense, partially offset by lower employment and consulting expenses as a result of the company-wide reduction in workforce in May 2017.
Restructuring expense of
$0.7 million
for the year ended December 31, 2017 included employee severance payments of $0.4 million, stock compensation expense of $0.2 million related to restricted stock units issued to terminated employees, and $0.1 million of other related severance related benefits. There was no comparable amount during the same period in
2018
.
Change in fair value, contingent liabilities decreased
$0.3 million
, or
89%
, for the year ended
December 31, 2018
compared to the same period of
2017
. This was due to the decrease in the fair value of the contingent consideration liability related to Equipois sales earn-outs as the obligation was no longer contingent as of December 31, 2018 and fair value of contingent success fee related to the outstanding debt with our lender in conformance with the decrease in our stock price.
Other Income, Net
Gain on revaluation of warrant liabilities of
$1.1 million
for the year ended
December 31, 2018
, related to warrants issued in 2015. Gain on revaluation of warrant liabilities of
$3.9 million
for the year ended
December 31, 2017
, related to warrants issued in 2015 and 2017. Gains and losses on revaluation of warrants are primarily driven by changes in our stock price.
Loss on repurchase of warrants of
$1.1 million
for the year ended
December 31, 2017
, was associated with the difference in the fair value of the April 2017 Warrants on the date of repurchase and the repurchase price. There was no comparable amount during the same period in
2018
.
Other (expense) income, net decreased
$0.7 million
, or
244%
, for the year ended
December 31, 2018
, compared to the same period of
2017
, due to unrealized gains and losses on foreign currency revaluations of monetary assets and liabilities.
Financial Condition, Liquidity and Capital Resources
Since our inception, we have devoted our efforts toward the development of exoskeletons for the medical and industrial markets, toward the commercialization of our medical exoskeletons to rehabilitation centers and toward raising capital. We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt.
Cash and Working Capital
Cash on hand at
December 31, 2018
was
$7.7 million
, compared to
$27.8 million
at
December 31, 2017
. Since our inception, we have incurred recurring net losses and negative cash flows from operations. We have incurred net losses of
$27.0 million
and
$29.1 million
for the years ended
December 31, 2018
and
2017
, respectively. In addition, our operating activities have used
$22.2 million
and
$31.2 million
in cash for the years ended
December 31, 2018
and
2017
, respectively.
Liquidity and Capital Resources
As of
December 31, 2018
, we had an accumulated deficit of
$171.1 million
and cash on hand of
$7.7 million
. Largely as a result of significant research and development activities related our advanced technology and commercialization of this technology into our medical device business, we have incurred significant operating losses and negative cash flows from operations since inception. In the year ended
December 31, 2018
, we used
$22.2 million
of cash in our operations.
Cash on hand at
December 31, 2018
was
$7.7 million
, compared to
$27.8 million
at
December 31, 2017
. As noted in Note 9 in the notes to our consolidated financial statements under the caption Long-Term Debt, borrowings under our long-term debt agreement have a requirement of minimum cash on hand roughly equivalent to three months of cash burn. As of
December 31, 2018
, the most recent determination of this restriction,
$5.3 million
of cash must remain as unrestricted, with such amounts to be re-computed at each month end. After considering cash restrictions, effective unrestricted cash as of
December 31, 2018
is estimated to be
$2.4 million
. Based on current forecasted amounts, our cash on hand will not be sufficient to satisfy our operations for the next twelve months from the date of issuance of these consolidated financial statements, which raises substantial doubt about our ability to continue as a going concern.
Based upon our current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue offset by incremental increases in expenses related to increased sales and marketing, we believe we have sufficient resources to meet our financial obligations until late in the second quarter of 2019. We will require significant additional financing. Our actual capital requirements may vary significantly and will depend on many factors. Our plans to continue our investments (i) in clinical and sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) in research, development and commercialization activities with respect to an Ekso robotic exoskeleton for rehabilitation, and/or (iii) in the development and commercialization of able-bodied exoskeletons for industrial use.
We are actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings, corporate collaborations and government grants or other funding. Sales of additional equity securities by us could result in the dilution of the interests of existing stockholders. Our use of any government grants or funds may require us to give preferential licensing terms to such source of funding, or to commit to conduct operations in certain jurisdictions. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to further reduce its discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2018
|
|
2017
|
Cash, beginning of period
|
|
$
|
27,813
|
|
|
$
|
16,846
|
|
Net cash used in operating activities
|
|
(22,165
|
)
|
|
(31,226
|
)
|
Net cash used in investing activities
|
|
(131
|
)
|
|
(456
|
)
|
Net cash provided by financing activities
|
|
2,273
|
|
|
42,568
|
|
Effect of exchange rate changes on cash
|
|
(135
|
)
|
|
81
|
|
Cash, end of period
|
|
$
|
7,655
|
|
|
$
|
27,813
|
|
Net Cash Used in Operating Activities
Net cash used in operations decreased
$9.1 million
, or
29%
, for the year ended
December 31, 2018
, compared to the same period of
2017
, primarily due to decreased employment costs as a result of the company-wide reduction in workforce in May 2017 and an increase in cash collections related to an increase in sales.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased
$0.3
, or
71%
, during the year ended
December 31, 2018
, compared to the same period of
2017
, primarily due to the absence of capitalized implementation cost associated with our new enterprise resource planning system which was implemented in October 2017.
Net Cash Provided by Financing Activities
Net cash provided by financing activities of
$2.3 million
for the year ended December 31, 2018 was from the sale of common stock under our "at the market offering" program resulting in cash proceeds of $4.4 million, partially offset by aggregate principal payments of
$2.2 million
related to our $7.0 million term loan.
Net cash provided by financing activities of $42.6 million for the year ended December 31, 2017 was driven by proceeds from the sale of common stock related to the Rights Offering in August 2017 and the equity financing in April 2017.
Off-Balance Sheet Arrangements
Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of
December 31, 2018
, we had no such arrangements. There has been no material change in our contractual obligations other than in the ordinary course of business since our fiscal year ended
December 31, 2018
.
Contractual Obligations and Commitments
The following table summarizes our outstanding contractual obligations, including interest payments, as of
December 31, 2018
and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
|
Total
|
|
Less than one year
|
|
1-3 Years
|
|
3-5 Years
|
|
After 5 Years
|
Term loan
|
|
$
|
5,521
|
|
|
$
|
2,632
|
|
|
$
|
2,889
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Facility operating leases
|
|
1,923
|
|
|
541
|
|
|
1,382
|
|
|
—
|
|
|
—
|
|
Purchase obligations
|
|
1,459
|
|
|
1,459
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital lease
|
|
59
|
|
|
37
|
|
|
22
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
8,962
|
|
|
$
|
4,669
|
|
|
$
|
4,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
In addition to the table above, which reflects only fixed payment obligations, we have two license agreements to maintain exclusive rights to certain patents. Under these license agreements, we are required to pay 1% of net sales of products sold to entities other than the U.S. government. In the event of a sublicense, we will owe 21% of license fees and must pass through 1% of the sub-licensee’s net sales of products sold to entities other than the U.S. government. The license agreements also stipulate minimum annual royalties of $50,000 per year.
In connection with our acquisition of Equipois in December 2015, we assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants us an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, we will be required to pay a single-digit royalty on net receipts, subject to a $50,000 annual minimum royalty requirement.
We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling
$1.5 million
as of
December 31, 2018
, which is expected to be paid within a year. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.
Recent Accounting Pronouncements
See Note 2 in the notes to our consolidated financial statements under the caption
Recent Accounting Pronouncements
for a discussion of new accounting pronouncements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
The following financial statements are filed as part of this Annual Report on Form 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Ekso Bionics Holdings, Inc.
Richmond, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Ekso Bionics Holdings, Inc. as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2018
,
in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2019 expressed an unqualified opinion thereon.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant recurring losses and negative cash flows from operations since inception and an accumulated deficit. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
San Francisco, California
February 28, 2019
We have served as the Company's auditor since 2010.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Ekso Bionics Holdings, Inc.
Richmond, California
Opinion on Internal Control over Financial Reporting
We have audited Ekso Bionics Holdings, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria
.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes and our report dated February 28, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control over Financial Reporting
. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
San Francisco, California
February 28, 2019
Ekso Bionics Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash
|
$
|
7,655
|
|
|
$
|
27,813
|
|
Accounts receivable, net of allowances of $128 and $212, respectively
|
3,660
|
|
|
2,760
|
|
Inventories, net
|
3,371
|
|
|
3,025
|
|
Prepaid expenses and other current assets
|
281
|
|
|
1,339
|
|
Total current assets
|
14,967
|
|
|
34,937
|
|
Property and equipment, net
|
2,365
|
|
|
2,249
|
|
Intangible assets, net
|
—
|
|
|
491
|
|
Goodwill
|
189
|
|
|
189
|
|
Other assets
|
134
|
|
|
122
|
|
Total assets
|
$
|
17,655
|
|
|
$
|
37,988
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
3,156
|
|
|
$
|
2,420
|
|
Accrued liabilities
|
3,541
|
|
|
3,503
|
|
Deferred revenues, current
|
1,102
|
|
|
1,103
|
|
Note payable, current
|
2,333
|
|
|
2,139
|
|
Total current liabilities
|
10,132
|
|
|
9,165
|
|
Deferred revenues
|
1,495
|
|
|
816
|
|
Note payable, net
|
2,648
|
|
|
4,830
|
|
Warrant liability
|
585
|
|
|
1,648
|
|
Other non-current liabilities
|
67
|
|
|
138
|
|
Total liabilities
|
14,927
|
|
|
16,597
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding at December 31, 2018 and 2017
|
—
|
|
|
—
|
|
Common stock, $0.001 par value; 141,429 shares authorized; 62,963 and 59,943, shares issued and outstanding at December 31, 2018 and 2017, respectively
|
63
|
|
|
60
|
|
Additional paid-in capital
|
173,903
|
|
|
165,825
|
|
Accumulated other comprehensive loss
|
(92
|
)
|
|
(340
|
)
|
Accumulated deficit
|
(171,146
|
)
|
|
(144,154
|
)
|
Total stockholders' equity
|
2,728
|
|
|
21,391
|
|
Total liabilities and stockholders' equity
|
$
|
17,655
|
|
|
$
|
37,988
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2018
|
|
2017
|
Revenue
|
$
|
11,332
|
|
|
$
|
7,353
|
|
Cost of revenue
|
7,023
|
|
|
5,284
|
|
Gross profit
|
4,309
|
|
|
2,069
|
|
|
|
|
|
Operating expenses:
|
|
|
|
Sales and marketing
|
13,827
|
|
|
13,156
|
|
Research and development
|
5,847
|
|
|
9,483
|
|
General and administrative
|
11,700
|
|
|
10,715
|
|
Restructuring
|
—
|
|
|
659
|
|
Change in fair value, contingent liabilities
|
(35
|
)
|
|
(332
|
)
|
Total operating expenses
|
31,339
|
|
|
33,681
|
|
|
|
|
|
Loss from operations
|
(27,030
|
)
|
|
(31,612
|
)
|
|
|
|
|
Other income, net:
|
|
|
|
Interest expense
|
(600
|
)
|
|
(648
|
)
|
Gain on warrant liability
|
1,063
|
|
|
3,909
|
|
Loss on repurchase of warrants
|
—
|
|
|
(1,067
|
)
|
Other (expense) income, net
|
(425
|
)
|
|
296
|
|
Total other income, net
|
38
|
|
|
2,490
|
|
|
|
|
|
Net loss
|
(26,992
|
)
|
|
(29,122
|
)
|
Foreign currency translation adjustments
|
248
|
|
|
(419
|
)
|
Comprehensive loss
|
$
|
(26,744
|
)
|
|
$
|
(29,541
|
)
|
|
|
|
|
Net loss per share, basic and diluted
|
$
|
(0.44
|
)
|
|
$
|
(0.82
|
)
|
Weighted average number of shares outstanding, basic and diluted
|
61,229
|
|
|
35,609
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance at December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
21,894
|
|
|
$
|
22
|
|
|
$
|
121,291
|
|
|
$
|
79
|
|
|
$
|
(114,861
|
)
|
|
$
|
6,531
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,122
|
)
|
|
(29,122
|
)
|
Issuance of common stock under:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2017 equity financing, net of underwriting discount & issuance costs of $662
|
—
|
|
|
—
|
|
|
3,732
|
|
|
4
|
|
|
11,054
|
|
|
—
|
|
|
—
|
|
|
11,058
|
|
Equipois supply and sales earn-outs
|
—
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
237
|
|
|
—
|
|
|
—
|
|
|
237
|
|
August 2017 equity financing, net of issuance costs of $227
|
—
|
|
|
—
|
|
|
34,000
|
|
|
34
|
|
|
33,739
|
|
|
—
|
|
|
—
|
|
|
33,773
|
|
Equity incentive plan
|
—
|
|
|
—
|
|
|
197
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
46
|
|
Issuance of common stock upon exercise of warrants
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
174
|
|
|
—
|
|
|
—
|
|
|
174
|
|
Issuance of warrants
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,301
|
)
|
|
—
|
|
|
—
|
|
|
(3,301
|
)
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,414
|
|
|
—
|
|
|
—
|
|
|
2,414
|
|
Cumulative retrospective adjustment to retained earnings for ASU 2016-09 adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
171
|
|
|
—
|
|
|
(171
|
)
|
|
—
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(419
|
)
|
|
—
|
|
|
(419
|
)
|
Balance at December 31, 2017
|
—
|
|
|
—
|
|
|
59,943
|
|
|
60
|
|
|
165,825
|
|
|
(340
|
)
|
|
(144,154
|
)
|
|
21,391
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,992
|
)
|
|
(26,992
|
)
|
Issuance of common stock under:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM program, net of commission & issuance costs of $274
|
—
|
|
|
—
|
|
|
2,032
|
|
|
2
|
|
|
4,444
|
|
|
—
|
|
|
—
|
|
|
4,446
|
|
Equipois sales earn-out
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
Equity incentive plan
|
—
|
|
|
—
|
|
|
571
|
|
|
1
|
|
|
(61
|
)
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
Matching contribution to 401(k) plan
|
—
|
|
|
—
|
|
|
221
|
|
|
—
|
|
|
508
|
|
|
—
|
|
|
—
|
|
|
508
|
|
In lieu of cash compensation
|
—
|
|
|
—
|
|
|
178
|
|
|
—
|
|
|
291
|
|
|
—
|
|
|
—
|
|
|
291
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,868
|
|
|
—
|
|
|
—
|
|
|
2,868
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248
|
|
|
—
|
|
|
248
|
|
Balance at December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
62,963
|
|
|
$
|
63
|
|
|
$
|
173,903
|
|
|
$
|
(92
|
)
|
|
$
|
(171,146
|
)
|
|
$
|
2,728
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statement of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2018
|
|
2017
|
Operating activities
|
|
|
|
Net loss
|
$
|
(26,992
|
)
|
|
$
|
(29,122
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
Depreciation and amortization
|
1,515
|
|
|
1,748
|
|
Inventory allowance expense
|
191
|
|
|
73
|
|
Provision (recovery) for doubtful accounts
|
(50
|
)
|
|
105
|
|
Loss on disposal of property and equipment
|
126
|
|
|
—
|
|
Amortization of debt discount and accretion of final payment fee
|
152
|
|
|
179
|
|
Gain on change in fair value of contingent liabilities
|
(35
|
)
|
|
(213
|
)
|
Common stock contribution to 401(k) plan
|
212
|
|
|
509
|
|
Stock-based compensation expense
|
2,868
|
|
|
2,414
|
|
Change in fair value of warrant liability
|
(1,063
|
)
|
|
(3,909
|
)
|
Loss on repurchase of warrants
|
—
|
|
|
1,067
|
|
Unrealized loss (gain) on foreign currency transactions
|
381
|
|
|
(500
|
)
|
Changes in operating assets and liabilities
|
|
|
|
Accounts receivable
|
(850
|
)
|
|
(1,085
|
)
|
Inventories
|
(1,655
|
)
|
|
(2,096
|
)
|
Prepaid expense and other assets, current and noncurrent
|
1,046
|
|
|
(862
|
)
|
Accounts payable
|
752
|
|
|
77
|
|
Accrued liabilities
|
559
|
|
|
105
|
|
Deferred revenues
|
678
|
|
|
284
|
|
Net cash used in operating activities
|
(22,165
|
)
|
|
(31,226
|
)
|
Investing activities
|
|
|
|
Acquisition of property and equipment, net
|
(131
|
)
|
|
(456
|
)
|
Net cash used in investing activities
|
(131
|
)
|
|
(456
|
)
|
Financing activities
|
|
|
|
Principal payments on notes payable
|
(2,174
|
)
|
|
(54
|
)
|
Proceeds from issuance of common stock, net
|
4,446
|
|
|
42,463
|
|
Proceeds from exercise of stock options
|
1
|
|
|
46
|
|
Proceeds from exercise of common stock warrants
|
—
|
|
|
113
|
|
Net cash provided by financing activities
|
2,273
|
|
|
42,568
|
|
Effect of exchange rate changes on cash
|
(135
|
)
|
|
81
|
|
Net (decrease) increase in cash
|
(20,158
|
)
|
|
10,967
|
|
Cash at beginning of the period
|
27,813
|
|
|
16,846
|
|
Cash at end of the period
|
$
|
7,655
|
|
|
$
|
27,813
|
|
|
|
|
|
Supplemental disclosure of cash flow activities
|
|
|
|
Cash paid for interest
|
$
|
457
|
|
|
$
|
429
|
|
Cash paid for income taxes
|
$
|
18
|
|
|
$
|
20
|
|
|
|
|
|
Supplemental disclosure of non-cash activities
|
|
|
|
Transfer of inventory to equipment
|
$
|
1,118
|
|
|
$
|
554
|
|
Share issuance for common stock contribution to 401(k) plan
|
$
|
508
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Share issuance for in lieu of cash compensation
|
$
|
291
|
|
|
$
|
—
|
|
Share issuance for vesting of restricted stock
|
$
|
1
|
|
|
$
|
—
|
|
Equipois sales earn-out
|
$
|
28
|
|
|
$
|
47
|
|
Equipois supply earn-out
|
$
|
—
|
|
|
$
|
189
|
|
April 2017 warrant issuance
|
$
|
—
|
|
|
$
|
3,301
|
|
Repurchase of April 2017 warrants and share issuance
|
$
|
—
|
|
|
$
|
2,245
|
|
Cumulative retrospective adjustment to retained earnings for ASU 2016-09 adoption
|
$
|
—
|
|
|
$
|
171
|
|
Reclassification of warrant liability to equity upon exercise of warrants
|
$
|
—
|
|
|
$
|
62
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
1. Organization
Description of Business
Ekso Bionics Holdings, Inc., or the Company, designs, develops and sells exoskeleton technology that has applications in healthcare and industrial markets. Our wearable exoskeletons are worn over clothing and are mechanically controlled by a trained operator to augment human strength, endurance and mobility.
Our exoskeleton technology serves multiple markets and can be used both by able-bodied users as well as by persons with physical disabilities. We have sold and rented devices that (a) enable individuals with neurological conditions affecting gait (e.g., spinal cord injury or stroke) to rehabilitate and to walk again; and (b) allow industrial workers to perform heavy duty or repetitive work for extended periods.
Unless otherwise indicated, all dollar and share amounts included in these notes to the consolidated financial statements are in thousands.
Liquidity and Going Concern
As of
December 31, 2018
, the Company had an accumulated deficit of
$171,146
. Largely as a result of significant research and development activities related to the Company’s advanced technology and commercialization of this technology into its medical device business, the Company has incurred significant operating losses and negative cash flows from operations since inception. In the year ended
December 31, 2018
, the Company used
$22,165
of cash in its operations.
Cash on hand at
December 31, 2018
was
$7,655
, compared to
$27,813
at
December 31, 2017
. As noted in Note 9,
Long-Term Debt
, borrowings under our long-term debt agreement have a requirement of minimum cash on hand roughly equivalent to three months of cash burn. As of
December 31, 2018
, the most recent determination of this restriction,
$5,269
of cash must remain as unrestricted, with such amounts to be re-computed at each month end. After considering cash restrictions, effective unrestricted cash as of
December 31, 2018
is estimated to be
$2,386
. Based on the current forecast, the Company’s cash on hand will not be sufficient to satisfy the Company’s operations for the next twelve months from the date of issuance of these consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern.
Based upon the Company’s current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue, the Company believes it has sufficient resources to meet its financial obligations until late in the second quarter of 2019. The Company will require significant additional financing. The Company’s actual capital requirements may vary significantly and will depend on many factors. The Company plans to continue its investments (i) in its clinical and sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) in its research, development and commercialization activities with respect to an Ekso robotic exoskeleton for rehabilitation, and/or (iii) in the development and commercialization of able-bodied exoskeletons for industrial use.
The Company is actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings and corporate collaborations. Sales of additional equity securities by the Company could result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, the Company may be required to further reduce its discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
2. Summary of Significant Accounting Policies and Estimates
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States or U.S. GAAP. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
have been made to prior year amounts to conform to the current year’s presentation. Such reclassifications had no net effect on previously reported financial results.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. For the Company, these estimates include, but are not limited to revenue recognition, deferred revenue and the deferral of associated costs, valuation of acquired intangible assets and goodwill, useful lives assigned to long-lived assets, realizability of deferred tax assets, valuation of common stock warrants, contingencies, accrued warranty expense, going concern, reserve for excess and obsolete inventory, and the valuation of options. Actual results could differ from those estimates.
Foreign Currency
The assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date and revenue and expense amounts are translated at average rates during the period, with resulting foreign currency translation adjustments recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Gains and losses from the re-measurement of balances denominated in currencies other than the entity's functional currency, are recorded in other expense, net in the accompanying consolidated statements of operations and comprehensive loss.
Accumulated Other Comprehensive Income (Loss)
The change in accumulated other comprehensive income (loss) presented on the consolidated balance sheets for the year ended
December 31, 2018
, is reflected in the table below net of tax:
|
|
|
|
|
|
Foreign
Currency
Translation
|
Balance at December 31, 2017
|
$
|
(340
|
)
|
Current period other comprehensive income
|
248
|
|
Balance at December 31, 2018
|
$
|
(92
|
)
|
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents in highly liquid instruments with, and in the custody of, financial institutions with high credit ratings. The Company did not have any cash equivalents or investments in money market funds as of
December 31, 2018
and
2017
.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains our cash accounts in excess of federally insured limits. However, the Company believes it is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held. The Company extends credit to customers in the normal course of business and performs ongoing credit evaluations of its customers. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the consolidated financial statements. The Company does not require collateral from its customers to secure accounts receivable.
Accounts receivable are derived from the sale of products shipped and services performed for customers primarily located in the U.S., Europe and Asia. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectibility and provides an allowance for potential credit losses. The Company has not experienced material losses related to accounts receivable during the years ended
December 31, 2018
and
2017
. Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S. dollar. The Company does not enter into any foreign currency
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
hedging agreements and is susceptible to gains and losses from foreign currency fluctuations. To date, the Company has not experienced significant gains or losses upon settling foreign contracts.
At
December 31, 2018
, the Company had one customer with an accounts receivable balance totaling
10%
or more of the Company’s total accounts receivable (
19%
) compared with one customer at
December 31, 2017
(
10%
).
The Company had no customers with sales of
10%
or more of the Company’s total revenue for the years ended
December 31, 2018
and
2017
.
Inventories, net
Inventories are recorded at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress or WIP. Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge to the consolidated statements of operations and comprehensive loss. Our estimate of write downs for excess and obsolete inventory is based on a detailed analysis of on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of an inventory reserve.
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
Raw materials
|
$
|
2,055
|
|
|
$
|
1,737
|
|
Work in progress
|
331
|
|
|
—
|
|
Finished goods
|
1,351
|
|
|
1,463
|
|
|
3,737
|
|
|
3,200
|
|
Less: inventory reserve
|
(366
|
)
|
|
(175
|
)
|
Inventories, net
|
$
|
3,371
|
|
|
$
|
3,025
|
|
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally ranging from
three
to
ten
years. Leasehold improvements are amortized over the shorter of the estimated useful life or the related term of the lease. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized.
Impairment of Long-Lived Assets
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from the Company’s use or eventual disposition. If estimates of future undiscounted net cash flows are insufficient to recover the carrying value of the assets, the Company will record an impairment loss in the amount by which the carrying value of the assets exceeds the fair value. If the assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the Company will depreciate or amortize the net book value of the assets over the newly determined remaining useful lives. None of the Company’s property and equipment or intangible assets were impaired as of
December 31, 2018
and
2017
. No impairment loss has been recognized in the years ended
December 31, 2018
and
2017
.
Goodwill
The Company records goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
indicators of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of goodwill. We perform impairment tests using a fair value approach when necessary. None of the Company’s goodwill was impaired as of
December 31, 2018
and
2017
. No impairment loss has been recognized in the years ended
December 31, 2018
and
2017
.
Warrant Valuation
We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash.
For warrants where there is a possibility that we may have to settle the warrants in cash, we estimate the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Binomial Lattice model, or Lattice, and the Black-Scholes Option Pricing model. The Lattice model provides for assumptions regarding volatility, call and put features and risk-free interest rates within the total period to maturity. The Black-Scholes Model requires inputs, such as the expected term of the warrants, expected volatility and risk-free interest rate. These values are subject to a significant degree of judgment on our part. The Company’s common stock price represents a significant input that affects the valuation of the warrants.
Business Combinations
We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification or ASC, 805,
Business Combinations
, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one-year from the acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.
Contingent consideration, if any, is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in loss from operations.
The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
Going Concern
We assess our ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40,
Presentation of Financial Statements – Going Concern
. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations.
The Company’s medical device segment revenue is primarily generated through the sale and rental of the Ekso GT and associated software (SmartAssist and VariableAssist), and sale of accessories, and support and maintenance contracts (Ekso Care). Revenue from medical device product sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility for sales of the Ekso GT, software, and accessories. Ekso Care support and maintenance contracts extend coverage beyond the Company’s standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. The Company receives payment at the inception of the contract and recognize revenue over the term of the agreement. Revenue from medical device leases is recognized over the lease term, typically over 12 months.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The Company’s industrial device segment revenue is generated by the sales of the upper body exoskeleton (EksoVest) and the support arm (EksoZeroG). Revenue from industrial device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility.
Research and Development
Research and development costs consist of costs incurred for internal research and development activities. These costs primarily include salaries and other personnel-related expenses, contractor fees, legal fees associated with developing and maintaining intellectual property, facility costs, supplies, and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. Such costs are expensed as incurred.
Advertising Costs
Advertising costs are recorded in sales and marketing expense as incurred. Advertising expense was
$123
and
$160
for the years ended
December 31, 2018
and
2017
, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, income tax expense or benefit is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. The Company accounts for any income tax contingencies in accordance with accounting guidance for income taxes. The measurement of current and deferred tax assets and liabilities is based on provisions of currently enacted tax laws. The effects of any future changes in tax laws or rates have not been considered.
For the preparation of the Company's consolidated financial statements included herein, the Company estimates its income taxes and tax contingencies in each of the tax jurisdictions in which it operates prior to the completion and filing of its tax returns. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in net deferred tax assets and liabilities. The Company must then assess the likelihood that the deferred tax assets will be realizable, and to the extent they believe that realizability is not likely, the Company must establish a valuation allowance. In assessing the need for any additional valuation allowance, the Company considers all the evidence available to it, both positive and negative, including historical levels of income, legislative developments, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies.
Stock-based Compensation
The Company measures stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes option pricing model and recognizes the fair value on a straight-line basis over the requisite service periods of the awards.
The Company’s determination of the fair value of stock options on the date of grant using the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Company adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, the Company estimated the expected term of options granted by taking the average of the vesting term and the contractual term of the option.
The Company has, from time to time, modified the terms of its stock options to employees. The Company accounts for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value of the modified award on the date of modification over the fair value of the original award immediately before the modification.
Recent Accounting Pronouncements
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
In February 2016, the FASB issued ASU 2016-02-Leases (ASC 842) and subsequent amendments to the initial guidance under ASU 2017-13, ASU 2018-10 and ASU 2018-11 (collectively, Topic 842) to supersede existing guidance on accounting for leases in ASC 840, Leases (ASC 840). Topic 842 requires the Company to recognize on its balance sheet a lease liability representing the present value of future lease payments and a right-of-use asset representing the lessee's right to use, or control the use of a specified asset for the lease term for any operating lease with a term greater than one year. This standard is effective for annual and interim reporting periods beginning after December 15, 2018. This standard is effective for the Company in the first quarter of 2019. We intend to use the modified retrospective approach, under which the Company applies the standard to each lease that had commenced as of the beginning of the reporting period in which the Company first applies the new lease standard. In addition, the Company will elect to apply the package of practical expedients permitted under the transition guidance, which among other things, allows the Company to carry forward the historical lease classification.
The adoption of this standard will have a material impact on the Company’s consolidated balance sheets, with the recognition of right of use assets and corresponding lease liabilities. As further described in Note 16,
Commitments and Contingencies
, the Company had minimum lease commitments under non-cancellable operating leases totaling
$1.9 million
as of December 31, 2018. The adoption of this standard will not have a material impact on the Company’s consolidated statements of operations or cash flows, nor will it have a material impact on the financial covenants set forth in the Company's long-term debt agreement.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities are required to record an impairment charge based on the excess of the carrying amount over its fair value. This update will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not expect the impact of adopting ASU 2017-04 to be material on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The standard modifies the disclosure requirements on fair value measurements in Topic 820 by removing the requirement to disclose the reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The standard expands the disclosure requirements for Level 3 fair value measurement, primarily focused on changes in unrealized gains and losses included in other comprehensive income. The amendments in this Update will be effective for all the Company in the first quarter of 2020. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of the amendments in this update will have on its consolidated financial statements and related disclosures.
Accounting Pronouncements Adopted in 2018
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under prior U.S. GAAP. The FASB has issued numerous amendments to ASU 2014-09 from August 2015 through January 2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for the Company in the first quarter of 2018. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. Effective January 1, 2018, the Company adopted the new standard using the modified retrospective transition method. The adoption did not result in a cumulative adjustment to the Company’s consolidated balance sheet as of January 1, 2018, nor did it materially impact the aggregate amount and timing of the Company’s revenue recognition subsequent to adoption. The Company has provided enhanced revenue recognition disclosures as required by the new standard (Refer to Note 6, Revenue Recognition).
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
3. Net Loss Per Share of Common Stock
Basic net loss per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted average number of common stock, adjusted to include conversion of certain stock options and warrants for common stock and release of common stock in connection with restricted stock units during the period, as follows:
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2018
|
|
2017
|
Numerator:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(26,992
|
)
|
|
$
|
(29,122
|
)
|
Adjusted net loss used for dilution calculation
|
$
|
(26,992
|
)
|
|
$
|
(29,122
|
)
|
|
|
|
|
Denominator
|
|
|
|
Weighted-average number of shares outstanding
|
61,229
|
|
|
35,609
|
|
Dilutive weighted-average number of shares outstanding
|
61,229
|
|
|
35,609
|
|
|
|
|
|
Net loss per share
|
|
|
|
Basic
|
$
|
(0.44
|
)
|
|
$
|
(0.82
|
)
|
Diluted
|
$
|
(0.44
|
)
|
|
$
|
(0.82
|
)
|
The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2018
|
|
2017
|
Options to purchase common stock
|
6,466
|
|
|
3,156
|
|
Restricted stock units
|
278
|
|
|
616
|
|
Warrants for common stock
|
3,396
|
|
|
3,396
|
|
Total common stock equivalents
|
10,140
|
|
|
7,168
|
|
4. Intangible Assets
On December 1, 2015, the Company acquired substantially all of the assets of
Equipois, LLC,
a New Hampshire limited liability company or Equipois, for an initial payment of approximately
$1,100
, paid for by issuance of the Company’s common stock pursuant to an asset purchase agreement among the Company, Ekso Bionics, Inc., Equipois and Allard Nazarian Group, Inc. The Company recorded
$1,610
to intangible assets as of the acquisition date and has amortized the value of the technology, customer relationships and trade name over an estimated useful life of
3 years
. Amortization expense related to the acquired intangible assets was
$491
and
$535
for the years ended
December 31, 2018
and
2017
, respectively, and was included as a component of operating expenses in the consolidated statement of operations and comprehensive loss.
The following table reflects the amortization of the acquired intangible assets as of
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Estimated
Useful Life
|
Developed technology
|
$
|
1,160
|
|
|
$
|
(1,160
|
)
|
|
$
|
—
|
|
|
3 years
|
Customer relationships
|
70
|
|
|
(70
|
)
|
|
—
|
|
|
3 years
|
Customer trade name
|
380
|
|
|
(380
|
)
|
|
—
|
|
|
3 years
|
|
$
|
1,610
|
|
|
$
|
(1,610
|
)
|
|
$
|
—
|
|
|
|
5. Fair Value Measurements
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which are the following:
|
|
•
|
Level 1
—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
•
|
Level 2
—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
•
|
Level 3
—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.
|
The Company’s fair value hierarchies for its financial assets and liabilities which require fair value measurement on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
December 31, 2018
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Warrant liability
|
$
|
585
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
585
|
|
Contingent success fee liability
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Warrant liability
|
$
|
1,648
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,648
|
|
Contingent consideration liability
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42
|
|
Contingent success fee liability
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39
|
|
During the years ended
December 31, 2018
and
2017
, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice.
The following table sets forth a summary of the changes in the fair value of Company’s Level 3 financial liabilities during the year ended
December 31, 2018
, which were measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liability
|
|
Contingent
Consideration
Liability
|
|
Contingent
Success Fee
Liability
|
Balance at December 31, 2017
|
$
|
1,648
|
|
|
$
|
42
|
|
|
$
|
39
|
|
Gain on revaluation of 2015 warrants
|
(1,063
|
)
|
|
|
|
|
Gain on revaluation
|
—
|
|
|
(30
|
)
|
|
(5
|
)
|
Reclassification to accrued liabilities
|
—
|
|
|
(12
|
)
|
|
—
|
|
Balance at December 31, 2018
|
$
|
585
|
|
|
$
|
—
|
|
|
$
|
34
|
|
See Note 13 in the notes to our consolidated financial statements under the caption
Capitalization and Equity Structure – Warrants – 2015 Warrants
for a description of the warrants accounted for as a liability, including the method and inputs used to estimate their fair value.
The contingent consideration liability was valued using the Probability Weighted Value Analysis which considered performance based contingent payments for both the supply and sales functions of the Company, and both buyer and seller options. Any changes in the fair value of this contingent consideration liability are recognized in loss from operations in the period of the change. For the year ended December 31, 2017, we reclassified
$38
from the contingent consideration liability to accrued liabilities as of
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
December 31, 2017, to be paid in shares of common stock in the first quarter of 2018. Due to a decrease in our stock price between December 31, 2017 and the final payment calculation, we recorded a gain of
$10
on the difference between the value of the consideration paid on March 20, 2018 of
$28
and the value of the accrued liability at December 31, 2017 of
$38
, which was reclassified from the accrued liability. For the year ended December 31, 2018, we reclassified
$12
from the contingent consideration liability to accrued liabilities, to be paid in shares of common stock in the first quarter of 2018. The Company also recorded a non-cash gain on the change in fair value of the remaining contingent consideration liability of
$20
in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2018.
The contingent consideration liability is measured at fair value at each reporting period using significant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probability weighted value analysis as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are sales projections over the earn-out period, and the probability outcome percentages assigned to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount settled, and the difference between the fair value estimate and amount settled will be recorded in earnings. The amount settled that is less than or equal to the liability on the acquisition date is reflected as non-cash financing activities in our consolidated statements of cash flows. Any amount settled in excess of the liability on the acquisition date is reflected as non-cash operating activities. Any changes in the estimated fair value of our contingent consideration liabilities related to the time component of the present value calculation are reported in interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in our statements of operations and comprehensive loss.
6. Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations. Revenue recognition is evaluated based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.
For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are determined based on observable prices at which the Company separately sells its products or services. If a standalone selling price is not directly observable, the Company estimates the selling price based on market conditions and entity-specific factors including features and functionality of the product and/or services, the geography of the Company’s customers, type of the Company’s markets. Any discounts or other reductions to the transaction price are allocated proportionately to all performance obligations within the multiple-element arrangement.
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers and receipt of payment. For the sale of its products, the Company generally recognizes revenue at a point in time through the ship-and-bill performance obligations. For the lease of its products, the Company generally recognizes revenue over the lease term commencing upon the completion of customer training. For service agreements, the Company generally invoices customers at the beginning of the coverage period and record revenue related to the billed amounts over time, equivalent to the coverage period of the maintenance and support contract.
Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts (Ekso Care) but also includes other offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
Deferred revenues consisted of the following:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31,
2017
|
Deferred extended maintenance and support
|
$
|
2,114
|
|
|
$
|
1,763
|
|
Deferred royalties
|
300
|
|
|
—
|
|
Deferred device revenues
|
70
|
|
|
31
|
|
Customer deposits and advances
|
62
|
|
|
52
|
|
Deferred rental income
|
51
|
|
|
73
|
|
Total deferred revenues
|
2,597
|
|
|
1,919
|
|
Less current portion
|
(1,102
|
)
|
|
(1,103
|
)
|
Deferred revenues, non-current
|
$
|
1,495
|
|
|
$
|
816
|
|
Deferred revenue activity consisted of the following:
|
|
|
|
|
|
December 31, 2018
|
Beginning balance
|
$
|
1,919
|
|
Deferral of revenue
|
2,230
|
|
Recognition of deferred revenue
|
(1,552
|
)
|
Ending balance
|
$
|
2,597
|
|
At
December 31, 2018
, the Company’s deferred revenue, was
$2,597
.
Excluding customer deposits, the Company expects to recognize approximately
$1,033
of the deferred revenue in
2019
,
$738
in
2020
, and
$764
thereafter.
In addition to deferred revenue, the Company has non-cancellable backlog of
$944
related to its contracts for rental units with its customers. These rental contracts are classified as operating leases, with typically 12-month lease terms.
As of
December 31, 2018
and
2017
, accounts receivable, net of allowance for doubtful accounts, were
$3,660
and
$2,760
, respectively, and are included in current assets on the Company’s consolidated balance sheets.
The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within
30
to
60
days.
Disaggregation of revenue
The following table disaggregates the Company’s revenue by major source for the year ended
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical
|
|
Industrial
|
|
Other
|
|
Total
|
Device revenue
|
$
|
6,403
|
|
|
$
|
2,360
|
|
|
$
|
—
|
|
|
$
|
8,763
|
|
Service, support and rentals
|
2,100
|
|
|
—
|
|
|
—
|
|
|
2,100
|
|
Parts and other
|
323
|
|
|
118
|
|
|
—
|
|
|
441
|
|
Collaborative arrangements
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
$
|
8,826
|
|
|
$
|
2,478
|
|
|
$
|
28
|
|
|
$
|
11,332
|
|
7. Property and Equipment, net
Property and equipment, net consisted of the following:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
December 31,
|
|
Life (Years)
|
|
2018
|
|
2017
|
Company owned fleet
|
3-4
|
|
$
|
3,794
|
|
|
$
|
2,890
|
|
Machinery and equipment
|
3-7
|
|
289
|
|
|
760
|
|
Computers and peripherals
|
3-5
|
|
77
|
|
|
572
|
|
Computer software
|
3-5
|
|
818
|
|
|
877
|
|
Leasehold improvement
|
5-10
|
|
631
|
|
|
631
|
|
Tools, molds, dies and jigs
|
5
|
|
69
|
|
|
50
|
|
Furniture, office and leased equipment
|
3-7
|
|
555
|
|
|
637
|
|
|
|
|
6,233
|
|
|
6,417
|
|
Accumulated depreciation and amortization
|
|
|
(3,868
|
)
|
|
(4,168
|
)
|
Property and equipment, net
|
|
|
$
|
2,365
|
|
|
$
|
2,249
|
|
Depreciation and amortization expense of property and equipment, net totaled
$1,009
and
$1,197
for the years ended
December 31, 2018
and
2017
, respectively.
8. Accrued Liabilities
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
Salaries, benefits and related expenses
|
$
|
2,446
|
|
|
$
|
2,850
|
|
Device warranty
|
307
|
|
|
232
|
|
Severance
|
270
|
|
|
—
|
|
Clinical trials
|
227
|
|
|
136
|
|
Capital lease obligation
|
35
|
|
|
34
|
|
Other
|
256
|
|
|
251
|
|
Total
|
$
|
3,541
|
|
|
$
|
3,503
|
|
Warranty
Sales of devices generally include an initial warranty for parts and services for one year in the U.S. and two years in Europe, the Middle East, Africa, and Asia. A liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. Specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. Warranty costs are reflected in the consolidated statements of operations and comprehensive loss as a component of costs of revenue.
|
|
|
|
|
|
|
|
|
|
Warranty
|
|
2018
|
|
2017
|
Balance at beginning of the period
|
$
|
232
|
|
|
$
|
204
|
|
Additions for estimated future expense
|
362
|
|
|
207
|
|
Incurred costs
|
(287
|
)
|
|
(179
|
)
|
Balance at end of the period
|
$
|
307
|
|
|
$
|
232
|
|
|
|
|
|
Current portion
|
295
|
|
|
232
|
|
Long-term portion
|
12
|
|
|
—
|
|
Total
|
$
|
307
|
|
|
$
|
232
|
|
9. Long-Term Debt
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
In December 2016, the Company entered into a loan agreement and received
$7,000
that bears interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus
5.41%
. The loan agreement created a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
The Company was required to pay accrued interest on the current loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company has been required to make equal monthly payments of principal, together with accrued and unpaid interest. The principal balance of the current loan amortizes ratably over
36
months, and matures on
January 1, 2021
, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment of
$245
will be due on the maturity date, of which
$178
has accreted as of
December 31, 2018
, to be paid in 2021 and is included as a component of note payable on the Company’s consolidated balance sheets.
In December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which the Company agreed to pay the lender a
$250
success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for the Company’s common stock being
$8.00
or more for five successive business days. The estimated fair value of the success fee was determined using the Binomial Lattice Model and was recorded as a discount to the debt obligation. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in the consolidated statements of operations and comprehensive loss. The success fee is classified as a component of other non-current liabilities in the consolidated balance sheets. At
December 31, 2018
, the fair value of the contingent success fee liability was
$34
.
The loan agreement includes a liquidity covenant requiring that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least three months of “Monthly Cash Burn,” which is the Company’s average monthly net income (loss) for the trailing six-month period plus (a) certain expenses and (b) the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month period. Such amount was determined to be
$5,269
as of
December 31, 2018
, the most current determination date, with the amount subject to change on a month-to-month basis. At
December 31, 2018
, with cash on hand of
$7,655
, the Company was compliant with this liquidity covenant and all other covenants.
The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate of
9.96%
for the year ended
December 31, 2018
. The final payment fee, the initial fair value of the success fee and the debt issuance costs was and will be accreted, amortized and amortized, respectively, to interest expense using the effective interest method over the life of the loan.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The following table presents scheduled principal payments of our long-term debt and final payment fee as of
December 31, 2018
:
|
|
|
|
|
Period
|
Amount
|
2019
|
$
|
2,333
|
|
2020
|
2,333
|
|
2021
|
440
|
|
Total principal payments
|
5,106
|
|
Less final payment fee, discount and issuance cost
|
125
|
|
Long-term debt, net
|
$
|
4,981
|
|
|
|
Current portion
|
2,333
|
|
Long-term portion
|
2,648
|
|
Long-term debt, net
|
$
|
4,981
|
|
10. Lease Obligations
In May 2017, the Company renewed its operating lease agreement for its headquarters and manufacturing facility in Richmond, California. The operating lease agreement expires in May 2022.
In July 2017, the Company entered into an operating lease agreement for its European operations office in Hamburg, Germany. The initial Hamburg lease term ends in July 2022. The Company has an option to extend the lease for another
five
-year term. The Company has an unoccupied leased sales office in Freiburg, which has a lease term expiring in December 2020. In 2018, the Company recorded a
$175
charge in sales and marketing expense in the consolidated statement of operations and comprehensive loss relating to remaining obligation of the lease.
In August 2015, the Company entered into a long-term capital lease obligation for equipment. The aggregate principal of the lease is
$166
, with an interest rate of
4.7%
, minimum monthly payments of
$3
and a
July 1, 2020
maturity. This capital lease is classified as a component of accrued liabilities and other non-current liabilities in the consolidated balance sheets.
Rent expense under the Company’s operating leases was
$719
and
$486
, for the years ended
December 31, 2018
and
2017
, respectively.
The Company estimates future minimum operating leases payments as of
December 31, 2018
to be the following:
|
|
|
|
|
|
Period
|
|
Operating
Leases
|
2019
|
|
$
|
541
|
|
2020
|
|
554
|
|
2021
|
|
566
|
|
2022
|
|
262
|
|
2023
|
|
—
|
|
Total minimum payments
|
|
$
|
1,923
|
|
11. Employee Benefit Plan
The Company administers a 401(k) retirement plan or the 401(k) Plan in which all employees are eligible to participate. Each eligible employee may elect to contribute to the 401(k) Plan.
In August 2017, the Company’s Board of Directors approved a match benefit to the 401(k) Plan in the form of shares of the Company’s common stock equal to
100%
of each employee's elected deferral (up to the statutory limit) for the year ended December 31, 2017 and
50%
for each year thereafter. The Company made matching contribution to the 401(k) Plan in an amount equal to
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
50%
and
100%
of employee contributions, for the year ended
December 31, 2018
and
2017
, respectively. The expense related to the contribution was
$212
and
$509
for the year ended
December 31, 2018
and
2017
, respectively.
12. Related Party Transactions
One of the Company’s directors, Dr. Ted Wang, is the founder, general partner and Chief Investment Officer of Puissance Capital Management LP, or Puissance Capital, which is an affiliate of Puissance Cross-Border Opportunities II LLC, one of the Company’s largest stockholders. Prior to Dr. Wang’s appointment to the Board in connection with the Rights Offering in September 2017, the Company entered into a one-year consulting agreement with Angel Pond Capital LLC, or Angel Pond, an entity solely owned and managed by Dr. Wang and affiliated with Puissance Capital. Angel Pond assists the Company with strategic positioning in the Asia Pacific region, including the introduction to potential strategic and capital partners and the development of strategic partnerships for the sale and manufacture of the Company’s products in that market. During the year ended December 31, 2017, the Company made aggregate payments of
$2,195
to Angel Pond, representing consulting services for one year. These fees were recognized ratably to expense over the one-year period, resulting in
$1,075
expense charged to general and administrative expense for the year ended
December 31, 2018
. During the year ended
December 31, 2018
, the Company made additional aggregate payments of
$90
to Angel Pond and held an additional
$90
in accrued expenses as of
December 31, 2018
in connection with consulting services provided by Angel Pond, which were expensed in the consolidated statement of operations and comprehensive loss.
The Company has license agreements and various collaboration agreements (see Note 16,
Commitments and Contingencies
) with the Regents of the University of California, Berkeley, or RUC, and for which RUC received shares of common stock of the Company. As of the second quarter of 2015, RUC no longer holds such shares. Total payments made to RUC for the years ended
December 31, 2018
and
2017
, were
$81
and
$66
, respectively. As of
December 31, 2018
and
2017
, amounts payable to RUC amounted to
$57
and
$31
, respectively.
13. Capitalization and Equity Structure
Summary
The Company’s authorized capital stock at
December 31, 2018
consisted of
141,429
shares of common stock and
10,000
shares of preferred stock. At
December 31, 2018
,
62,963
shares of common stock were issued and outstanding and
no
shares of preferred stock were issued and outstanding.
Common Stock
The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Board of Directors may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting for the election of directors. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and validly issued, fully paid, and non-assessable.
Reverse Stock Split
After the close of the stock market on May 4, 2016, the Company effected a 1-for-7 reverse split of its common stock. As a result, all amounts included in this filing with respect to shares of the Company’s common stock issued prior to May 4, 2016 have been retroactively reduced by a factor of seven and all per share amounts with respect to shares of the Company’s common stock issued prior to May 4, 2016 have been increased by a factor of seven, with the exception of our common stock par value. Amounts affected include common stock outstanding on May 4, 2016, including the issuance of new shares of common stock as a result of the conversion of preferred stock and the exercise of stock options and warrants prior to such date.
At-the-market Offering
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
In August 2018, the Company entered into a Controlled Equity Offering
SM
Sales Agreement, or ATM Agreement, with Cantor Fitzgerald & Co., or the Agent, under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent, by methods deemed to be an “at the market offering.” Shares having an aggregate offering price of up to
$25,000
may be offered and sold under the prospectus and prospectus supplement filed with the SEC related to such offering, or the ATM Prospectus. For the year ended
December 31, 2018
, the Company sold
2,032
shares of common stock under the ATM Agreement at an average price of
$2.39
per share, for aggregate proceeds of
$4,446
, net of commission and issuance costs, to the Company. As of
December 31, 2018
, approximately
$20,134
aggregate offering price of the Company's common stock remained available for issuance pursuant to the ATM Prospectus.
August 2017 Rights Offering
In August 2017, the Company commenced a
$34,000
rights offering or Rights Offering to its existing stockholders and certain warrant holders of the Company on the record date of August 10, 2017. The subscription price was
$1.00
per share and each subscription right provided
1.1608
shares of the Company’s common stock plus an oversubscription right, subject to availability. Concurrent with the rights offering, the Company entered into a purchase agreement or the Backstop Investment Agreement with Puissance Cross-Border Opportunities II LLC, or the Backstop Investor. The Backstop Investment Agreement contemplated the purchase of any unsubscribed shares from the Rights Offering under the same terms, subject to a cap of
40%
of the Company’s total outstanding shares. Under the Backstop Investment Agreement,
20,535
shares of our common stock or Puissance Shares were issued to the Backstop Investor. The Puissance Shares were issued in an unregistered offering, and were subsequently registered by the Company for resale to the public pursuant to a registration rights agreement entered into with the Backstop Investor.
In connection with the Rights Offering, the Company entered into a Warrant Repurchase and Amendment Agreement, or Repurchase Agreement, with all of the holders of the warrants issued in April 2017, or April 2017 Warrants. Under the Repurchase Agreement, the Company agreed to repurchase the April 2017 Warrants from each holder thereof at a price of
$1.23
per underlying share. The Company’s obligation to repurchase the warrants was subject to the warrant holder’s participation in the Rights Offering. The Repurchase Agreement also permitted the holders of the April 2017 Warrants to use all or a portion of the consideration received as a result of the Company’s repurchase of the April 2017 Warrants to pay the subscription price for the exercise of their subscription rights in the Rights Offering. Upon the closing of the Rights Offering the Company repurchased April 2017 Warrants exercisable for
1,866
shares and applied consideration of
$2,245
to the subscribed shares in the Rights Offering.
The Company sold an aggregate of
13,465
shares of its common stock to existing stockholders and certain warrant holders, including the holders of the April 2017 Warrants, in the Rights Offering for gross proceeds of
$13,465
, which after deducting expenses, totaling approximately
$286
, resulted in net proceeds of
$13,179
from the Rights Offering; and sold the Puissance Shares to the Backstop Investor pursuant to the Backstop Investment Agreement for gross proceeds of
$20,535
. Of the
$286
in direct issuance costs, warrants with a fair value of
$131
have been issued to an information agent. The warrants are classified as equity in the statement of stockholders’ equity.
April 2017 Common Stock Offering
In April 2017, the Company sold in a registered direct offering, or the 2017 Registered Direct Offering, an aggregate of
3,732
shares of its common stock, par value
$0.001
per share, and warrants to purchase
1,866
shares of common stock. The aggregate net proceeds of the transaction were approximately
$10,919
.
Preferred Stock
The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by its Board of Directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors.
Warrants
Warrant share activity for the year ended
December 31, 2018
was as follows:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source
|
Exercise
Price
|
|
Term
(Years)
|
|
December 31, 2017
|
|
Issued
|
|
Expired
|
|
Exercised
|
|
December 31, 2018
|
Information Agent Warrants
|
$
|
1.50
|
|
|
3
|
|
200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200
|
|
2015 Warrants
|
$
|
3.74
|
|
|
5
|
|
1,604
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,604
|
|
2014 PPO and Merger warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement agent warrants
|
$
|
7.00
|
|
|
5
|
|
426
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
426
|
|
PPO warrants
|
$
|
14.00
|
|
|
5
|
|
1,078
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,078
|
|
Pre-2014 warrants
|
$
|
9.66
|
|
|
9-10
|
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
|
|
|
|
3,396
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,396
|
|
Information Agent Warrants
In September 2017, in connection with the Rights Offering in August of 2017, the Company issued warrants to purchase
200
shares of the Company’s common stock with an exercise price of
$1.50
to an information agent or the Information Agent Warrants. The Information Agent Warrants became exercisable immediately upon issuance. These warrants were recorded in stockholders’ equity on the Company’s consolidated balance sheet.
April 2017 Warrants
In April 2017, in connection with the 2017 Registered Direct Offering, the Company issued the April 2017 Warrants to purchase
1,866
shares of the Company’s common stock with an exercise price of
$4.10
per share. The April 2017 Warrants were to become exercisable six months following the issuance date and were to expire
five years
from the date they became exercisable. The April 2017 Warrants contained a put-option provision. Under this provision, while the April 2017 Warrants were outstanding, if the Company entered into a Fundamental Transaction, defined as a merger, consolidation or similar transaction, the Company or any successor entity would, at the option of each warrant holder, exercisable at any time within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction, calculated using the Black-Scholes Model. Because of this put-option provision, a portion of the proceeds from the sale of common stock in the 2017 Registered Direct Offering was recorded as a warrant liability equal to the fair value of the warrants on the date of issuance and the April 2017 Warrants were marked to market at each reporting date. Issuance costs allocated to the April 2017 Warrants were
$185
and were expensed as financing costs on the date of issuance. All of the issued and outstanding April 2017 Warrants were repurchased at a price of
$1.23
per underlying share, as a result of the Rights Offering. As of
December 31, 2018
, none of the April 2017 Warrants remained outstanding.
2015 Warrants
In December 2015, the Company issued warrants to purchase
2,122
shares with an exercise price of
$3.74
per share, or the 2015 Warrants. The 2015 Warrants contain a put-option provision. Under this provision, while the 2015 Warrants are outstanding, if the Company enters into a Fundamental Transaction, defined as a merger, consolidation or similar transaction, the Company or any successor entity will, at the option of each warrant holder, exercisable at any time within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction, calculated using the Black-Scholes Model. Because of this put-option provision, the 2015 Warrants are classified as a liability and are marked to market at each reporting date. During the years ended December 31, 2016 and 2017,
488
shares and
30
shares, respectively, of the 2015 warrants, were exercised.
None
of the 2015 Warrants were exercised during the year ended December 31, 2018.
The warrant liability is measured at fair value using certain estimated inputs, which are classified within Level 3 of the valuation hierarchy. These values are subject to a significant degree of judgment on our part. The Company’s common stock price represents a significant input that affects the valuation of the warrants.
The Company estimated the fair value of the warrant liability by using a Black-Scholes Model. The following assumptions were used in the Black-Scholes Model to measure the fair value of the 2015 Warrants as of the years ended:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
December 31, 2018
|
December 31, 2017
|
Current share price
|
$
|
1.24
|
|
$
|
2.13
|
|
Conversion price
|
$
|
3.74
|
|
$
|
3.74
|
|
Risk-free interest rate
|
2.48
|
%
|
1.98
|
%
|
Expected term (years)
|
1.99
|
|
2.99
|
|
Volatility of stock
|
104
|
%
|
95
|
%
|
2014 PPO and Merger Warrants and Pre-Merger Warrants
On January 15, 2014, a wholly-owned subsidiary of Ekso Bionics Holdings, Inc. named Ekso Acquisition Corp. merged with and into Ekso Bionics, Inc., or the Merger. Concurrently with the closing of the Merger and in contemplation of the Merger, the Company closed a private placement offering, or PPO, in which it issued warrants to purchase a total of
5,151
shares of common stock of which
4,329
were at an exercise price of
$14.00
per share, and the balance of which were at an exercise price of
$7.00
per share. The aforementioned warrants expired January 14, 2019.
Warrants to purchase preferred stock of Ekso Bionics Inc. outstanding prior to the Merger were converted into warrants to purchase
89
shares of common stock of the Company in connection with the Merger, or the Merger Warrants. As of
December 31, 2018
, there remained Merger Warrants to purchase
88
shares of the Company’s common stock outstanding, with the following terms: (1) the Merger Warrants expire on various dates from June 1, 2022 to August 30, 2023; (2) the Merger Warrants have an exercise price of
$9.66
per share; and (3) at the option of the holder, the Merger Warrants may be exercised on a “cashless exercise” basis in which shares are retained to cover the exercise price based on the market value of the Company’s common stock on the date of exercise.
14. Stock-based Compensation
2014 Equity Incentive Plan
In 2014, prior to the Merger, the Board of Directors and a majority of the stockholders adopted the 2014 Equity Incentive Plan, or the 2014 Plan, allowing for the issuance of
2,058
shares of common stock. In June 2015, the 2014 Plan was amended and restated with approval by the stockholders to increase the maximum number of shares issuable by
1,656
shares to an aggregate of
3,714
shares of common stock. In June 2017, the 2014 Plan was further amended with the approval by the stockholders to increase the maximum number of shares issuable under the 2014 Plan by
1,000
shares to an aggregate of
4,714
shares of common stock. In June 2018, the Company’s stockholders ratified an amendment to the 2014 Plan, which was first approved by the stockholders in December 2017, to increase the number of shares available for grant by
4,400
shares. As of
December 31, 2018
, the total shares authorized for grant under the 2014 Plan was
9,114
, of which
1,267
were available for future grants.
Under the terms of the 2014 Plan, the Board of Directors may award stock, options, or similar rights having either a fixed or variable price related to the fair market value of the shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions or any other security with the value derived from the value of the shares. Such awards include stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights.
Shares available for future grant under the 2014 Plan was as follows:
|
|
|
|
|
Shares Available For Grant
|
Available as of December 31, 2017
|
4,838
|
|
Granted
|
(4,279
|
)
|
Forfeited
|
523
|
|
Expired
|
185
|
|
Available as of December 31, 2018
|
1,267
|
|
Stock Options
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The Board of Directors may grant stock options under the 2014 Plan at a price of not less than
100%
of the fair market value of the Company’s common stock on the date the option is granted. The maximum term of an incentive stock option granted to participants may not exceed
ten years
. Subject to the limitations discussed above, the Board of Directors determines the term and exercise or purchase price of other awards granted under the 2014 Plan. To date, no incentive stock options have been granted. The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2014 Plan vest upon the passage of time, generally
four years
, or upon the attainment of certain performance criteria established by the Board of Directors. We may grant options to purchase common stock to non-employees for advisory and consulting services. Upon exercise of a stock option, the Company issues new shares of common stock.
A summary of the stock option activity as of
December 31, 2018
and changes during the fiscal year then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
Outstanding at beginning of year
|
3,156
|
|
|
$
|
4.96
|
|
|
|
|
|
Granted
|
3,925
|
|
|
$
|
1.93
|
|
|
|
|
|
Exercised
|
(1
|
)
|
|
$
|
1.13
|
|
|
|
|
|
Forfeited
|
(429
|
)
|
|
$
|
4.67
|
|
|
|
|
|
Expired
|
(185
|
)
|
|
$
|
7.91
|
|
|
|
|
|
Outstanding at end of year
|
6,466
|
|
|
$
|
3.05
|
|
|
8.34
|
|
$
|
58
|
|
Vested and expected to vest
|
6,466
|
|
|
$
|
3.05
|
|
|
8.34
|
|
$
|
58
|
|
Exercisable at year end
|
2,149
|
|
|
$
|
5.22
|
|
|
6.07
|
|
$
|
37
|
|
In
2018
, the Company received
$1
in cash from exercised stock options. The intrinsic value of the options exercised totaled
$1
and
$86
, for the years ended
December 31, 2018
and
2017
, respectively.
The weighted-average grant date fair value of stock options granted for the years ended
December 31, 2018
and
2017
was
$1.57
and
$1.26
, respectively. The total grant date fair value of stock option vested during the years ended
December 31, 2018
and
2017
was
$1,725
and
$2,192
, respectively.
As of
December 31, 2018
, total unrecognized compensation cost related to unvested stock options was
$6,007
. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of
2.9 years
.
The following table summarizes information about stock options outstanding as of
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of
Exercise
Prices
|
|
Number of
Shares
|
|
Weighted-Average
Remaining
Contractual Life
(Years)
|
|
Weighted
Average
Price
|
|
Number of
Shares
|
|
Weighted
Average
Price
|
$0.49 - $1.59
|
|
688
|
|
|
8.44
|
|
$
|
1.17
|
|
|
272
|
|
|
$
|
1.13
|
|
$1.76 - $1.79
|
|
1,824
|
|
|
9.50
|
|
$
|
1.76
|
|
|
68
|
|
|
$
|
1.79
|
|
$1.82 - $2.85
|
|
2,422
|
|
|
9.09
|
|
$
|
2.16
|
|
|
381
|
|
|
$
|
2.54
|
|
$3.22 - $15.33
|
|
1,532
|
|
|
5.80
|
|
$
|
6.85
|
|
|
1,428
|
|
|
$
|
6.89
|
|
|
|
6,466
|
|
|
8.34
|
|
$
|
3.05
|
|
|
2,149
|
|
|
$
|
5.22
|
|
The Company recognizes compensation expense using the straight-line method over the requisite service period. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes Model under the following assumptions:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
Dividend yield
|
—
|
|
—
|
Risk-free interest rate
|
2.68% - 3.0%
|
|
1.83% - 2.37%
|
Expected term (in years)
|
5.27-10
|
|
5.27-9.23
|
Volatility
|
88%-106%
|
|
77%-88%
|
Restricted Stock Units
Beginning in 2017, the Company started issuing restricted stock units, or RSUs, to employees and non-employees as permitted by the 2014 Plan. Each RSU corresponds to one share of the Company’s common stock and becomes issuable upon vesting. The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.
RSU activity for the year ended
December 31, 2018
is summarized below:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Grant-
Date Fair Value
|
Unvested as of January 1, 2018
|
617
|
|
|
$
|
1.65
|
|
Granted
|
354
|
|
|
$
|
1.78
|
|
Vested
|
(599
|
)
|
|
$
|
1.46
|
|
Forfeited
|
(94
|
)
|
|
$
|
2.78
|
|
Unvested as of December 31, 2018
|
278
|
|
|
$
|
1.83
|
|
The total grant-date fair value of RSUs that vested in
2018
was
$1,026
. As of
December 31, 2018
,
$442
of total unrecognized compensation expense related to employee RSUs was expected to be recognized over a weighted average period of
3.43 years
.
Compensation Expense
Stock-based compensation is included in the consolidated statements of operations and comprehensive loss in general and administrative, research and development, or sales and marketing expenses, depending upon the nature of services provided. Stock-based compensation expense recorded for stock options and RSUs granted to employees and non-employees was as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
Sales and marketing
|
$
|
611
|
|
|
$
|
485
|
|
Research and development
|
426
|
|
|
439
|
|
General and administrative
|
1,831
|
|
|
1,304
|
|
Restructuring
|
—
|
|
|
186
|
|
|
$
|
2,868
|
|
|
$
|
2,414
|
|
Employee Stock Purchase Plan
In June 2017, the Company’s stockholders approved the Employee Stock Purchase Plan or the 2017 ESPP. Under the 2017 ESPP, the Company has reserved
500
shares of common stock for issuance, subject to adjustment in the event of a stock split, stock dividend, combination or reclassification or similar event. The 2017 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to
25%
of their eligible compensation, subject to any plan limitations. The 2017 ESPP provides for six-month offering periods. At the end of each offering period, employees can purchase shares at
85%
of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. As of
December 31, 2018
, the Company had not initiated employee enrollment to the plan.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
15. Income Taxes
The domestic and foreign components of pre-tax loss for the years ended
December 31, 2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
Domestic
|
$
|
(24,787
|
)
|
|
$
|
(26,434
|
)
|
Foreign
|
(2,205
|
)
|
|
(2,688
|
)
|
Loss before income taxes
|
$
|
(26,992
|
)
|
|
$
|
(29,122
|
)
|
The Company had no current or deferred federal and state income tax expense or benefit for the years ended
December 31, 2018
and
2017
because the Company generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized. The Company’s non-U.S. tax obligation is primarily for business activities conducted through the Germany and Singapore for which taxes included in other expense, net for the years ended
December 31, 2018
and
2017
were immaterial and accordingly, such amounts were excluded from the following tables.
Income tax expense (benefit) for the years ended
December 31, 2018
and
2017
differed from the amounts computed by applying the statutory federal income tax rate of 21% and 34%, respectively, to pretax income (loss) as a result of the following:
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
Federal tax at statutory rate
|
21.0
|
%
|
|
34.0
|
%
|
State tax, net of federal tax effect
|
—
|
|
|
—
|
|
R&D credit
|
1.3
|
|
|
1.2
|
|
Change in valuation allowance
|
(21.1
|
)
|
|
18.9
|
|
Deferred tax impacts of the Tax Act
|
—
|
|
|
(59.1
|
)
|
Unrealized (gain) loss on warrant
|
0.8
|
|
|
3.1
|
|
Foreign
|
1.0
|
|
|
(0.4
|
)
|
Other
|
(3.0
|
)
|
|
2.3
|
|
Total tax expense
|
—
|
%
|
|
—
|
%
|
The tax effects of temporary differences and related deferred tax assets and liabilities as of
December 31, 2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
Deferred tax assets:
|
|
|
|
Depreciation and other
|
$
|
248
|
|
|
$
|
242
|
|
Net operating loss carryforwards
|
36,970
|
|
|
31,590
|
|
Unused R& D tax credits
|
1,769
|
|
|
1,359
|
|
Accruals & reserves
|
480
|
|
|
524
|
|
Deferred Revenue
|
221
|
|
|
253
|
|
Stock Compensation
|
1,888
|
|
|
2,277
|
|
Other
|
55
|
|
|
42
|
|
Deferred tax liabilities:
|
|
|
|
Prepaid expenses
|
(49
|
)
|
|
(314
|
)
|
Less: Valuation allowance
|
(41,582
|
)
|
|
(35,973
|
)
|
Net deferred tax asset (liability)
|
$
|
—
|
|
|
$
|
—
|
|
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance was established and no deferred tax assets were shown in the accompanying balance sheets. The valuation allowance increased by
$5,608
during the year ended
December 31, 2018
and decreased by
$4,153
during the year ended
December 31, 2017
.
In December 2017, the Tax Cuts and Jobs Act or the Tax Act, was signed into law. Among other provisions, the Tax Act reduces the federal statutory corporate tax rate from 35% to
21%
for the Company’s tax years beginning in 2018. As a result, net deferred tax assets were re-measured, which resulted in a reduction of our deferred tax assets by
$17,220
, with a corresponding decrease to the valuation allowance of the same amount for the tax year ended December 31, 2017. Furthermore, for tax years beginning after December 31, 2018, the Global Intangible Low-taxed Income (GILTI) takes effect. Due to the aggregated negative E&P of the foreign subsidiaries there is no GILTI inclusion for 2018.
As of
December 31, 2018
the Company had federal net operating loss carryforwards of
$142,076
. The federal net operating loss carryforwards of
$120,792
generated before January 1, 2018 will begin to expire in
2027
, and
$21,284
will carryforward indefinitely but are subject to the 80% taxable income limitation. The Company also had federal research and development tax credit carryforwards of
$1,776
that will expire beginning in
2027
, if not utilized.
As of
December 31, 2018
, the Company had state net operating loss carryforwards of
$87,803
, which will begin to expire in
2028
. The Company also had state research and development tax credit carryforwards of
$738
, which have no expiration.
As of
December 31, 2018
, the Company had foreign net operating loss carryforwards of
$7,537
. The foreign net operating loss carryforwards do not expire.
As of
December 31, 2017
,
$1,749
of federal and
$689
of state net operating loss was attributable to stock-based compensation deductions in excess of book expense. Upon adoption of ASU 2016-09-Compensation-Stock Compensation, the benefit of the tax deduction related to these options did not affect retained earnings due to the Company applying a full valuation allowance against the deferred tax assets, as is the Company’s current policy
Utilization of the Company’s net operating losses and credit carryforwards may be subject to annual limitations in the event of a Section 382 ownership change. Such future limitations could result in the expiration of net operating losses and credit carryforwards before utilization as a result of such an ownership change.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
|
|
|
|
|
Balance at December 31, 2016
|
335
|
|
Increase of unrecognized tax benefits taken in prior years
|
33
|
|
Increase of unrecognized tax benefits related to current year
|
119
|
|
Balance at December 31, 2017
|
487
|
|
Increase of unrecognized tax benefits taken in prior years
|
51
|
|
Increase of unrecognized tax benefits related to current year
|
90
|
|
Balance at December 31, 2018
|
$
|
628
|
|
If the Company eventually is able to recognize these uncertain tax positions, the unrecognized tax benefits would not reduce the effective tax rate if the Company is applying a full valuation allowance against the deferred tax assets, as is the Company’s current policy.
The Company had not incurred any material tax interest or penalties as of
December 31, 2018
. The Company does not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions. The Company is subject to taxation in the United States, Germany, Singapore and various states jurisdictions. There are no other ongoing examinations by taxing authorities at this time. The Company’s tax years
2007
through 2018 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
16. Commitments and Contingencies
Commitments
Material Contracts
The Company has
two
license agreements with the Regents of the University of California to maintain exclusive rights to patents. The Company is required to pay
1%
of net sales of licensed medical devices sold to entities other than the U.S. government. In addition, the Company is required to pay
21%
of consideration collected from any sublicensee for the grant of the sublicense.
In connection with acquisition of Equipois, the Company assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants the Company an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company is required to pay the developer a single-digit royalty on net receipts, subject to a
$50
annual minimum royalty requirement.
Purchase Obligations
The Company purchases components from a variety of suppliers and use contract manufacturers to provide manufacturing services for its products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling
$1,459
as of
December 31, 2018
, which is expected to be paid within a year. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.
Other Contractual Obligations
The following table summarizes our outstanding contractual obligations, including interest payments, as of
December 31, 2018
and the effect those obligations are expected to have on our liquidity and cash flows in future periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
Total
|
|
Less than
one year
|
|
1-3 Years
|
|
3-5 Years
|
Term loan
|
$
|
5,521
|
|
|
$
|
2,632
|
|
|
$
|
2,889
|
|
|
$
|
—
|
|
Facility operating lease
|
1,923
|
|
|
541
|
|
|
1,382
|
|
|
—
|
|
Capital lease
|
59
|
|
|
37
|
|
|
22
|
|
|
—
|
|
Total
|
$
|
7,503
|
|
|
$
|
3,210
|
|
|
$
|
4,293
|
|
|
$
|
—
|
|
Contingencies
In the normal course of business, the Company is subject to various legal matters. In the opinion of management, the resolution of such matters will not have a material adverse effect on the Company’s consolidated financial statements.
17. Segment Disclosures
The Company has
two
reportable segments: EksoHealth and EksoWorks. The EksoHealth segment designs, engineers, manufactures, and sells exoskeletons for applications in the medical markets. The EksoWorks segment designs, engineers, manufactures, and sells exoskeleton devices to allow able-bodied users to perform heavy duty work for extended periods.
The Company evaluates performance and allocates resources based on segment gross profit margin. The reportable segments are each managed separately because they serve distinct markets. The Company does not consider net assets as a segment measure and, accordingly, assets are not allocated.
Segment reporting information is as follows:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EksoHealth
|
|
EksoWorks
|
|
Other
|
|
Total
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
Revenue
|
$
|
8,826
|
|
|
$
|
2,478
|
|
|
$
|
28
|
|
|
$
|
11,332
|
|
Cost of revenue
|
4,932
|
|
|
2,055
|
|
|
36
|
|
|
7,023
|
|
Gross profit
|
$
|
3,894
|
|
|
$
|
423
|
|
|
$
|
(8
|
)
|
|
$
|
4,309
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
Revenue
|
$
|
5,831
|
|
|
$
|
1,484
|
|
|
$
|
38
|
|
|
$
|
7,353
|
|
Cost of revenue
|
4,164
|
|
|
1,106
|
|
|
14
|
|
|
5,284
|
|
Gross profit
|
$
|
1,667
|
|
|
$
|
378
|
|
|
$
|
24
|
|
|
$
|
2,069
|
|
Geographic revenue information based on location of customer is as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
2018
|
|
2017
|
United States
|
$
|
7,028
|
|
|
$
|
4,958
|
|
All Other
|
4,304
|
|
|
2,395
|
|
|
$
|
11,332
|
|
|
$
|
7,353
|
|
18. Subsequent events
In January 2019, the Company entered into an agreement with Zhejiang Youchuang Venture Capital Investment Co., Ltd (ZYVC) and another partner to establish a joint venture designed to develop and serve the exoskeleton market in China and other Asian markets and to create a global exoskeleton manufacturing center.
In exchange for contributing licenses for its manufacturing technology and relevant Chinese patent rights, the Company received a
20%
ownership position in the joint venture. The other partners have committed to contribute over
$90,000
in cash in exchange for the remaining
80%
ownership. Concurrent with the signing of the agreement, the partners agreed to make a
$10,000
equity investment in the Company,
$5,000
of which was due to be invested upon the signing of the agreement with the remaining
$5,000
to be invested upon the shipment of the first products from the manufacturing facility. The Company received the first
$5,000
equity investment after the signing of the agreement. The Company will also be entitled to receive royalties on the joint venture’s medical and industrial product sales in China, Hong Kong, Malaysia, and Singapore.
The joint venture will develop, sell and support exoskeleton products into China, Hong Kong, Malaysia, and Singapore, and will be capitalized at greater than
$100,000
over its term. The joint venture is expected to have multiple benefits for the Company primarily by gaining access to the world’s largest market for stroke rehabilitation services which is expected to expand the Company’s revenue opportunities while providing economics of scale that will accrue to its current markets and support profitable expansion into other developing markets. The joint venture’s manufacturing facility, which will be purpose-built to manufacture the component parts of the Company’s products at scale, is expected to also improve the Company’s profit margins.
Pursuant to the consulting agreement that the Company entered into in July 2017 with Angel Pond, upon the consummation of the joint venture in China, the Company is required to make a
$1,000
payment to Angel Pond in consideration for its services related to the Company’s entry into the joint venture. Refer to
Note 12. Related Party Transactions.
During the first quarter of
2019
through
February 28, 2019
, pursuant to the ATM Agreement and the ATM Prospectus, the Company sold
1,294
shares of common stock for
$2,328
, net of fees and commissions, at an average price of
$1.85
.