See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
See Accompanying Notes to the Unaudited
Condensed Consolidated Financial Statements
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
1. Organization
Description of Business
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. Ekso Bionics, Inc. was incorporated in January
2005 in the State of Delaware.
As used in these notes to the consolidated
financial statements, the term “the Company” refers to Ekso Bionics Holdings, Inc. formerly known as PN Med Group,
Inc., and its wholly-owned subsidiaries, including Ekso Bionics, Inc. 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. Unless otherwise indicated, all dollar and share amounts included in these notes to the financial
statements are in thousands. All common stock share and per share amounts have been retroactively adjusted to reflect the one-for-seven
reverse stock split completed on May 4, 2016. See
Note 15, Subsequent Event
.
The Company designs, develops, and sells
exoskeletons that augment human strength, endurance and mobility. The Company’s exoskeletons have applications in health
care, industrial, military, and consumer markets.
Liquidity
Largely as a result of significant research
and development activities related to the development of the Company’s advanced technology and commercialization of this
technology into its medical device business, the Company has incurred significant operating losses and negative cash flows from
operations since inception. The Company has also recognized significant non-cash losses associated with the revaluation of certain
securities, which have also contributed significantly to its accumulated deficit. As of March 31, 2016, the Company had an accumulated
deficit of $95,042.
Cash on hand at March 31, 2016 was
$12,314, compared to $19,552 at December 31, 2015. For the three months ended March 31, 2016, the Company used $6,789 of cash
in operations which included non-routine investments of working capital, the majority of which the Company expects will be
reversed during the year, compared to $3,828 for the three months ended March 31, 2015.
Based upon the Company’s current
twelve-month average net use of cash of approximately $1,800 per month and assuming increases in current revenue, offset by an
incremental increase in expenses related to increased sales and marketing and research and development, and a potential increase
in rental activity from its medical device business, the Company believes it has sufficient resources to meet its financial obligations
into the first quarter of 2017.
The Company’s actual capital requirements
may vary significantly and will depend on many factors. For example, the Company plans to continue to increase its investments
(i) in its clinical, sales and marketing initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation
market, (ii) in its research, development and commercialization activities with respect to an Ekso robotic exoskeleton for 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 the Company intends to raise by the end of the year through
corporate collaborations, public or private equity offerings, debt financings or warrant solicitations. 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, the Company may be required to reduce its discretionary overhead costs substantially,
including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
2. Basis of Presentation and Summary
of Significant Accounting Policies and Estimates
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, 2015, 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, 2015. Unless otherwise indicated,
all dollar and share amounts (excluding per share 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 March 31, 2016, 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, future
warranty costs, maintenance and planned improvement costs associated with medical device units sold prior to 2016, 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 March 31, 2016 and December 31, 2015.
Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S. dollar.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
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.
As of March 31, 2016, we had one customer
with accounts receivable balances totaling 10% or more of our total accounts receivable (16%), compared with one customer as of
December 31, 2015 (10%).
In the three months ended March 31, 2016,
we had four customers with billed revenue of 10% or more of total billed revenue (27%, 20%, 11% and 10%), compared with two customers
in the three months ended March 31, 2015 (17% and 16%).
Medical Device Revenue and Cost of Revenue
Recognition
The Company builds medical device robotic
exoskeletons for sale and capitalizes into inventory materials, direct and indirect labor and overhead in connection with manufacture
and assembly of these units.
When the Company brought its first version
medical device to market in 2012, the Company could not be certain as to the costs it would incur to support, maintain, service
and upgrade these early stage devices. Primarily for this reason, prior to January 1, 2016, the sale of a device, associated software,
initial training, and extended support and maintenance were deemed as a single unit of accounting due to the uncertainty of the
Company’s follow-up maintenance and upgrade expenses, which were forecast to extend over three years. Accordingly, the revenue
from the sales of the device and associated cost of revenue were deferred at the time of shipment. Upon completion of training,
such amounts were recognized as revenue and cost of revenue over a three year period on a straight line basis, while all service
expenses, whether or not covered by the Company’s original warranty, extended warranty contracts, or neither, were recognized
as incurred.
Effective January 1, 2016, the
Company determined it had established (i) separate individual pricing for training, extended warranty coverage, and
out-of-contract service or repairs, (ii) sufficient historical evidence of customer buying patterns for extended warranty and
maintenance coverage, and (iii) a basis for estimating and recording warranty and service costs, to allow the Company to
bifurcate its sales transactions into two separate units of accounting: (1) the device, associated software, original
manufacturer warranty and training if required, and (2) extended support and maintenance. The Company has therefore now begun
to recognize revenue related to its sales transactions on a multiple element approach in which revenue is recognized upon
the delivery of the separate elements to the customer. Revenue relating to the undelivered elements is deferred using the
relative selling price method, which allocates revenue to each element using the estimated selling prices for
the deliverables when vendor-specific objective evidence or third-party evidence is not available. For sales beginning
January 1, 2016, revenue and associated cost of revenue of medical devices will be recognized when delivered, or training has
been completed, if required. Revenue for extended maintenance and support agreements will be recognized on a straight
line basis over the contractual term of the agreement, which typically ranges from one to four years. Consistent with this
change, the Company recognized medical device revenue previously deferred at December 31, 2015 of $6,517 (which represents
the fair value of the already delivered devices) and associated cost of revenue of $4,159, resulting in additional gross
profit, reduction in net loss from operations, and reduction of net loss applicable to common stockholders of $2,358.
In addition, the Company recorded $212 for warranty expenses and a one-time charge of $911 for a planned
preventative maintenance and upgrade program associated with the devices it had sold prior to 2016.
Recent Accounting Pronouncements
In March 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09
Compensation – Stock
Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting
. ASU 2016-09 simplifies several aspects of
the accounting for share-based payment award transactions for public companies, including: (1) income
tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash
flows. The amendments in this update are effective for annual periods beginning after December 15, 2016. Management is in the process
of assessing the impact of ASU 2016-09 on the Company’s consolidated financial statements.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
In May 2014, the 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. In April 2016, the
FASB issued a further update, ASU 2016-10
Revenue from Contracts with Customers (Topic 606) Identifying Performance
Obligations and Licensing
. ASU 2016-10 clarifies the contractual provisions that explicitly or implicitly, require an
entity to transfer control of additional goods or services to a customer should be distinguished from contractual provisions
that explicitly or implicitly, define the attributes of a single promised license. 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. Fair Value Measurements
Fair value is defined as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques
used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels
of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which
are the following:
|
•
|
Level 1
—Quoted
prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for
the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
•
|
Level 2
—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
•
|
Level 3
—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
The Company’s fair value hierarchies for its financial
assets and liabilities which require fair value measurement are as follows:
|
|
|
|
|
Quoted Prices in
Active Markets
For Identical
Items
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
(6,210
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(6,210
|
)
|
Contingent consideration liability
|
|
$
|
(768
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
(9,195
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(9,195
|
)
|
Contingent consideration liability
|
|
$
|
(768
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(768
|
)
|
The following table sets forth a summary of the changes in the
fair value of the Company’s Level 3 financial liabilities for the three month period ended March 31, 2016, which were measured
at fair value on a recurring basis:
|
|
Warrant
Liability
|
|
|
Contingent
Consideration
Liability
|
|
Balance at December 31, 2015
|
|
$
|
(9,195
|
)
|
|
$
|
(768
|
)
|
Gain on decrease in fair value of warrants issued with 2015 financing
|
|
|
2,985
|
|
|
|
-
|
|
Balance at March 31, 2016
|
|
$
|
(6,210
|
)
|
|
|
(768
|
)
|
Refer to
Note 9. Capitalization and Equity Structure –
Warrants
for additional information regarding the valuation of warrants.
4. Deferred Revenues
In connection with our medical device sales
and engineering 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 engineering
services until the earnings process is achieved. In both cases, the cash received is recorded as a component of deferred revenue.
As described in
Note 2. Summary
of Significant Accounting Policies and Estimates, Medical Device Revenue and Cost of Revenue Recognition
prior to January
1, 2016, the sale of a device, associated software, initial training, and extended support and maintenance were deemed as a
single unit of accounting due to the uncertainty of the Company’s follow-up maintenance and upgrade expenses, which
were forecast to extend over three years. Accordingly, the revenue from the sales of the device and associated cost of
revenue were deferred at the time of shipment. Upon completion of training, such amounts were recognized as revenue and cost
of revenue over a three year period on a straight line basis, while all service expenses, whether or not covered by the
Company’s original warranty, extended warranty contracts, or neither, were recognized as incurred. For sales
beginning January 1, 2016, revenue and associated cost of revenue of medical devices are being recognized when delivered, or
training has been completed, if required. Revenue for extended maintenance and support agreements will be recognized on
a straight line basis over the contractual term of the agreement, which typically ranges from one to four years. Consistent with
this change, the Company recognized medical device revenue previously deferred at December 31, 2015 of $6,517 (which
represents the fair value of the already delivered devices) and associated cost of revenue of $4,159.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
Deferred revenues and deferred cost of revenues consist of the
following:
|
|
March 31
2016
|
|
|
December 31,
2015
|
|
Customer deposits and advances
|
|
$
|
47
|
|
|
$
|
48
|
|
Deferred medical device revenues
|
|
|
551
|
|
|
|
7,388
|
|
Deferred rental income
|
|
|
64
|
|
|
|
71
|
|
Deferred extended maintenance and support
|
|
|
1,326
|
|
|
|
1,066
|
|
Total deferred revenues
|
|
|
1,988
|
|
|
|
8,573
|
|
Less current portion
|
|
|
(1,222
|
)
|
|
|
(3,960
|
)
|
Deferred revenues, non-current
|
|
|
766
|
|
|
|
4,613
|
|
|
|
|
|
|
|
|
|
|
Deferred medical device unit costs
|
|
$
|
255
|
|
|
$
|
4,590
|
|
Less current portion
|
|
|
(255
|
)
|
|
|
(2,088
|
)
|
Deferred cost of revenue, non-current
|
|
$
|
-
|
|
|
$
|
2,502
|
|
5. Intangible Assets
On December 1, 2015, the Company acquired
substantially all of the assets of Equipois, LLC, a New Hampshire limited liability company, for an initial payment of $1,071,
payable in shares of the Company’s common stock, and recorded $768 of estimated contingent consideration. The transaction
resulted in the Company recording $1,610 of intangible assets with an estimated life of three years. The following table reflects
the amortization of the purchased intangible assets as of March 31, 2016:
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Developed technology
|
|
$
|
1,160
|
|
|
$
|
(129
|
)
|
|
$
|
1,031
|
|
Customer relationships
|
|
|
70
|
|
|
|
(8
|
)
|
|
|
62
|
|
Customer trade name
|
|
|
380
|
|
|
|
(42
|
)
|
|
|
338
|
|
|
|
$
|
1,610
|
|
|
$
|
(179
|
)
|
|
$
|
1,431
|
|
Estimated future amortization for the remainder of 2016 is $404,
and $537 and $490 for the years 2017 and 2018, respectively.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
6. Accrued Liabilities
Accrued liabilities consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Salaries, benefits and related expenses
|
|
$
|
1,563
|
|
|
$
|
1,464
|
|
Maintenance
|
|
|
911
|
|
|
|
-
|
|
Warranty expense
|
|
|
216
|
|
|
|
-
|
|
Professional fees
|
|
|
158
|
|
|
|
257
|
|
Other
|
|
|
80
|
|
|
|
164
|
|
Total
|
|
$
|
2,928
|
|
|
$
|
1,885
|
|
7. Maintenance and Warranty
Sales of devices generally include an initial
warranty for parts and services for one year in the U.S. and two years in Europe, the Middle East and Africa. During the quarter
ended March 31, 2016, the Company determined it had sufficient historical experience of warranty costs to estimate future costs
for devices sold. As a result, and beginning during the quarter ended March 31, 2016, a liability for the estimated cost of product
warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and
expected material and labor costs to provide warranty services. From time to time, specific additional warranty accruals may be
made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary,
a portion of the liability may be reversed in future periods. Warranty costs are reflected in the condensed consolidated statement
of operations as a component of costs of revenue.
In addition, for the quarter ended
March 31, 2016, the Company recorded a one-time charge of $911 for a preventative maintenance and improvement program for
devices sold prior to 2016 to bring the devices to second generation GT-level of functionality.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
A reconciliation of the changes in the
maintenance and warranty liabilities for the periods ended March 31, 2016 and 2015 are as follows:
|
|
2016
|
|
|
|
Maintenance
|
|
|
Warranty
|
|
|
Total
|
|
Balance at December 31, 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Additions for estimated future expense
|
|
|
911
|
|
|
|
255
|
|
|
|
1,166
|
|
Incurred costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at March 31, 2016
|
|
$
|
911
|
|
|
$
|
255
|
|
|
$
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
|
911
|
|
|
|
216
|
|
|
|
1,127
|
|
Long-term portion
|
|
|
-
|
|
|
|
39
|
|
|
|
39
|
|
Total
|
|
$
|
911
|
|
|
$
|
255
|
|
|
$
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
Maintenance
|
|
|
Warranty
|
|
|
Total
|
|
Balance at December 31, 2014
|
|
$
|
-
|
|
|
$
|
126
|
|
|
$
|
126
|
|
Additions for estimated future expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Incurred costs
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
(17
|
)
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at March 31, 2015
|
|
$
|
-
|
|
|
$
|
109
|
|
|
$
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
|
-
|
|
|
|
109
|
|
|
|
109
|
|
Long-term portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
109
|
|
|
$
|
109
|
|
The long-term portion of warranty accrual
is included as a component of Other long-term liabilities in the condensed consolidated balance sheets.
8. Lease and Note Obligations
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. The Company
also leases nominal office space in Germany.
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-current and other non-current liabilities in the condensed consolidated
balance sheet.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
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. This capital lease is classified as a component of capital
lease obligation-current and other non-current liabilities in the condensed consolidated balance sheet.
The Company estimates future minimum payments
as of March 31, 2016 to be the following:
Period
|
|
Operating
Lease
|
|
|
Note
Payable
|
|
|
Capital
Lease
|
|
|
Total
Minimum
Payments
|
|
2016 - remainder
|
|
$
|
350
|
|
|
$
|
36
|
|
|
$
|
32
|
|
|
$
|
68
|
|
2017
|
|
|
248
|
|
|
|
20
|
|
|
|
40
|
|
|
|
60
|
|
2018
|
|
|
91
|
|
|
|
-
|
|
|
|
37
|
|
|
|
37
|
|
2019
|
|
|
91
|
|
|
|
-
|
|
|
|
37
|
|
|
|
37
|
|
2020
|
|
|
89
|
|
|
|
-
|
|
|
|
22
|
|
|
|
22
|
|
Total minimum payments
|
|
$
|
869
|
|
|
|
56
|
|
|
|
168
|
|
|
|
224
|
|
Less interest
|
|
|
|
|
|
|
(2
|
)
|
|
|
(16
|
)
|
|
|
(18
|
)
|
Present value minimum payments
|
|
|
|
|
|
|
54
|
|
|
|
152
|
|
|
|
206
|
|
less current portion
|
|
|
|
|
|
|
(45
|
)
|
|
|
(36
|
)
|
|
|
(81
|
)
|
Long-term portion
|
|
|
|
|
|
$
|
9
|
|
|
$
|
116
|
|
|
$
|
125
|
|
Rent expense under the Company’s
operating leases was $96 and $86 for the three month periods ended March 31, 2016 and 2015, respectively.
9. Capitalization and Equity Structure
Refer to
Note 15, Subsequent Event
, for a discussion
of the Company’s May 4, 2016 reverse stock split.
Summary:
The Company’s authorized capital
stock at March 31, 2016 consisted of 71,429 shares of common stock and 10,000 shares of preferred stock. At March 31, 2016, 15,604
shares of common stock were issued and outstanding and 9 shares of preferred stock were issued and outstanding.
Convertible Preferred Stock:
In December 2015, the Company issued
15
shares of Series A Convertible Preferred Stock (the “Preferred Shares”) and warrants to purchase 2,122
shares of the Company’s common stock for which the Company received gross proceeds of $15,000.
Each Preferred Share
is convertible into Common Stock at any time at the election of the investor. At December 31, 2015, 13 Preferred Shares remained
outstanding. During the three-months ended March 31, 2016, 4 Preferred Shares were converted to 566 shares of common stock at the
Series A Conversion Price of $7.07 per share. The conversion resulted in the amortization of the discount related to the issuance
of warrants in the December 2015 transaction of $3,124, which has been accounted for as a preferred deemed dividend in the condensed
consolidated statement of operations. As of March 31, 2016, $7,221 of non-cash warrant discounts remain unamortized, and will be
recognized as preferred deemed dividend on the conversion of outstanding shares of convertible preferred stock.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
Warrants
Warrant share activity for the three-month
period ended March 31, 2016 is as follows:
Source
|
|
Exercise
Price
|
|
|
Term
(Years)
|
|
At December 31,
2015
|
|
|
At March 31,
2016
|
|
2015 Series A Preferred warrants
|
|
$
|
8.75
|
|
|
5
|
|
|
2,122
|
|
|
|
2,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 PPO and Merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement agent warrants
|
|
$
|
7.00
|
|
|
5
|
|
|
426
|
|
|
|
426
|
|
Bridge warrants
|
|
$
|
7.00
|
|
|
3
|
|
|
371
|
|
|
|
371
|
|
PPO warrants
|
|
$
|
14.00
|
|
|
5
|
|
|
1,078
|
|
|
|
1,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre 2014 warrants
|
|
$
|
9.66
|
|
|
various
|
|
|
88
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
4,085
|
|
|
|
4,085
|
|
In connection with the December 2015 issuance
of convertible preferred stock mentioned above, the Company issued warrants to purchase up to an aggregate of 2,122 shares of
common stock. The warrants have a 5 year term and an exercise price of $8.75 per share. The Company estimates the fair value of
the warrant liability by using a Binomial Lattice Option Pricing Model. The warrant liability is measured at fair value using
certain estimated inputs, which are classified within Level 3 of the valuation hierarchy. The following assumptions were used
in the Binomial Lattice Option Pricing Model to measure the fair value of the embedded anti-dilution feature in the warrants as
of March 31, 2016:
Current share price
|
|
$
|
5.25
|
|
Conversion price
|
|
$
|
8.75
|
|
Risk-free interest rate
|
|
|
1.16
|
%
|
Periodic rate
|
|
|
0.55
|
%
|
Term (years)
|
|
|
4.73
|
|
Volatility of stock
|
|
|
75
|
%
|
The warrants were valued at $9,195 at December
31, 2015. Due to a decrease in the Company’s common stock price from December 31, 2015 to March 31, 2016, the fair value
of the warrants decreased by $2,985, which was recorded as a gain in the Company’s consolidated statements of operations
for the three month period ended March 31, 2016.
10. Stock-based Compensation
Refer to
Note 15, Subsequent Event
, for a discussion
of the Company’s May 4, 2016 reverse stock split.
The Company’s Amended and Restated
2014 Equity Incentive Plan (the “2014 Plan”) allows for the issuance of an aggregate of 3,714 shares of common stock,
of which 1,480 are available for future grant as of March 31, 2016.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
The following table summarizes information
about the Company’s stock options outstanding at March 31, 2016, and activity during the three-month period then ended:
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Stock
Awards
|
|
|
Exercise
Price
|
|
|
Life
(Years)
|
|
|
Intrinsic
Value
|
|
Balance as of December 31, 2015
|
|
|
1,963
|
|
|
$
|
7.09
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
145
|
|
|
$
|
5.55
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(10
|
)
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(110
|
)
|
|
$
|
8.41
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(9
|
)
|
|
$
|
10.11
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016
|
|
|
1,979
|
|
|
|
6.91
|
|
|
|
7.00
|
|
|
|
1,522
|
|
Vested and expected to vest at March 31, 2016
|
|
|
1,851
|
|
|
|
|
|
|
|
6.85
|
|
|
|
1,518
|
|
Exercisable as of March 31, 2016
|
|
|
1,062
|
|
|
|
|
|
|
|
5.23
|
|
|
|
1,464
|
|
As of March 31, 2016, total unrecognized
compensation cost related to unvested stock options was $4,640. 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 2.8 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 March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
|
—
|
|
|
|
—
|
|
Risk-free interest rate
|
|
|
1.24% - 1.78
|
%
|
|
|
1.41% - 1.92
|
%
|
Expected term (in years)
|
|
|
5-10
|
|
|
|
6-10
|
|
Volatility
|
|
|
77
|
%
|
|
|
73
|
%
|
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 March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Sales and marketing
|
|
$
|
232
|
|
|
$
|
132
|
|
Research and development
|
|
|
231
|
|
|
|
54
|
|
General and administrative
|
|
|
1,111
|
|
|
|
163
|
|
|
|
$
|
1,574
|
|
|
$
|
349
|
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
In conjunction with the resignation of
the Company’s then Chief Executive Officer in February 2016, the Company accelerated the vesting of options that would have
vested in the subsequent twelve months and extended the exercise period of the resulting shares from three months to six years.
In addition, the Company extended the exercise period for an employee that was terminated in March 2016 from three months to one
year. These modifications resulted in incremental stock compensation expense of $59 and $774 included in research and development
and general administration, respectively.
11. Income Taxes
There were no material changes to the unrecognized
tax benefits in the three months ended March 31, 2016, 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.
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 patents. The Company is also 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 agreements also stipulate minimum
annual royalties of $50.
In connection with acquisition of Equipois,
the Company assumed the rights and obligations of Equipois under a license agreement with Garrett Brown, the developer of certain
intellectual property related to mechanical balance and support arm technologies, which grants us an exclusive license with respect
to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company will
be required to pay Mr. Brown a single-digit royalty on net receipts, subject to a $50 annual minimum royalty requirement.
The Company entered into a supply agreement
with Equipois to purchase mechanical arm products on a quarterly basis commencing on December 1, 2015 through December 31, 2016,
with a minimum annual price of $157.
U.S. Food and Drug Administration Clearance
On April 4, 2016, the Company received
clearance from the U.S. Food and Drug Administration (“FDA”) to market its Ekso GT robotic exoskeleton for use in
the treatment of individuals with hemiplegia due to stroke, individuals with spinal cord injuries at levels T4 to L5, and individuals
with spinal cord injuries at levels of T3 to C7 (ASIA D), in accordance with the device’s labeling.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
The Company believes that prior to
April 4, 2016, the Company’s Ekso GT robotic exoskeleton had been appropriately marketed in the United States 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 the Ekso GT device. On December 24, 2014, the Company
filed a 510(k) notice for the Ekso robotic exoskeleton which was accepted by the FDA for substantive review on July 29, 2015.
As
discussed above, the Company received FDA clearance to market the Ekso GT in accordance with the devise’s labeling on
April 4, 2016.
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 were inspectional and
did not represent a final FDA determination of non-compliance. The observations pertained to informed consent requirements,
reporting of adverse results and records maintenance. On October 2, 2015, the Company responded to the FDA describing the
corrective and preventive actions that the Company had implemented and continued to implement to address the FDA’s
concerns.
On March 30, 2016, the FDA accepted the Company’s corrective actions for the Form 483 observations
that were generated during the FDA’s inspection.
13. Net Loss Per Share
Refer to
Note 15, Subsequent Event
, for a discussion
of the Company’s May 4, 2016 reverse stock split.
The following table sets forth the computation of basic and
diluted net loss per share:
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss applicable to common stockholders, basic and diluted
|
|
$
|
(6,775
|
)
|
|
$
|
(4,115
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted-average number of shares, basic and diluted
|
|
|
15,388
|
|
|
|
14,542
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.44
|
)
|
|
$
|
(0.28
|
)
|
Recognition of previously deferred revenue
and cost of goods in the quarter ended March 31, 2016 as described in
Note 2.
Summary of Significant Accounting Policies
and Estimates, Medical Device Revenue and Cost of Revenue Recognition
reduced net loss applicable to common stockholders by
$2,358, or $0.15 per share.
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:
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Options to purchase common stock
|
|
|
1,979
|
|
|
|
1,496
|
|
Warrants for common stock
|
|
|
4,085
|
|
|
|
1,966
|
|
Common stock issuable upon conversion of preferred shares
|
|
|
1,309
|
|
|
|
-
|
|
Total common stock equivalents
|
|
|
7,373
|
|
|
|
3,462
|
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(in thousands, except per share amounts)
(Unaudited)
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.
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:
|
|
Medical
|
|
|
Engineering
|
|
|
|
|
|
|
Devices
|
|
|
Services
|
|
|
Total
|
|
Three months ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,057
|
|
|
$
|
429
|
|
|
$
|
8,486
|
|
Cost of revenue
|
|
|
6,669
|
|
|
|
319
|
|
|
|
6,988
|
|
Gross profit
|
|
$
|
1,388
|
|
|
$
|
110
|
|
|
$
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
985
|
|
|
$
|
704
|
|
|
$
|
1,689
|
|
Cost of revenue
|
|
|
798
|
|
|
|
488
|
|
|
|
1,286
|
|
Gross profit
|
|
$
|
187
|
|
|
$
|
216
|
|
|
$
|
403
|
|
Geographic information for revenue based
on location of customer is as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
North America
|
|
$
|
4,521
|
|
|
$
|
1,271
|
|
All Other
|
|
|
3,965
|
|
|
|
418
|
|
|
|
$
|
8,486
|
|
|
$
|
1,689
|
|
15.
Subsequent Event – Reverse Stock Split
After the close of the stock market on May
4, 2016, the Company effected a 1-for-7 reverse split of its common stock in preparation for its planned application for listing
of its common stock on the NASDAQ Capital Market. The reverse stock split was approved by the Company’s board of directors
and is intended to allow the Company to meet the minimum share price requirement for listing on the NASDAQ Capital Market. However,
there can be no assurance that the Company’s listing application will be approved by NASDAQ. As a result, all common
stock share amounts included in this filing have been retroactively reduced by a factor of seven, and all common stock per share
amounts have been increased by a factor of seven, with the exception of our common stock par value. Amounts affected include common
stock outstanding, including those that have resulted from the conversion of preferred stock, stock options, and warrants that
convert to common stock.