Prospectus Supplement No. 5 |
Filed
Pursuant to Rule 424(b)(3) |
Dated November 10, 2015 |
Registration
No. 333-195783 |
(to Prospectus
dated April 6, 2015) |
|
Ekso
Bionics Holdings, INC.
67,134,768 Shares
Common Stock
This
prospectus supplement no. 5 (the “Supplement”) supplements information contained in the prospectus dated April 6, 2015,
as supplemented by the prospectus supplement no. 1 dated April 23, 2015, the prospectus supplement no. 2 dated May 11, 2015, the
prospectus supplement no. 3 dated August 13, 2015 and the prospectus supplement no. 4 dated September 14, 2015
(collectively, the “Prospectus”), relating to the resale by selling stockholders of Ekso Bionics Holdings, Inc., a
Nevada corporation, of up to 67,134,768 shares of our common stock, par value $0.001 per share. Of the shares being
offered, 54,008,968 are presently issued and outstanding and 13,125,800 are issuable upon exercise of common stock purchase warrants.
The shares offered by the Prospectus may be sold by the selling stockholders from time to time in the open market, through privately
negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.
This Supplement is being filed to update
and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q filed with
the Securities and Exchange Committee for the quarterly period ended September 30, 2015 (the “Form 10-Q”). Accordingly,
we have attached the Form 10-Q to this Prospectus Supplement.
This Supplement is incorporated by reference into, and should be
read in conjunction with, the Prospectus. This Supplement is not complete without, and may not be delivered or utilized except
in connection with, the Prospectus, including any amendments or supplements thereto. Any statement contained in the Prospectus
shall be deemed to be modified or superseded to the extent that information in this Prospectus Supplement modifies or supersedes
such statement. Any statement that is modified or superseded shall not be deemed to constitute a part of the Prospectus except
as modified or superseded by this Prospectus Supplement.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this Supplement is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus Supplement
is November 10, 2015
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly
period ended September 30, 2015
or
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition
period from ______ to ______
Commission File Number: 333-181229
Ekso Bionics Holdings, Inc.
(Exact name of registrant
as specified in its charter)
Nevada |
|
99-0367049 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
1414 Harbour Way South, Suite 1201
Richmond, CA |
|
94804 |
(Address of principal executive offices) |
|
(Zip Code) |
(203) 723-3576
(Registrant’s telephone number, including
area code)
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check
mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
|
Accelerated filer ¨ |
|
|
|
Non-accelerated filer x |
|
Smaller reporting company ¨ |
(Do not check if a smaller reporting
company) |
|
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares
of registrant’s common stock outstanding as of November 2, 2015 was: 102,389,957
Ekso Bionics Holdings, Inc.
Quarterly Report on Form 10-Q
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ekso Bionics Holdings,
Inc.
Condensed Consolidated
Balance Sheets
(in thousands, except share and par value
amounts)
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(unaudited) | | |
(Note 2) | |
Assets | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 11,238 | | |
$ | 25,190 | |
Accounts receivable | |
| 2,185 | | |
| 1,549 | |
Inventories, net | |
| 1,179 | | |
| 622 | |
Prepaid expenses and other current assets | |
| 726 | | |
| 388 | |
Deferred cost of revenue, current | |
| 1,920 | | |
| 1,551 | |
Total current assets | |
| 17,248 | | |
| 29,300 | |
Property and equipment, net | |
| 2,399 | | |
| 2,102 | |
Deferred cost of revenue, non-current portion | |
| 2,424 | | |
| 2,017 | |
Other assets | |
| 55 | | |
| 55 | |
Total assets | |
$ | 22,126 | | |
$ | 33,474 | |
Liabilities and Stockholders' Equity | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 2,148 | | |
$ | 783 | |
Accrued liabilities | |
| 2,190 | | |
| 2,378 | |
Deferred revenues, current portion | |
| 3,839 | | |
| 3,412 | |
Capital lease obligation, current | |
| 79 | | |
| 41 | |
Total current liabilities | |
| 8,256 | | |
| 6,614 | |
Deferred revenues, non-current portion | |
| 4,399 | | |
| 3,895 | |
Other non-current liabilities | |
| 225 | | |
| 165 | |
Total liabilities | |
| 12,880 | | |
| 10,674 | |
Commitments and contingencies (Note 12) | |
| | | |
| | |
Stockholders' equity: | |
| | | |
| | |
Convertible Preferred stock, $0.001 par value; 10,000,000 shares
authorized at September 30, 2015 and December 31, 2014; none issued and outstanding at September 30, 2015 and December 31,
2014, respectively | |
| - | | |
| - | |
Common stock, $0.001 par value; 500,000,000 shares authorized at September 30, 2015 and December 31, 2014;
102,371,591 and 101,621,358, shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | |
| 102 | | |
| 102 | |
Additional paid-in capital | |
| 95,890 | | |
| 94,499 | |
Accumulated deficit | |
| (86,746 | ) | |
| (71,801 | ) |
Total stockholders' equity | |
| 9,246 | | |
| 22,800 | |
Total liabilities and stockholders' equity | |
$ | 22,126 | | |
$ | 33,474 | |
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of
Operations
(in thousands, except share and per
share amounts)
(unaudited)
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Revenue | |
| | | |
| | | |
| | | |
| | |
Medical devices | |
$ | 1,095 | | |
$ | 789 | | |
$ | 3,128 | | |
$ | 2,006 | |
Engineering services | |
| 1,820 | | |
| 799 | | |
| 3,590 | | |
| 1,841 | |
Total revenue | |
| 2,915 | | |
| 1,588 | | |
| 6,718 | | |
| 3,847 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| | | |
| | | |
| | | |
| | |
Medical devices | |
| 1,095 | | |
| 578 | | |
| 2,863 | | |
| 1,410 | |
Engineering services | |
| 1,352 | | |
| 530 | | |
| 2,482 | | |
| 1,432 | |
Total cost of revenue | |
| 2,447 | | |
| 1,108 | | |
| 5,345 | | |
| 2,842 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 468 | | |
| 480 | | |
| 1,373 | | |
| 1,005 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Sales and marketing | |
| 2,380 | | |
| 1,642 | | |
| 6,754 | | |
| 5,022 | |
Research and development | |
| 1,713 | | |
| 1,096 | | |
| 4,438 | | |
| 2,564 | |
General and administrative | |
| 1,556 | | |
| 1,474 | | |
| 5,090 | | |
| 5,354 | |
Total operating expenses | |
| 5,649 | | |
| 4,212 | | |
| 16,282 | | |
| 12,940 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (5,181 | ) | |
| (3,732 | ) | |
| (14,909 | ) | |
| (11,935 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (4 | ) | |
| (3 | ) | |
| (10 | ) | |
| (433 | ) |
Gain (loss) on warrant liability | |
| - | | |
| 15,773 | | |
| - | | |
| (1,206 | ) |
Interest income | |
| 2 | | |
| 1 | | |
| 9 | | |
| 4 | |
Other expense, net | |
| (2 | ) | |
| (15 | ) | |
| (35 | ) | |
| (44 | ) |
Total other income (expense), net | |
| (4 | ) | |
| 15,756 | | |
| (36 | ) | |
| (1,679 | ) |
Net income (loss) | |
$ | (5,185 | ) | |
$ | 12,024 | | |
$ | (14,945 | ) | |
$ | (13,614 | ) |
Basic net income (loss) per share | |
$ | (0.05 | ) | |
$ | 0.15 | | |
$ | (0.15 | ) | |
$ | (0.18 | ) |
Weighted-average shares used in computing basic per share amounts | |
| 102,239,868 | | |
| 78,513,144
| | |
| 102,043,392
| | |
| 74,943,169
| |
Diluted net loss per share | |
$ | (0.05 | ) | |
$ | (0.04 | ) | |
$ | (0.15 | ) | |
$ | (0.18 | ) |
Weighted-average shares used in computing diluted per share amounts | |
| 102,239,868
| | |
| 83,336,371 | | |
| 102,043,392 | | |
| 74,943,169
| |
See Accompanying Notes to the Unaudited
Condensed Consolidated Financial Statements
Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of
Cash Flows
(in thousands)
(unaudited)
| |
Nine months ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
Operating activities | |
| | | |
| | |
Net loss | |
$ | (14,945 | ) | |
$ | (13,614 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Depreciation and amortization | |
| 653 | | |
| 535 | |
Inventory allowance expense | |
| - | | |
| 21 | |
Amortization of deferred rent | |
| (28 | ) | |
| (27 | ) |
Amortization of debt discounts | |
| - | | |
| 191 | |
Stock-based compensation expense | |
| 1,259 | | |
| 810 | |
Loss on increase in fair value of warrant liability | |
| - | | |
| 1,206 | |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (636 | ) | |
| (1,372 | ) |
Inventories | |
| (379 | ) | |
| (161 | ) |
Prepaid expense and other assets | |
| (338 | ) | |
| (80 | ) |
Deferred cost of revenue | |
| (776 | ) | |
| (1,541 | ) |
Accounts payable | |
| 1,365 | | |
| (422 | ) |
Accrued liabilities | |
| (188 | ) | |
| (108 | ) |
Deferred revenues | |
| 931 | | |
| 2,266 | |
Net cash used in operating activities | |
| (13,082 | ) | |
| (12,296 | ) |
Investing activities | |
| | | |
| | |
Acquisition of property and equipment, net | |
| (962 | ) | |
| (917 | ) |
Note receivable from stockholder | |
| - | | |
| 104 | |
Net cash used in investing activities | |
| (962 | ) | |
| (813 | ) |
Financing activities | |
| | | |
| | |
Principal payments on notes payable | |
| (40 | ) | |
| (2,547 | ) |
Proceeds from exercise of stock options | |
| 80 | | |
| - | |
Proceeds from exercise of common stock warrants | |
| 52 | | |
| - | |
Proceeds from issuance of common stock, net of issuance costs | |
| - | | |
| 22,027 | |
Net cash provided by financing activities | |
| 92 | | |
| 19,480 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| (13,952 | ) | |
| 6,371 | |
Cash at beginning of the period | |
| 25,190 | | |
| 805 | |
Cash at end of the period | |
$ | 11,238 | | |
$ | 7,176 | |
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per
share amounts)
(unaudited)
1. Organization
Description of Business and Liquidity
On January 15, 2014, a wholly-owned subsidiary
of Ekso Bionics Holdings, Inc. named Ekso Acquisition Corp merged with and into Ekso Bionics, Inc. (the “Merger”).
Ekso Bionics, Inc. was the surviving corporation and became a wholly-owned subsidiary of Ekso Bionics Holdings, Inc. As a result
of this transaction, Ekso Bionics Holdings, Inc. discontinued its pre-merger operations, acquired the business of Ekso Bionics,
Inc. and continues the operations of Ekso Bionics, Inc. as a publicly traded company. See Note 3, The Merger, Offering and
Other Related Transactions. Ekso Bionics, Inc. was incorporated in January 2005 in the State of Delaware. We are currently
headquartered in Richmond, California.
As used in these notes to the condensed
consolidated financial statements, the term “the Company” refers to Ekso Bionics Holdings, Inc. (formerly known as
PN Med Group, Inc.) and its direct and indirect wholly-owned subsidiaries, including Ekso Bionics, Inc. and Ekso Bionics Ltd.,
after giving effect to the Merger; the term “Holdings” refers to the business of Ekso Bionics Holdings, Inc. prior
to the Merger, and the term “Ekso Bionics” refers to Ekso Bionics, Inc. prior to the Merger.
We are a leading developer and manufacturer
of human bionic exoskeletons. We were founded after the Robotics and Human Engineering Laboratory at the University of California,
Berkeley had a breakthrough in demonstrating human exoskeletons that are more energy efficient than previously thought possible.
We are pioneering the field of human exoskeletons
to augment human strength, endurance and mobility. We design, develop and sell wearable robots, or “human exoskeletons,”
that have applications in healthcare, industrial, military, and consumer markets. Our exoskeleton systems are strapped over the
user’s clothing, enabling individuals with neurological conditions affecting gait (e.g., stroke or spinal cord injury) to
walk again, permitting soldiers to carry heavy loads for long distances while mitigating lower back, knee, and ankle injuries,
and allowing industrial workers to increase productivity and quality of work, for extended periods.
Our current medical device product, the
Ekso GT, is a wearable bionic suit that provides individuals with stroke, spinal cord injuries and other lower-extremity paralysis
or weakness the ability to stand and walk over ground with a full weight-bearing, reciprocal gait using a cane, crutches or a
walker under the supervision of a physical therapist. Walking is achieved by the shifting of the user’s body to activate
sensors in the device that initiate steps. Battery-powered motors drive the legs, replacing deficient neuromuscular function.
Sensors in the Ekso GT detect the level of motor control a user has, allowing the Ekso GT to provide that level of assist necessary
for the user to complete his or her step. First-time users can expect to walk with aid from the device the first time they put
on the Ekso exoskeleton (after passing an assessment), while an experienced user can transfer to or from their wheelchair and
don or remove the Ekso in less than five minutes.
Our engineering services division, Ekso
Labs, is an exoskeleton laboratory that continually integrates emerging technologies into new product applications and expands
on such technologies with our partners. To date, the majority of our Ekso Labs revenue has been in the form of research grants
from government organizations including United States Special Operations Command, the Defense Advanced Research Projects Agency,
the National Institute of Health and the National Science Foundation. These projects fund research and development on new exoskeleton
systems, providing the Company with new intellectual property and exoskeleton designs that have the potential for commercialization.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per
share amounts)
(unaudited)
We are currently developing industrial
exoskeleton models that are intended to increase an individual’s workload, endurance and productivity. For example, we recently
announced our intention to commercialize a passive, unpowered exoskeleton that would increase the productivity and quality of
work of industrial workers and potentially reduce workmen’s compensation claims and insurance costs of industrial employers.
We are currently assessing interest of potential customers by targeting major North American and European construction companies
and major tool manufacturers, and we have prototypes being tested in the field.
As we continue to develop, commercialize
and market our various exoskeleton technologies, we may seek to establish new strategic relationships with third parties.
Potential relationships may be in the form of technology or product development agreements, sales or distribution agreements,
or license agreements.
Liquidity
Largely as a result of significant research
and development activities related to the development of 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.
The Company has also recognized significant non-cash losses associated with the revaluation of certain securities, which have
also contributed significantly to our accumulated deficit. As of September 30, 2015, we had an accumulated deficit of $86,746.
The Company’s cash as of September
30, 2015, was $11,238 compared to $25,190 at December 31, 2014. During the nine months ended September 30, 2015, the Company used
$13,082 of cash in operations compared to $12,296 for the nine months ended September 30, 2014.
Based upon our current nine-month average
monthly net use of cash of approximately $1,550 and assuming increases in current revenue and gross profit, offset by incremental
net use of cash for increased sales and marketing and research and development, and a potential increase in rental activity from
our medical device business, the Company believes it has sufficient resources to meet its financial obligations into the second
quarter of 2016.
Our actual capital requirements may vary
significantly and will depend on many factors. For example, we plan to continue to increase our investments (i) in our clinical,
sales and marketing initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) in our
research, development and commercialization activities with respect to an Ekso robotic exoskeleton for home use, and/or (iii)
in the development and commercialization of able-bodied exoskeletons for industrial use. Consequently, the Company will require
significant additional financing in the future, which we intend to raise through corporate collaborations, public or private equity
offerings, debt financings or warrant solicitations within the next two to four quarters. Sales of additional equity securities
by us 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, we may be required to reduce our discretionary overhead costs substantially, including research and development,
general and administrative and sales and marketing expenses or otherwise curtail operations.
2. Basis of Presentation and Summary
of Significant Accounting Policies and Estimates
There have been no material changes to
our significant accounting policies as compared to those described in our Annual Report on Form 10-K for the year ended December
31, 2014.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
Basis of Presentation
These unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”), for the presentation of interim financial information. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted,
pursuant to such rules and regulations. The condensed consolidated balance sheet at December 31, 2014, has been derived from
the audited consolidated financial statements at that date but does not include all disclosures required for the annual
financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto
included as part of our Annual Report on Form 10-K for the year ended December 31, 2014. Unless otherwise indicated, all
dollar amounts included in these notes to the financial statements are in thousands.
In management’s opinion, the condensed
consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary
to present fairly the financial position at September 30, 2015, and results of operations and cash flows for all periods presented.
The interim results presented are not necessarily indicative of results that can be expected for a full year. The condensed consolidated
financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
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 the associated costs, useful lives assigned to long-lived assets, realizability
of deferred tax assets, the valuation of options and warrants, and contingencies. Actual results could differ from those estimates.
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. We maintain our cash accounts
in excess of federally insured limits. However, we believe we are not exposed to significant credit risk due to the financial
position of the depository institutions in which these deposits are held. We extend credit to customers in the normal course
of business and perform ongoing credit evaluations of our customers. Concentrations of credit risk with respect to accounts receivable
exist to the full extent of amounts presented in the consolidated financial statements. We do not require collateral from our
customers to secure accounts receivable.
Accounts receivable are derived from the
sale of products shipped and services performed for customers located in the U.S. and throughout the world. Invoices are aged
based on contractual terms with the customer. We review accounts receivable for collectability and provide an allowance for credit
losses, as needed. We have not experienced any material losses related to accounts receivable as of September 30, 2015 and December
31, 2014. Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S.
dollar. We do not enter into any foreign currency hedging agreements and are susceptible to gains and losses from foreign currency
fluctuations. To date, we have not experienced significant gains or losses upon settling foreign currency denominated accounts
receivable.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
As of September 30, 2015, we had three
customers with accounts receivable balances totaling 10% or more of our total accounts receivable (15%, 11% and 10%), compared
with two customers as of December 31, 2014 (22% and 11%).
In the three months ended September
30, 2015, we had one customer with sales comprising 10% or more of our total customer sales (48%), compared with three
customers in the three months ended September 30, 2014 (19%, 17% and 17%). In the nine months ended September 30, 2015, we
had one customer with sales comprising 10% or more of our total customer sales (33%), compared with one customer in the nine
months ended September 30, 2014 (17%).
Common Stock Warrants
We accounted for the common stock warrants
issued in connection with our Merger and related private placement offering (see Note 3, The Merger, Offering and Other Related
Transactions) in accordance with the guidance in Accounting Standards Codification (“ASC”) 815-40. Under ASC 815-40,
the warrants did not meet the criteria for equity treatment and were recorded as a liability. The warrants initially had an anti-dilution
clause that allowed for a decrease in the exercise price of the warrants if the Company issued additional shares of common stock
without consideration or for consideration per share less than the exercise price of such warrants. Accordingly, we classified
the warrant instruments as liabilities at their fair value at the date of issuance and re-measured the warrants at each balance
sheet date. Changes in the fair value were recognized as a gain (loss) on warrant liability in our Condensed Consolidated Statement
of Operations. These warrants were amended in November 2014 to remove the price-based anti-dilution provision, among other things.
Accordingly, the warrants are no longer recorded as a liability.
Recent Accounting Pronouncements
In July 2015, the Financial Accounting
Standards Board issued Accounting Standards Update (“ASU”) 2015-11 Simplifying the Measurement of Inventory. Under
ASU 2015-11, inventory is to be measured at the lower of cost and net realizable value (“NRV”). NRV is the estimated
selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
The updated guidance is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods therein.
Early adoption is permitted. Management is in the process of assessing the impact of ASU 2015-11 on the Company’s consolidated
financial statements.
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers. The updated standard
will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the
retrospective or cumulative effect transition method. In August 2015, the FASB issued an update, ASU No. 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of this update by one year.
The updated standard becomes effective for the Company in the first quarter of fiscal year 2018, but allows the Company to adopt
the standard one year earlier if it so chooses. The Company has not yet selected a transition method and is currently evaluating
the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures, and is therefore
unable to determine the impact on the Company's financial statements.
3. The Merger, Offering and Other
Related Transactions
Holdings was incorporated in the State
of Nevada on January 30, 2012 as a distributor of medical supplies and equipment to municipalities, hospitals, pharmacies, care
centers, and clinics in Chile. At the time of the Merger, Holdings was a “shell company” as defined in Rule 12b-2
of the Exchange Act. Holdings’ fiscal year end was previously March 31 but was changed to December 31 in connection with
the Merger.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
On January 15, 2014, Holdings and a
newly formed wholly-owned subsidiary of Holdings, Ekso Acquisition Corp, (“Acquisition Sub”) entered into an
Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Ekso Bionics. Under the Merger
Agreement, Acquisition Sub merged with and into Ekso Bionics, with Ekso Bionics remaining as the surviving corporation and
with the stockholders of Ekso Bionics exchanging all of their common stock, convertible preferred stock and warrants to
purchase preferred stock issued and outstanding immediately prior to the closing of the Merger into an aggregate of
42,615,556 shares of Holdings’ common stock and warrants to purchase 621,361 shares of common stock. In addition,
options to purchase 4,989,111 shares of common stock of Ekso Bionics were converted into options to purchase 7,602,408 shares
of common stock of Holdings. These shares are in addition to 5,280,368 outstanding shares of Holdings common stock held by
certain pre-Merger stockholders of Holdings, consisting of 4,500,600 shares held by such stockholders prior to the Merger and
an additional 779,768 shares issued to such stockholders pursuant to a provision in the Merger Agreement requiring us to
issue a number of shares of common stock such that the aggregate ownership of the pre-Merger stockholders (not including any
shares of common stock purchased by them in the private placement offering described below) was approximately 6.8% of the
outstanding common stock of the Company following the Merger and private placement offering.
Upon the closing of the Merger,
under the terms of a split-off agreement and a general release agreement, Holdings transferred all of its pre-Merger
operating assets and liabilities to a newly formed wholly-owned special-purpose subsidiary (“Split-Off
Subsidiary”), and transferred all of the outstanding shares of capital stock of Split-Off Subsidiary to two individuals
who were the pre-Merger majority stockholders of Holdings and Holdings’ former officers and sole director (the
“Split-Off”), in consideration of and in exchange for (a) the surrender and cancellation of all shares of
Holdings’ common stock held by such individuals (which were cancelled and resumed the status of authorized but unissued
shares of our common stock) and (b) certain representations, covenants and indemnities.
Accounting for Reverse Merger
Ekso Bionics, as the accounting acquirer,
recorded the Merger as the issuance of stock for the net monetary assets of Holdings accompanied by a recapitalization. This accounting
was identical to that resulting from a reverse merger, except that no goodwill or intangible assets were recorded. In filings
with the SEC subsequent to the Merger, including this filing, the historical financial statements of Holdings before the Merger
have been replaced with the historical financial statements of Ekso Bionics before the Merger. The Merger was intended to be treated
as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.
Retroactive Conversion of all Share
and Per Share Amounts
In accordance with reverse merger
accounting guidance, amounts for Ekso Bionics’ historical (pre-merger) common stock, preferred stock and warrants and
options to purchase common stock, including share and per share amounts, have been retroactively adjusted using their
respective exchange ratios in these financial statements unless otherwise disclosed. The conversion ratios were 1.5238,
1.6290, 1.9548 and 1.9548 for one with respect to shares of Ekso Bionics’ common stock, Series A preferred stock,
Series A-2 preferred stock and Series B preferred stock, respectively.
Repayment of 2013 Bridge Note
In November 2013, in anticipation of the
Merger and related private placement offering, Ekso Bionics completed a private placement to accredited investors of $5,000 of
its senior subordinated secured convertible notes (“2013 Bridge Notes”). Upon the closing of the Merger and the private
placement offering described below, the $5,000 in outstanding principal and $83 of accrued interest of the 2013 Bridge Notes automatically
converted into 5,000,000 Units (as defined below), and investors in the 2013 Bridge Notes received warrants to purchase 2,500,000
shares of common stock at an exercise price of $1.00 per share for a term of three years (“Bridge Warrants”). The
Bridge Warrants had weighted average anti-dilution protection, subject to customary exceptions.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
Private Placement Offering
Concurrently with the closing of the
Merger and in contemplation of the Merger, the Company held a closing of a private placement offering (“PPO”) in
which it sold 20,580,000 units (“Units”) at a purchase price of $1.00 per Unit, with each Unit consisting of one
share of common stock plus a warrant to purchase an additional share of common stock of the Company at $2.00 per share with a
five year term (“PPO Warrants”). Included in the initial Unit sales were 5,000,000 Units that were issued upon
conversion of the 2013 Bridge Notes mentioned above. Between January 29, 2014 and February 6, 2014, the Company issued an
additional 9,720,000 Units in subsequent closings of the PPO. As a result of issuing a total of 30,300,000 Units, (a) the
Company received gross proceeds of $25,300, (b) $5,083 of debt and accrued interest attributable to the 2013 Bridge Notes was
settled with the issuance of 5,000,000 Units, (c) $2,553 of our Senior Note Payable (as defined below) was paid in full, and
(d) we incurred offering costs of $3,338.
Investors in the Units have weighted average
anti-dilution protection with respect to the shares of common stock included in the Units if within 24 months after the final
closing of the PPO the Company issues additional shares of common stock or common stock equivalents (subject to customary exceptions,
including but not limited to issuances of awards under the Company’s 2014 Equity Incentive Plan) for consideration per share
less than $1.00. The PPO warrants also had weighted average anti-dilution protection, subject to customary exceptions.
In connection with the conversion of the
2013 Bridge Notes and the PPO, the placement agent for the PPO and its sub-agents were paid an aggregate commission of $3,030
and were issued warrants to purchase an aggregate of 3,030,000 shares of common stock with a term of five years and an exercise
price of $1.00 per share (“Agent Warrants”). The Agent Warrants had weighted average anti-dilution protection, subject
to customary exceptions.
Offer to Amend and Exercise
In November 2014,
the Company consummated an offer to amend and exercise its PPO Warrants at a temporarily reduced exercise price (“Offer
to Amend and Exercise”). Pursuant to the Offer to Amend and Exercise, an aggregate of 22,755,500 PPO Warrants were exercised
by their holders and were also amended to reduce the exercise price from $2.00 to $1.00 per share of common stock, and to restrict
the ability of the holder of shares issuable upon exercise of the amended warrants to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any of such shares without the prior written consent of the Company for
a period of 50 days after the expiration date of the Offer to Amend and Exercise.
In connection with the Offer to Amend
and Exercise, the holders of a majority of the then outstanding PPO Warrants, Bridge Warrants, and Agent Warrants approved an
amendment to remove the price-based anti-dilution provisions in those warrants (see Note 9, Warrants).
2014 Equity Incentive Plan
Before the Merger, the Board of Directors
adopted, and the stockholders approved, the 2014 Equity Incentive Plan (“2014 Plan”), which provides for the issuance
of incentive awards constituting up to 14,410,000 shares of common stock to officers, key employees, consultants and directors.
In connection with the Merger, options to purchase Ekso Bionics common stock outstanding immediately prior to the Merger were
converted into options to purchase an aggregate of 7,602,408 shares of Holdings issued under the 2014 Plan.
On the closing of the Merger, the Board
granted to officers and directors options to purchase an aggregate of 2,300,000 shares of common stock under the 2014 Plan.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
Subsequent to the Merger, on June 10, 2015, the Board submitted
to the stockholders and the stockholders approved and ratified an amendment of the 2014 Plan to increase the maximum number of
shares of common stock that may be issued under the 2014 Plan by 11,590,000 shares to 26,000,000 shares.
4. Deferred Revenues
In connection with our medical
device sales and research services, we often receive cash payments before our earnings process is complete. In these
instances, we record the payments as customer deposits until a device is shipped to the customer, or as customer advances in
the case of research services until the earnings process is achieved. In both cases, the cash received is recorded as a
component of deferred revenue.
Revenue from our Ekso medical device sales
is deferred and recognized over the maintenance period. Accordingly, at the time of shipment to the customer the amount billed
is recorded as deferred revenue. Also, at the time of shipment, the related inventory is reclassified to deferred cost of revenue
where it is amortized to cost of revenue over the same period as the related revenue.
Deferred revenues and deferred cost of revenues consist of
the following:
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
Customer deposits and advances | |
$ | 90 | | |
$ | 105 | |
Deferred Ekso medical device revenues | |
| 5,917 | | |
| 5,327 | |
Deferred service and leasing revenues | |
| 2,231 | | |
| 1,875 | |
Deferred revenues | |
| 8,238 | | |
| 7,307 | |
Less current portion | |
| (3,839 | ) | |
| (3,412 | ) |
Deferred revenues, non-current | |
$ | 4,399 | | |
$ | 3,895 | |
Deferred Ekso medical device costs | |
$ | 4,344 | | |
$ | 3,568 | |
Less current portion | |
| (1,920 | ) | |
| (1,551 | ) |
Deferred cost of revenue, non-current | |
$ | 2,424 | | |
$ | 2,017 | |
5. Accrued Liabilities
Accrued liabilities consist of the following:
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
Salaries, benefits and related expenses | |
$ | 1,687 | | |
$ | 1,847 | |
Professional fees | |
| 298 | | |
| 184 | |
Warranty expense | |
| - | | |
| 126 | |
Taxes | |
| 46 | | |
| 46 | |
Royalties | |
| - | | |
| 50 | |
Travel | |
| 15 | | |
| 76 | |
All other | |
| 144 | | |
| 49 | |
Total | |
$ | 2,190 | | |
$ | 2,378 | |
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
6. Capital Lease Obligation
In 2012, the Company entered into a
note agreement in connection with the lease for its Richmond, California facility. The note, for an aggregate principal of
$200, with an interest rate of 7%, minimum monthly payments of $4, and a May 31, 2017 maturity, was used to fund leasehold
improvements. This note is classified as a component of Capital lease obligation on the balance sheet. Commencing 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 matures on July 1, 2020. The total capital lease
obligation, including a nominal capital lease for equipment, was $169 and $13 as of September 30, 2015, and December 31,
2014, respectively.
Future obligations as of September 30,
2015 are as follows:
| |
Leasehold | | |
| | |
| |
| |
Improvement | | |
Capital | | |
| |
| |
Note | | |
Lease | | |
Total | |
2015 (remainder) | |
$ | 12 | | |
$ | 10 | | |
$ | 22 | |
2016 | |
| 48 | | |
| 42 | | |
| 90 | |
2017 | |
| 20 | | |
| 40 | | |
| 60 | |
2018 | |
| - | | |
| 37 | | |
| 37 | |
2019 | |
| - | | |
| 37 | | |
| 37 | |
Thereafter | |
| - | | |
| 22 | | |
| 22 | |
Total minimum payments | |
| 80 | | |
| 188 | | |
| 268 | |
Less interest | |
| (5 | ) | |
| (19 | ) | |
| (24 | ) |
Present value minimum payments | |
| 75 | | |
| 169 | | |
| 244 | |
Less current portion | |
| (44 | ) | |
| (35 | ) | |
| (79 | ) |
Long-term portion of capital lease obligation | |
$ | 31 | | |
$ | 134 | | |
$ | 165 | |
7. Operating Lease
On November 29, 2011, the Company entered
into an operating lease agreement for its headquarters and manufacturing facility in Richmond, California. The lease term commenced
in March 2012 and expires in May 2017. The lease provides the Company with one option to renew for five additional years.
Future minimum operating lease payments
are as follows as of September 30, 2015:
2015 (remainder of year) | |
$ | 94 | |
2016 | |
| 375 | |
2017 | |
| 157 | |
Total | |
$ | 626 | |
Rent expense under the Company’s
operating leases was $86 and $86 for the three month periods ended September 30, 2015, and 2014, respectively and was $258 and
$257 for the nine month periods ended September 30, 2015, and 2014, respectively.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
8. Capitalization and Equity Structure
The Company’s authorized capital
stock at September 30, 2015, consisted of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. At September
30, 2015, 102,371,591 shares of common stock were issued and outstanding, and no shares of preferred stock were issued and outstanding.
9. Warrants
As discussed in Note 3, The
Merger, Offering and Other Related Transactions, the Company issued during the Merger and PPO, warrants to purchase a total
of 36,055,000 shares of common stock of which 30,300,000 were at an exercise price of $2.00 per share, and the balance at $1.00
per share. These warrants contained “weighted average” anti-dilution protection in the event that we issued common
stock or securities convertible into or exercisable for shares of common stock at a price lower than the subject warrant’s
exercise price, subject to certain customary exceptions, as well as customary provisions for adjustment in the event of stock
splits, subdivision or combination, mergers, etc.
Due to the market price of the Company’s
common stock price exceeding the exercise price of the then outstanding warrants, the Company recorded a non-cash benefit of $15,773
and a non-cash charge of $1,206 for the three and nine months ended September 30, 2014, respectively.
The assumptions utilized in re-valuing
the warrants were as follows as of September 30, 2014:
Dividend yield | |
| – | |
Risk-free interest rate | |
| 0.72- 1.53 | % |
Share price at final valuation | |
| 0.84 | |
Expected term (in years) | |
| 2.30-4.30 | |
Volatility | |
| 65-70 | % |
Periodic rate | |
| 0.17- 0.66 | % |
Periods in the model | |
| 10 | |
These warrants were amended in November
2014 to remove the price-based anti-dilution provision, among other things. Accordingly, the warrants are no longer recorded as
a liability.
Warrant activity for the nine month period
ended September 30, 2015 is as follows:
| |
Balance | | |
Exercise | | |
Term | | |
| | |
Balance | |
Name | |
December 31, 2014 | | |
Price | | |
(Years) | | |
Exercised | | |
September 30, 2015 | |
Placement agent warrants | |
| 3,030,000 | | |
$ | 1.00 | | |
| 5 | | |
| (48,700 | ) | |
| 2,981,300 | |
Bridge warrants | |
| 2,600,000 | | |
$ | 1.00 | | |
| 3 | | |
| | | |
| 2,600,000 | |
PPO warrants | |
| 7,544,500 | | |
$ | 2.00 | | |
| 5 | | |
| | | |
| 7,544,500 | |
Pre-Merger/PPO warrants* | |
| 621,361 | | |
$ | 1.38 | | |
| various | | |
| (2,720 | ) | |
| 618,641 | |
Total | |
| 13,795,861 | | |
| | | |
| | | |
| (51,420 | ) | |
| 13,744,441 | |
* The Pre-Merger/PPO warrants all expire on May 20, 2023.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
10. Stock-based Compensation Plans
and Awards
In January 2014, and prior to the Merger,
the Board of Directors and a majority of the stockholders adopted the 2014 Plan that allowed for the issuance of 14,410,000 shares
of common stock. Options previously issued under the Ekso Bionics 2007 Equity Incentive Plan were converted into options to purchase
an aggregate of 7,602,408 shares of the Company’s common stock under the 2014 Plan. On June 10, 2015, the 2014 Plan was
amended and restated by the stockholders to increase the maximum number of shares by 11,590,000 shares to an aggregate of 26,00,000
shares of common stock available for issuance under the 2014 Plan. As of September 30, 2015, there were 11,801,901 shares available
for future awards.
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.
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 our common stock on the date the option
is granted. Incentive stock options granted to employees who, on the date of grant, own stock representing more than 10% of the
voting power of all of our classes of stock, are granted at an exercise price of not less than 110% of the fair market value of
our common stock. The maximum term of incentive stock options granted to employees who, on the date of grant, own stock possessing
more than 10% of the voting power of all our classes of stock, may not exceed five years. The maximum term of an incentive stock
option granted to any other participant 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. 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 may 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 from time to time grant options to purchase common stock to non-employees for advisory and consulting
services. Pursuant to ASC 505-50, Equity-Based Payments to Non-Employees, we periodically re-measure the fair value of
these stock options using the Black-Scholes option pricing model and recognize expense ratably over the vesting period of each
stock option award. Upon exercise of an option, it is the Company’s policy to issue new shares of common stock.
The following table summarizes information
about the Company’s stock options outstanding at September 30, 2015, and activity during the nine-month period then ended:
| |
| | |
| | |
Weighted- | | |
| |
| |
| | |
| | |
Average | | |
| |
| |
Stock | | |
Weighted- | | |
Remaining | | |
Aggregate | |
| |
Awards | | |
Average | | |
Contractual | | |
Intrinsic | |
| |
Outstanding | | |
Exercise Price | | |
Life (Years) | | |
Value | |
Balance as of December 31, 2014 | |
| 10,791,081 | | |
$ | 0.79 | | |
| | | |
| | |
Options granted | |
| 3,332,800 | | |
$ | 1.40 | | |
| | | |
| | |
Options exercised | |
| (1,067,806 | ) | |
$ | 0.52 | | |
| | | |
| | |
Options forfeited | |
| (128,888 | ) | |
$ | 0.76 | | |
| | | |
| | |
Options cancelled | |
| (104,813 | ) | |
$ | 0.50 | | |
| | | |
| | |
Balance as of September 30, 2015 | |
| 12,822,374 | | |
$ | 0.98 | | |
| 7.84 | | |
$ | 4,154 | |
Vested and expected to vest at September 30, 2015 | |
| 11,850,532 | | |
$ | 0.95 | | |
| 7.73 | | |
$ | 4,098 | |
Exercisable as of September 30, 2015 | |
| 6,103,793 | | |
$ | 0.66 | | |
| 6.51 | | |
$ | 3,498 | |
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
Of the 1,067,806 shares exercised, 846,576
were issued on a withhold to cover basis, with 368,993 shares withheld from option holders to cover the exercise price of awards
being exercised.
As of September 30, 2015, total unrecognized
compensation cost related to unvested stock options was $4,998. This amount is expected to be recognized as stock-based compensation
expense in the Company’s Condensed Consolidated Statements of Operations over the remaining weighted average vesting period
of 2.93 years.
The per-share fair value of each stock
option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014(1) | | |
2015 | | |
2014 | |
| |
| | | |
| | | |
| | | |
| | |
Dividend yield | |
| - | | |
| - | | |
| - | | |
| - | |
Risk-free interest rate | |
| 1.68 | % | |
| - | | |
| 1.41-
2.50 | % | |
| 1.74-
2.61 | % |
Expected term (in years) | |
| 6.08 | | |
| - | | |
| 6.08-10 | | |
| 6.08-10 | |
Volatility | |
| 75.27 | % | |
| - | | |
| 73.21-75.27 | % | |
| 65.66-66.46 | % |
(1) No options were granted for the three months
ended September 30, 2014.
Total stock-based compensation expense
related to options granted to employees and non-employees was included in the Condensed Consolidated Statements of Operations
as follows:
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Sales and marketing | |
$ | 147 | | |
$ | 9 | | |
$ | 440 | | |
$ | 260 | |
Research and development | |
| 133 | | |
| 36 | | |
| 295 | | |
| 125 | |
General and administrative | |
| 187 | | |
| 72 | | |
| 524 | | |
| 425 | |
| |
$ | 467 | | |
$ | 117 | | |
$ | 1,259 | | |
$ | 810 | |
11. Income Taxes
There were no material changes to the
unrecognized tax benefits in the nine months ended September 30, 2015, and the Company does not expect significant changes to
unrecognized tax benefits through the end of the fiscal year. Because of the Company’s history of tax losses, all years
remain open to tax audit.
12. Commitments and Contingencies
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 condensed consolidated financial statements.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
Material Contracts
The Company enters into various license,
research collaboration and development agreements which provide for payments to the Company for government grants, fees, cost
reimbursements typically with a markup, technology transfer and license fees, and royalty payments on sales.
The Company has two license agreements
to maintain exclusive rights to certain patents. Under these license agreements, the Company is required to pay 1% of net sales
of products sold to entities other than the U.S. government. In the event of a sublicense, the Company 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, starting in 2015 and for future years, of $50 per year.
U.S. Food and Drug Administration Clearance
The Company’s Ekso GT robotic exoskeleton
has been marketed in the United States as a Class I 510(k) exempt Powered Exercise Equipment device since February 2012. On June
26, 2014, the U.S. Food and Drug Administration (“FDA”) announced the creation of a new product classification for
Powered Exoskeleton devices. On October 21, 2014, the FDA published the summary for the new Powered Exoskeleton classification
and designated it as being Class II, which requires the clearance of a 510(k) notice.
On October 21, 2014, concurrent with the
FDA’s publication of the reclassification of Powered Exoskeleton devices, the FDA issued the Company an “Untitled Letter”
which informed the Company in writing of the agency’s belief that this new product classification applied to our Ekso GT
device. We filed a 510(k) notice for the Ekso robotic exoskeleton on December 24, 2014, which was accepted by the FDA for substantive
review on July 29, 2015. The Company intends to continue marketing the Ekso robotic exoskeleton under its current Class I registration
and listing with its current indications for use until 510(k) clearance is either granted or denied by the FDA or the Company is
otherwise notified by the FDA to cease such activities. The Company believes that in situations where the class of a product has
been elevated by the FDA, manufacturers are normally granted enforcement discretion by the FDA and given ample time to seek clearance
at the new class level. Nonetheless, the FDA may not agree with our decision to continue marketing the device until a 510(k) notice
is cleared. From the time of our submission to the date of this report, the FDA has not indicated or notified the Company that
it disagrees with this decision. If the FDA disagrees with our decision, we may be required to cease marketing or to recall the
products until we obtain clearance or approval, and we may be subject to regulatory fines or penalties.
From
September 2, 2015 to September 11, 2015, the Division of Bioresearch Monitoring Center for Devices and Radiological Health of the
FDA conducted an inspection of the Company’s facility in Richmond, California. At the conclusion of the inspection, the FDA
issued a Form FDA 483 with four observations. These observations are inspectional and do not represent a final FDA determination
of non-compliance. The observations pertain to informed consent requirements, reporting of adverse results and records maintenance.
On October 2, 2015, the Company responded to the FDA. That response describes the corrective and preventive actions that we have
implemented and continue to implement to address the FDA’s concerns.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per share
amounts)
(unaudited)
13. Net Income (Loss) Per Share
The following table sets forth the computation of basic and
diluted net income (loss) per share:
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net profit (loss) | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (5,185 | ) | |
$ | 12,024 | | |
$ | (14,945 | ) | |
$ | (13,614 | ) |
Adjustment for change in fair value of warrant liability | |
| - | | |
| (15,773 | ) | |
| - | | |
| - | |
Diluted | |
$ | (5,185 | ) | |
$ | (3,749 | ) | |
$ | (14,945 | ) | |
$ | (13,614 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average common shares outstanding used in computing basic and diluted net income (loss) per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 102,239,868
| | |
| 78,513,144
| | |
| 102,043,392
| | |
| 74,943,169
| |
Dilutive effect of warrants | |
| - | | |
| 750,653
| | |
| - | | |
| - | |
Dilutive effect of stock options | |
| - | | |
| 4,072,574
| | |
| - | | |
| - | |
Diluted | |
| 102,239,868
| | |
| 83,336,371
| | |
| 102,043,392
| | |
| 74,943,169
| |
Net income (loss) per share, basic | |
$ | (0.05 | ) | |
$ | 0.15 | | |
$ | (0.15 | ) | |
$ | (0.18 | ) |
Net income (loss) per share, diluted | |
$ | (0.05 | ) | |
$ | (0.04 | ) | |
$ | (0.15 | ) | |
$ | (0.18 | ) |
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:
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Options to purchase common stock | |
| 12,822,374 | | |
| - | | |
| 12,822,374 | | |
| 3,724,529 | |
Warrants | |
| 13,744,441 | | |
| - | | |
| 13,744,441 | | |
| 8,407,084 | |
Total common stock equivalents | |
| 26,566,815 | | |
| - | | |
| 26,566,815 | | |
| 12,131,613 | |
14. Segment Disclosures
The Company has two reportable segments,
Engineering Services and Medical Devices. Engineering Services generates revenue principally from collaborative research and development
service arrangements, technology license agreements, and government grants where the Company uses its robotics domain knowledge
in bionic exoskeletons to bid on and procure contracts and grants from entities such as such as the National Science Foundation
and the Defense Advanced Research Projects Agency. The Medical Devices segment designs, engineers, and manufactures exoskeletons
for applications in the medical and military markets.
Ekso Bionics Holdings, Inc.
Notes to Unaudited Condensed Consolidated
Financial Statements
(in thousands, except share and per
share amounts)
(unaudited)
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, and one segment provides a service and the other manufactures and distributes a unique product. The Company
does not consider net assets as a segment measure and, accordingly, assets are not allocated.
Segment reporting information is as follows:
| |
Engineering | | |
Medical | | |
| |
| |
Services | | |
Devices | | |
Total | |
Three months ended September 30, 2015 | |
| | | |
| | | |
| | |
Revenue | |
$ | 1,820 | | |
$ | 1,095 | | |
$ | 2,915 | |
Cost of revenue | |
| 1,352 | | |
| 1,095 | | |
| 2,447 | |
Gross profit | |
$ | 468 | | |
$ | 0 | | |
$ | 468 | |
| |
| | | |
| | | |
| | |
Three months ended September 30, 2014 | |
| | | |
| | | |
| | |
Revenue | |
$ | 799 | | |
| 789 | | |
| 1,588 | |
Cost of revenue | |
| 530 | | |
| 578 | | |
| 1,108 | |
Gross profit | |
$ | 269 | | |
| 211 | | |
| 480 | |
| |
| | | |
| | | |
| | |
Nine months ended September 30, 2015 | |
| | | |
| | | |
| | |
Revenue | |
$ | 3,590 | | |
$ | 3,128 | | |
$ | 6,718 | |
Cost of revenue | |
| 2,482 | | |
| 2,863 | | |
| 5,345 | |
Gross profit | |
$ | 1,108 | | |
$ | 265 | | |
$ | 1,373 | |
| |
| | | |
| | | |
| | |
Nine months ended September 30, 2014 | |
| | | |
| | | |
| | |
Revenue | |
$ | 1,841 | | |
$ | 2,006 | | |
$ | 3,847 | |
Cost of revenue | |
| 1,432 | | |
| 1,410 | | |
| 2,842 | |
Gross profit | |
$ | 409 | | |
$ | 596 | | |
$ | 1,005 | |
Geographic information for revenue based
on location of customer is as follows:
| |
Three months ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
North America | |
$ | 2,379 | | |
$ | 1,271 | | |
$ | 5,272 | | |
$ | 3,102 | |
Europe, Middle East, Asia | |
| 536 | | |
| 317 | | |
| 1,446 | | |
| 745 | |
| |
$ | 2,915 | | |
$ | 1,588 | | |
$ | 6,718 | | |
$ | 3,847 | |
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion
of our financial condition and results of operation in conjunction with the condensed consolidated financial statements and the
notes thereto included elsewhere in this Quarterly Report on Form 10-Q and on our Annual Report on Form 10-K for the year ended
December 31, 2014.
This Quarterly Report on Form 10-Q contains
forward-looking statements. These forward-looking statements include all statements other
than statements of historical facts contained or incorporated by reference in this prospectus, including statements regarding (i)
the plans and objectives of management for future operations, including plans or objectives relating to the design, development
and commercialization of human exoskeletons, (ii) a projection of income (including income/loss), earnings (including earnings/loss)
per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance,
including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations
included pursuant to the rules and regulations of the SEC, (iv) our beliefs regarding the potential for commercial opportunity
for exoskeleton technology in general and our exoskeleton products in particular, (v) our beliefs regarding potential clinical
and other health benefits of our medical devices, and (vi) the assumptions underlying or relating to any statement described in
points (i), (ii), (iii), (iv) or (v) above. The words “may,” “might,”
“would,” “should,” “could,” “project,” “estimate,” “pro-forma,”
“predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,”
“plan,” “help,” “believe,” “continue,” “intend,” “expect,”
“future,” and similar expressions (including the negative of any of the foregoing) are intended to identify forward-looking
statements.
The following factors, among others, including
those described in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended
December 31, 2014, could cause our future results to differ materially from those expressed in the forward-looking information:
| · | our ability to obtain or maintain regulatory approval to market the Company’s medical devices; |
| · | the anticipated timing, cost and progress of the development and commercialization of new products or services, and improvements
to our existing products, and related impacts on our profitability and cash position; |
| · | our ability to effectively market and sell our products and expand our business, both in unit sales and product diversification; |
| · | our ability to achieve broad customer adoption of our products and services; |
| · | our ability to complete clinical trials on a timely basis and that completed clinical trials will be sufficient to support
commercialization of our products; |
| · | existing or increased competition; |
| · | rapid changes in technological solutions available to our markets; |
| · | volatility with our business, including long and variable sales cycles, which could have a negative impact on our results of
operations for any given quarter; |
| · | our ability to obtain or maintain patent protection for the Company’s intellectual property; |
| · | the scope, validity and enforceability of our and third party intellectual property rights; |
| · | significant government regulation of medical devices and the healthcare industry; |
| · | our customers’ ability to get third party reimbursement for our products and services associated with them; |
| · | our failure to implement our business plan or strategies; |
| · | our ability to retain or attract key employees; |
| · | our ability to obtain adequate financing to fund operations and to develop or enhance our technology; |
| · | stock volatility or illiquidity; |
| · | our ability to maintain adequate internal controls over financial reporting; and |
| · | overall economic and market conditions. |
Although
we believe that the assumptions underlying the forward-looking statements and forward-looking information contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore such statements and information included in this Quarterly
Report on Form 10-Q may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements
and forward-looking information included herein, the inclusion of such statements and information should not be regarded as a representation
by us or any other person that the results or conditions described in such statements and information or that our objectives and
plans will be achieved. Such forward-looking statements speak only as of the date of this report. Except as required by
law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such
statements.
Overview
The Company designs, develops and sells
wearable bionic devices or “human exoskeletons” that have applications in healthcare, industrial, military, and consumer
markets. Our exoskeletons systems are strapped over the user’s clothing and augment human strength, endurance and mobility.
These robotic or mechanical systems serve multiple markets and can be used both by able-bodied users as well as by persons with
physical disabilities. We or our partners have sold, rented or leased devices that (a) enable individuals with neurological conditions
affecting gait (e.g., stroke or spinal cord injury) to rehabilitate and to walk again; (b) allow industrial workers to perform
heavy duty work for extended periods; and (c) permit soldiers to carry heavy loads for long distances while mitigating lower back,
knee, and ankle injuries.
In our efforts to develop exoskeleton technology,
we have established an extensive intellectual property portfolio that includes, in the United States alone and as of September
30, 2015, 12 patents that have been granted, 24 patent applications that are currently pending (meaning a complete non-provisional
patent application has been filed and additional action is pending), and ten pending provisional patent applications that have
been filed (meaning we have filed a short form application to establish an early filing date in anticipation of subsequently filing
a non-provisional application). All but three of the patents and pending patent applications are either solely owned by us or exclusively
licensed to us. Many of these patents and applications are also being pursued internationally as appropriate for their respective
subject matter. Our patent portfolio includes claims directed to both devices and methods to provide optimal coverage of technologies
relevant to our products, including medical exoskeletons, commercial exoskeletons, actuators, and strength-enhancing exoskeletons.
The earliest priority date reaches back to 2003, and new applications continue to be filed.
Our long-term goal is to have one million
people stand and walk in an Ekso exoskeleton by February 2022. Our first step to achieving that goal was for us to focus on selling
our medical exoskeletons to rehabilitation centers and hospitals in the United States and Europe. We began that journey with the
February 2012 sale of the Ekso, an exoskeleton for complete spinal cord injuries (“SCI”). We have since expanded that
effort with the July 2013 launch of our Variable Assist software and the December 2013 release of our next generation Ekso hardware
platform, Ekso GT. The Variable Assist software enables users with any amount of lower extremity strength to contribute their own
power for either leg to achieve self-initiated walking. The Ekso GT builds on the experience of the Ekso and incorporates the Variable
Assist, allowing us to expand our sales and marketing efforts beyond SCI-focused centers to centers supporting stroke and related
neurological patients.
The Ekso GT is a wearable bionic suit that
provides individuals with stroke, spinal cord injuries and other lower-extremity paralysis or weakness the ability to stand and
walk over ground with a full weight-bearing, reciprocal gait using a cane, crutches or a walker under the supervision of a physical
therapist. Walking is achieved by the shifting of the user’s body to activate sensors in the device that initiate steps.
Battery-powered motors drive the legs, replacing deficient neuromuscular function. First-time users can expect to walk with aid
from the device the first time they put on the Ekso exoskeleton (after passing an assessment), while an experienced user can transfer
to or from their wheelchair and don or remove the Ekso in less than five minutes.
Most recently, we further upgraded our
technology with the announcement in June 2015 of SmartAssist and the ability of the Ekso GT to integrate functional electrical
stimulation (“FES”). Our SmartAssist software is the next generation software after Variable Assist, both improving
on its core functionality and adding new features. The SmartAssist software will allow therapists to utilize Ekso GT across a broader
continuum of care so that patients can use the device earlier for the pre ambulatory exercises and later during therapy to assist
only as needed for each leg. The addition to the Ekso GT of FES integration offers the potential to combine the benefits of these
two leading technologies into a single product offering.
Ekso Labs, our engineering services division,
is focused on technology development and future applications. It is an exoskeleton laboratory that integrates emerging technologies
into new product applications and expands on it for our partners. To date, the majority of our Ekso Labs revenue has been in the
form of research grants from government organizations including United States Special Operations Command, the Defense Advanced
Research Projects Agency, the National Institute of Health and the National Science Foundation. These projects fund research and
development on new exoskeleton systems, providing the Company with new intellectual property and exoskeleton designs that have
the potential for commercialization.
In addition to furthering exoskeleton technology
for our current medical applications, Ekso Labs’ research and development work may have potential use in future, able-bodied
models of the Ekso human exoskeleton. Many of the research projects funded by grants are focused on researching future medical
applications and capabilities not yet ready for commercial development. Other projects, often funded by commercial partners or
the U.S. military, focus on able-bodied human exoskeleton applications.
We are currently developing industrial
exoskeleton models that are intended to increase an individual’s workload, endurance and productivity. For example, we recently
announced our intention to commercialize a passive, unpowered exoskeleton that would increase the productivity and quality of work
of industrial workers and potentially reduce workmen’s compensation claims and insurance costs of industrial employers.
We are currently assessing interest of potential customers by targeting major North American and European construction companies
and major tool manufacturers, and we have prototypes being tested in the field.
As we continue to develop, commercialize
and market our various exoskeleton technologies, we may seek to establish new strategic relationships with third parties.
Potential relationships may be in the form of technology or product development agreements, sales or distribution agreements, or
license agreements.
Regulatory Update
The U.S. government regulates the medical
device industry through various agencies, including but not limited to, the U.S. Food and Drug Administration (“FDA”),
which administers the federal Food, Drug and Cosmetic Act. The FDA classifies medical devices into one of three classes (Class
I, II or III) based on the degree of risk the FDA determines to be associated with a device and the extent of control deemed necessary
to ensure the device’s safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk
are placed in Class I or II. Class I devices are deemed to pose the least risk and are subject only to general controls applicable
to all devices, such as requirements for device labeling, premarket notification, and adherence to the FDA’s current good
manufacturing practice requirements, as reflected in its Quality System Regulation (“QSR”). Class II devices are intermediate
risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific
guidance documents, special labeling requirements, patient registries or post-market surveillance. Class III devices are those
for which insufficient information exists to assure safety and effectiveness solely through general or special controls, and include
life-sustaining, life-supporting, or implantable devices, and devices not “substantially equivalent” to a device that
is already legally marketed. Most Class I devices, and some Class II devices are exempted by regulation from the 510(k) clearance
requirement and can be marketed without prior authorization from FDA. Class I and Class II devices that have not been so exempted
are eligible for marketing through the 510(k) clearance pathway. By contrast, devices placed in Class III generally require premarket
approval, or PMA, prior to commercial marketing.
To obtain 510(k) clearance for a medical
device, an applicant must submit a premarket notification application to the FDA demonstrating that the device is “substantially
equivalent” to a predicate device, which is typically a legally marketed Class II device in the United States. A device is
substantially equivalent to a predicate device if it has the same intended use and (i) the same technological characteristics,
or (ii) has different technological characteristics and the information submitted demonstrates that the device is as safe and effective
as a legally marketed device and does not raise different questions of safety or effectiveness.
While we believe that the Company’s
Ekso GT robotic exoskeleton has been appropriately marketed as a Class I 510(k) exempt Powered Exercise Equipment device since
February 2012, on June 26, 2014, the FDA announced the creation of a new product classification for Powered Exoskeleton devices.
On October 21, 2014, the FDA published the summary for the new Powered Exoskeleton classification and designated it as being Class
II, which requires the clearance of a 510(k) notice.
On October 21, 2014, concurrent with the
FDA’s publication of the reclassification of Powered Exoskeleton devices, the FDA issued the Company an “Untitled Letter”
which informed the Company in writing of the agency’s belief that this new product classification applied to our Ekso GT
device. We filed a 510(k) notice for the Ekso robotic exoskeleton on December 24, 2014, which was accepted by the FDA for substantive
review on July 29, 2015.
The Company’s requested indications
for use, as specified in the Company’s 510(k) notice, provides that the Ekso robotic exoskeleton is intended to enable individuals
with weakness or paralysis of the lower limbs, such as from spinal cord injury (SCI), stroke and other conditions causing lower
extremity weakness, to perform ambulatory functions such as gait training in rehabilitation institutions. Insofar as the proposed
indications for use includes individuals with lower extremity weakness other than SCI, the Company’s requested indications
for use is more expansive than the indications for use of the predicate device referenced in the Company’s 510(k) notice.
By letter dated September 11, 2015, the
FDA has requested that the Company provide additional information regarding its clinical data and other information in support
of the Company’s requested 510(k) clearance for the Ekso robotic exoskeleton. The Company is working diligently to provide
the information requested by the FDA, including information pertaining to the Company’s requested indications for use and
the Company’s clinical data supporting the requested indications for use, information pertaining to mechanical and electromagnetic
compatibility testing, electrical safety and software, information pertaining to medical device reports related to adverse events
involving the Ekso robotic exoskeleton, and other requested information.
The Company has up to 180 days from September
11, 2015 to respond to the FDA’s requests for additional information. Once the Company has submitted the additional information,
the FDA will review that response for substantive adequacy and either: (1) determine that the response is adequate to support a
determination of substantial equivalence; or (2) request further additional information, generally in the form of an interactive
review. The FDA will generally seek to make a final decision on a 510(k) submission within 90 days from the date the 510(k) notice
was first accepted for substantive review, excluding any time that the application was placed on hold due to an additional information
request from the FDA. There is no guarantee that the FDA will ultimately determine that the information provided by the company
is adequate to support a determination of substantial equivalence, and could seek the Company’s voluntary withdrawal of the
510(k) notice or issue a not substantially equivalent (NSE) letter should there be deficiencies in the response.
The Company intends to request a submission
issue meeting with the FDA to be held in advance of the Company’s formal submission of its response to the FDA’s request
for additional information to discuss the Company’s response strategy and seek the FDA’s input on that strategy. Following
that submission issue meeting and assuming a positive outcome to that meeting, the Company intends to submit a response to the
FDA that addresses all aspects of the FDA’s requests for additional information in a manner intended to support a clearance
decision by the FDA. Although the FDA has not expressly requested that the Company conduct additional clinical studies or trials
in support of its request for clearance, the Company may conclude after further dialogue with the FDA and the Company’s advisors
that additional clinical data is required in order to support the Company’s requested indications for use. In such an event,
the Company may be required to conduct additional clinical testing in support of its requested clearance. Alternatively, the Company
also may determine to pursue more narrow indications for use until such time as the Company is able to generate additional data
to support a broader indications for use.
Although there is the possibility that
the Company could receive FDA clearance in 2015, we believe that it is much more likely that the Company will receive a determination
from the FDA sometime in 2016. However, if the Company were to decide, or be required, to conduct additional clinical testing in
support of its request for clearance, the Company may determine to withdraw its pending 510(k) notification and resubmit a 510(k)
notification following completion of the additional clinical testing, which could further delay receipt of clearance.
The Company intends to continue marketing
the Ekso robotic exoskeleton under its current Class I registration and listing with its current indications for use until 510(k)
clearance is either granted or denied by the FDA or the Company is otherwise notified by the FDA to cease such activities. The
Company believes that in situations where the class of a product has been elevated by the FDA, manufacturers are normally granted
enforcement discretion by the FDA and given ample time to seek clearance at the new class level. Nonetheless, the FDA may not agree
with our decision to continue marketing the device until a 510(k) notice is cleared. If the FDA disagrees with our decision, we
may be required to cease marketing or to recall our products in the U.S. until we obtain clearance or approval, and we may be subject
to regulatory fines or penalties.
From
September 2, 2015 to September 11, 2015, the Division of Bioresearch Monitoring Center for Devices and Radiological Health of the
FDA conducted an inspection of the Company’s facility in Richmond, California. At the conclusion of the inspection, the FDA
issued a Form FDA 483 with observations pertaining to informed consent requirements, reporting of events to FDA, and records maintenance.
These observations are inspectional and do not represent a final FDA determination of non-compliance. On October 2, 2015, the Company
responded to the FDA. That response describes the corrective and preventive actions that we have implemented and continue to implement
to address the FDA’s observations. Due to the nature of the findings, the Company does not expect that the Form FDA
483 will result in a warning letter or other action that could interfere with the Company’s operations.
Since July 1, 2015, we have been informed of seven events with
respect to our Ekso GT devices that are reportable pursuant to the FDA’s medical device reporting, or MDR, regulations. There
were no reported patient injuries related to any of these events, and in each case we have filed or will file the required adverse
event reports with the FDA. We have voluntarily implemented a field correction and accelerated maintenance schedule based on field
usage to address these issues. In addition, we have analyzed the root causes of these issues and have adjusted our manufacturing
process and will source new components accordingly.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial
condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates,
judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure
of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe
are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be
critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time
the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that
are reasonably likely to occur, could materially impact the condensed consolidated financial statements. We believe that our critical
accounting policies reflect the more significant estimates and assumptions used in the preparation of the condensed consolidated
financial statements.
For the nine month period ended September
30, 2015, there have been no material changes to our critical accounting policies and estimates as compared to those described
in our Annual Report on Form 10-K for the year ended December 31, 2014, under the caption “Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies, Estimates and Judgments.”
Results of Operations
The following table present our results of operations for the
periods indicated (in thousands):
| |
Three months ended September 30, |
| |
2015 | | |
2014 | | |
Change | | |
% Change |
Revenue: | |
| | |
| | |
| | |
|
Medical devices | |
$ | 1,095 | | |
$ | 789 | | |
$ | 306 | | |
39% |
Engineering services | |
| 1,820 | | |
| 799 | | |
| 1,021 | | |
128% |
Total revenue | |
| 2,915 | | |
| 1,588 | | |
| 1,327 | | |
84% |
| |
| | | |
| | | |
| | | |
|
Cost of revenue: | |
| | | |
| | | |
| | | |
|
Medical devices | |
| 1,095 | | |
| 578 | | |
| 517 | | |
89% |
Engineering services | |
| 1,352 | | |
| 530 | | |
| 822 | | |
155% |
Total cost of revenue | |
| 2,447 | | |
| 1,108 | | |
| 1,339 | | |
121% |
| |
| | | |
| | | |
| | | |
|
Gross profit | |
| 468 | | |
| 480 | | |
| (12 | ) | |
(3%) |
| |
| | | |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
|
Sales and marketing | |
| 2,380 | | |
| 1,642 | | |
| 738 | | |
45% |
Research and development | |
| 1,713 | | |
| 1,096 | | |
| 617 | | |
56% |
General and administrative | |
| 1,556 | | |
| 1,474 | | |
| 82 | | |
6% |
Total operating expenses | |
| 5,649 | | |
| 4,212 | | |
| 1,437 | | |
34% |
| |
| | | |
| | | |
| | | |
|
Loss from operations | |
| (5,181 | ) | |
| (3,732 | ) | |
| (1,449 | ) | |
39% |
| |
| | | |
| | | |
| | | |
|
Other income (expense): | |
| | | |
| | | |
| | | |
|
Interest expense | |
| (4 | ) | |
| (3 | ) | |
| (1 | ) | |
33% |
Gain on warrant liability | |
| - | | |
| 15,773 | | |
| (15,773 | ) | |
(100%) |
Interest income | |
| 2 | | |
| 1 | | |
| 1 | | |
100% |
Other expense, net | |
| (2 | ) | |
| (15 | ) | |
| 13 | | |
(87%) |
Total other income (expense), net | |
| (4 | ) | |
| 15,756 | | |
| (15,760 | ) | |
(100%) |
| |
| | | |
| | | |
| | | |
|
Net income (loss) | |
$ | (5,185 | ) | |
$ | 12,024 | | |
$ | (17,209 | ) | |
(143%) |
The following table present our results of operations for the
periods indicated (in thousands):
| |
Nine months ended September 30, |
| |
2015 | | |
2014 | | |
Change | | |
% Change |
Revenue: | |
| | |
| | |
| | |
|
Medical devices | |
$ | 3,128 | | |
$ | 2,006 | | |
$ | 1,122 | | |
56% |
Engineering services | |
| 3,590 | | |
| 1,841 | | |
| 1,749 | | |
95% |
Total revenue | |
| 6,718 | | |
| 3,847 | | |
| 2,871 | | |
75% |
| |
| | | |
| | | |
| | | |
|
Cost of revenue: | |
| | | |
| | | |
| | | |
|
Medical devices | |
| 2,863 | | |
| 1,410 | | |
| 1,453 | | |
103% |
Engineering services | |
| 2,482 | | |
| 1,432 | | |
| 1,050 | | |
73% |
Total cost of revenue | |
| 5,345 | | |
| 2,842 | | |
| 2,503 | | |
88% |
| |
| | | |
| | | |
| | | |
|
Gross profit | |
| 1,373 | | |
| 1,005 | | |
| 368 | | |
37% |
| |
| | | |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
|
Sales and marketing | |
| 6,754 | | |
| 5,022 | | |
| 1,732 | | |
34% |
Research and development | |
| 4,438 | | |
| 2,564 | | |
| 1,874 | | |
73% |
General and administrative | |
| 5,090 | | |
| 5,354 | | |
| (264 | ) | |
(5%) |
Total operating expenses | |
| 16,282 | | |
| 12,940 | | |
| 3,342 | | |
26% |
| |
| | | |
| | | |
| | | |
|
Loss from operations | |
| (14,909 | ) | |
| (11,935 | ) | |
| (2,974 | ) | |
25% |
| |
| | | |
| | | |
| | | |
|
Other income (expense): | |
| | | |
| | | |
| | | |
|
Interest expense | |
| (10 | ) | |
| (433 | ) | |
| 423 | | |
(98%) |
Loss on warrant liability | |
| - | | |
| (1,206 | ) | |
| 1,206 | | |
(100%) |
Interest income | |
| 9 | | |
| 4 | | |
| 5 | | |
125% |
Other expense, net | |
| (35 | ) | |
| (44 | ) | |
| 9 | | |
(20%) |
Total other income (expense), net | |
| (36 | ) | |
| (1,679 | ) | |
| 1,643 | | |
(98%) |
| |
| | | |
| | | |
| | | |
|
Net loss | |
$ | (14,945 | ) | |
$ | (13,614 | ) | |
$ | (1,331 | ) | |
10% |
Revenue
For the three months ended September 30, 2015
Medical device revenue increased $0.3 million,
or 39%, as compared to the three months ended September 30, 2014, primarily due to the near doubling of the number of medical device
sales being recognized to revenue during the three months ended September 30, 2015, as compared to the same period in the prior
year. Engineering services revenue increased by $1.0 million, or 128%, as compared to the three months ended September 30, 2014,
primarily due to an overall increase in Ekso Labs projects period over period.
For the nine months ended September 30, 2015
Medical device revenue increased $1.1 million,
or 56%, as compared to the nine months ended September 30, 2014, primarily due to the more than doubling of the number of medical
device sales being recognized to revenue during the nine months ended September 30, 2015, as compared to the same period in the
prior year. Engineering services revenue increased by $1.7 million, or 95%, as compared to the nine months ended September 30,
2014, primarily due to an overall increase in Ekso Labs projects period over period.
Gross Profit
For the three months and nine months ended September 30,
2015
Overall our gross profit remained relatively
unchanged as compared to the three months ended September 30, 2014, and increased $0.4 million or 37%, as compared to the nine
months ended September 30, 2014.
Our medical device segment has experienced
increased service related expenses related to an accelerated maintenance program, field corrections and the implementation of technological
improvements developed subsequent to many of our units being placed into service. We recognize service expense on an as-incurred
basis, which exceeded the increase in associated revenue during the same periods. The Company continues to evaluate this level
of increased cost associated with fleet enhancements and expects increased costs for the next quarter or two.
The decrease in gross profit and margins
for our medical devices was more than offset by improvements in gross profit and margins for our engineering services business
during the three and nine months ended September 30, 2015. The improvement in this segment was driven primarily by a better balance
of higher margin projects compared to the prior year.
Operating Expenses
For the three months ended September 30, 2015
Sales and marketing expenses increased
$0.7 million, or 45%, as compared to the three months ended September 30, 2014, due to an increase in sales and marketing personnel
and related resources, the greatest of which is an increase of $0.3 million in compensation related costs.
Research and development expenses increased
$0.6 million, or 56%, as compared to the three months ended September 30, 2014, primarily due to an increase of $0.5 million in
compensation related expenses as a result of increases in headcount and $0.1 million in development of our industrial business.
General and administrative expenses were
relatively unchanged, as compared to the three months ended September 30, 2014.
For the nine months ended September 30, 2015
Sales and marketing expenses increased $1.7 million, or 34%,
as compared to the nine months ended September 30, 2014, due to an increase in sales and marketing personnel, and regulatory and
public relations expenses, the greatest of which is an increase of $0.7 million in compensation related costs.
Research and development expenses increased
$1.9 million, or 73%, as compared to the nine months ended September 30, 2014, primarily due to an increase of $1.5 million in
compensation related expenses as a result of increases in headcount to support our increase in government projects
and $0.3 million in expenses related to the development of our industrial business.
General and administrative expenses were
relatively unchanged as compared to the nine months ended September 30, 2014.
Other Income (Expense), Net
For the three months ended September
30, 2015
Total other income (expenses), net decreased
$15.8 million, as compared to the three months ended September 30, 2014. The decrease was primarily attributable to a non-cash
benefit in the 2014 period relating to outstanding warrants, with no comparable amount in the 2015 period. Due to the price-based
anti-dilution provision in the warrants, the Company was required to classify the warrants as a liability and to adjust their fair
value to market at each measurement period. In November 2014, the holders of a majority of the warrants approved an amendment
to remove the price-based anti-dilution provisions in the warrants. As a result, the warrants are no longer recorded as a liability
effective November 2014 because they met the criteria for equity treatment.
For the nine months ended September
30, 2015
Total other expense, for the nine months
ended September 30, 2015, reflected a decrease of $1.6 million as compared to the
nine months period ended September 30, 2014, primarily due to a $1.2 million
non-cash charge in the 2014 period relating to outstanding warrants, with no comparable amount in the 2015 period. The $1.2 million
of prior year warrant liability charges was attributable to warrants issued in the private placement offering in the first quarter
of 2014. Interest expense decreased by $0.4 million during the nine months ended September 30, 2015, as compared to the prior year
periods due to the repayment of outstanding debt in January 2014.
Financial Condition, Liquidity and Capital Resources
Since the Company’s inception, we
have devoted substantially all of our efforts toward the development of exoskeletons for the medical, military and industrial markets,
toward the commercialization of our medical exoskeletons to rehabilitation centers and toward raising capital. Accordingly,
we are considered to be in the early commercialization stage. We have financed our operations primarily through the issuance and
sale of equity securities for cash consideration and convertible and promissory notes, as well as from government research grant
awards and strategic collaboration payments.
Cash and Working Capital
Since the Company’s inception, we
have incurred net losses and negative cash flows from operations. We incurred net losses of $14.9 million for the nine months ended
September 30, 2015, and $33.7 million for the year ended December 31, 2014. In addition, our operating activities used $13.1 million
for the nine months ended September 30, 2015, and $15.0 million for the year ended December 31, 2014.
Liquidity and Capital Resources
Largely as a result of significant research
and development activities related to the development of 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.
The Company has also recorded significant non-cash losses associated with revaluation of certain securities, which have also contributed
significantly to our accumulated deficits. As of September 30, 2015, we had an accumulated deficit of $86.7 million.
The Company’s cash as of September
30, 2015, was $11.2 million compared to $25.2 million at December 31, 2014. During the nine months ended September 30, 2015, the
Company used $13.1 million of cash in operations compared to $12.3 million for the nine months ended September 30, 2014.
Based upon our current nine-month average
monthly net use of cash of approximately $1.6 million and assuming increases in current revenue and gross profit, offset by incremental
net use of cash for increased sales and marketing and research and development and a potential increase in rental activity for
our medical device business, the Company believes it has sufficient resources to meet its financial obligations into the second
quarter of 2016.
Our actual capital requirements may vary
significantly and will depend on many factors. For example, we plan to continue to increase our investments (i) in our clinical,
sales and marketing initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) in our
research, development and commercialization activities with respect to an Ekso robotic exoskeleton for home use, and/or (iii) in
the development and commercialization of able-bodied exoskeletons for industrial use. Consequently, the Company will require significant
additional financing in the future, which we intend to raise through corporate collaborations, public or private equity offerings,
debt financings or warrant solicitations within the next two to four quarters. Sales of additional equity securities by us 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,
we may be required to reduce our 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). The Company held no cash equivalents for any of the periods presented.
| |
Nine months ended | |
| |
September 30, | |
| |
2015 | | |
2014 | |
Net cash used in operating activities | |
$ | (13,082 | ) | |
$ | (12,296 | ) |
Net cash used in investing activities | |
| (962 | ) | |
| (813 | ) |
Net cash provided by financing activities | |
| 92 | | |
| 19,480 | |
Net increase (decrease) in cash | |
| (13,952 | ) | |
| 6,371 | |
Cash at beginning of the period | |
| 25,190 | | |
| 805 | |
Cash at end of the period | |
$ | 11,238 | | |
$ | 7,176 | |
Net Cash Used in Operating Activities
Net cash used in operations for the nine
months ended September 30, 2015 was driven by our $14.9 million operating loss, offset by $1.9 million in non-cash charges related
to depreciation and amortization, and stock compensation expense.
Net cash used in operations for the nine
months ended September 30, 2014 was driven by our $13.6 million operating loss and was partially offset by non-cash charges totaling
$2.7 million which primarily related to the loss on warrant liability of $1.2 million, $0.8 million in stock-based compensation
expense, and $0.5 million of depreciation and amortization expense. Net cash used in operating activities was also negatively impacted
by increases of $1.4 million in accounts receivable, and $1.5 million in deferred cost of revenue, along with a positive impact
of an increase of $2.3 million in customer advances and deferred revenue related to an increase in medical devices shipped year
over year.
Net Cash Used in Investing Activities
Net cash used in investing activities of
$1.0 million and $0.8 million for the nine months ended September 30, 2015 and 2014, respectively, was primarily to acquire property
and equipment, including expansion of our company-owned fleet of Ekso units used for demonstrations, loaners to current customers,
and as rental units.
Net Cash Provided by Financing Activities
The net cash provided by financing activities
for the nine months ended September 30, 2015, of $0.1 million was primarily from the exercise of common stock warrants and options,
offset by nominal note payments.
The net cash provided by financing activities
for the nine months ended September 30, 2014, of $19.5 million included a net $22.0 million from the issuance of common stock related
to the PPO. The proceeds from the PPO were in turn used in part to retire $2.5 million of outstanding debt.
Contractual Obligations and Commitments
The following table summarizes our outstanding
contractual obligations as of September 30, 2015, and the effect those obligations are expected to have on our liquidity and cash
flows in future periods (in thousands):
| |
Payments Due By Period: | |
| |
| | |
Less Than | | |
| | |
| | |
After | |
| |
Total | | |
1 Year | | |
1-3 Years | | |
4-5 Years | | |
5 Years | |
Facility Operating Lease | |
$ | 626 | | |
$ | 94 | | |
$ | 532 | | |
$ | - | | |
$ | - | |
Leasehold Improvement Loans | |
| 80 | | |
| 12 | | |
| 68 | | |
| - | | |
| - | |
Capital lease | |
| 188 | | |
| 10 | | |
| 119 | | |
| 59 | | |
| - | |
Total | |
$ | 894 | | |
$ | 116 | | |
$ | 719 | | |
$ | 59 | | |
$ | - | |
In addition to the table above, which reflects
only payment obligations, fixed and determinable, the Company has two license agreements to maintain exclusive rights to certain
patents. Under these license agreements, the Company is required to pay 1% of net sales of products sold to entities other than
the U.S. government. In the event of a sublicense, the Company 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,
starting in 2015 and for future years, of $50 per year.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk
We are exposed to market risks in the ordinary course of our
business, including inflation risks.
We do not believe that inflation has had
a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant
inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure
to do so could harm our business, financial condition and results of operations.
In addition, we conduct business in foreign
countries and have an United Kingdom based subsidiary. Accordingly, we are exposed to exchange rate risk. See Item 7A. Quantitative
and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2014.
Item 4. Controls and Procedures
Disclosure Controls and Procedures.
Our management, with the participation
of our principal executive officer and principal financial officer, conducted an evaluation of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, (“Exchange Act”)) as of September
30, 2015, which are intended to provide reasonable assurance that information required to be disclosed in reports filed by us under
the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated
to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
We previously reported a material weakness
in internal control over financial reporting related to the timing of the implementation of certain policies, processes and procedures
that we have put in place since the Merger, which was described in Item 9A of our Annual Report on Form 10-K for the year
ended December 31, 2014. As of December 31, 2014, we considered the material weakness that resulted from the previously identified
deficiencies in the aggregate to have been remediated. The Company has implemented policies, practices and procedures to remediate
the previously identified material weakness and has begun the process of testing the controls it has put in place. However, many
of these have not been operational for a sufficient period of time to be properly tested for their effectiveness over time, and
therefore the Company cannot determine our controls to be effective in the aggregate. As a result, our management, with the participation
of our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were
not effective as of September 30, 2015.
It should be noted that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment and makes assumptions about the likelihood of future events. There can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Management
believes that the financial statements included in this Report fairly present in all material respects our financial condition,
results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial
Reporting
Except as noted in the preceding paragraphs,
there were no changes in our internal control over financial reporting that occurred during the three months ended September
30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the nine months ended September
30, 2015, we were not a party to any material legal proceedings.
Item 1A. Risk Factors
An investment
in our securities involves a risk of loss. You should carefully consider the information set forth in this Quarterly Report on
Form 10-Q and in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December
31, 2014. Except as set forth in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Regulatory Update section of this Quarterly
Report on Form 10-Q there have been no material changes to the Risk Factors described in our Annual Report on Form 10-K for the
year ended December 31, 2014.
Item 6. Exhibits
Exhibit
Number |
|
Description |
31.1* |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
|
|
|
32.1* |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2* |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101* |
|
The following financial statements from the Ekso Bionics Holdings, Inc. Quarterly Report on Form 10Q for the quarter ended September 30, 2015, formatted in Extensible Business Reporting Language (“XBRL”): |
|
· |
unaudited condensed consolidated balance sheets; |
|
· |
unaudited condensed consolidated statement of operations; |
|
· |
unaudited condensed consolidated statement of cash flows; |
|
· |
notes to unaudited condensed consolidated financial statements; |
* Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Ekso Bionics Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
EKSO BIONICS HOLDINGS, INC. |
|
|
Date: November 9, 2015 |
By: |
/s/ Nathan Harding |
|
|
Nathan Harding |
|
|
Chief Executive Officer |
|
|
|
Date: November 9, 2015 |
By: |
/s/ Max Scheder-Bieschin |
|
|
Max Scheder-Bieschin |
|
|
Chief Financial Officer |
|
|
|
|
|
(Duly Authorized Officer and Principal Financial and Accounting
Officer) |
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