The accompanying notes are an integral part
of these condensed consolidated financial statements
The accompanying notes are an integral part
of these condensed consolidated financial statements
The accompanying notes are an integral part
of these condensed consolidated financial statements
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
1. Organization
Description of Business
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.
All common stock share and per share amounts
have been adjusted to reflect the one-for-seven reverse stock split completed on May 4, 2016. See
Note 11, Capitalization and
Equity Structure – Reverse Stock Split
.
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, 2017, the Company had an accumulated
deficit of $123,334.
Cash on hand at March 31, 2017 was $9,426
compared to $16,846 at December 31, 2016. For the three month period ended March 31, 2017, the Company used $7,254 of cash in operations
compared to $6,789 for the three month period ended March 31, 2016. As noted in Note 9,
Long-Term Debt
, borrowings under
our long-term debt agreement have a requirement of minimum cash on hand roughly equivalent to three months of cash burn. As of
March 31, 2017, the most recent determination of this restriction, $6,678 of cash must remain as unrestricted, with such amounts
to be re-computed at each month end period. After considering such cash restriction, effective unrestricted cash as of March 31,
2017 is estimated to be $2,748. In April 2017, the Company sold 3,732 shares of common stock and warrants to purchase 1,866 shares
of common stock for net proceeds of approximately $10.9 million (refer to Note 17
Subsequent Events
for additional information).
Based on a look-forward period of one year from the date of issuance of these financial statements, and after considering the approximately
$10.9 million raised in April 2017, the Company’s cash on hand will not be sufficient to satisfy its operations for the next
twelve months from the date of issuance of these condensed consolidated financial statements, which raises substantial doubt about
our ability to continue as a going concern.
Based upon the Company’s current
cash resources, cash raised in April 2017 from the sale of common stock, the recent rate of using cash for operations and investment,
and assuming modest increases in current revenue offset by incremental increases in expenses related to increased sales and marketing
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 2018. The Company will require significant
additional financing. The Company is actively pursuing opportunities to obtain additional financing in the future through public
or private equity and/or debt financings, corporate collaborations, or warrant solicitations.
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 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, 2016, 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, 2016.
Unless otherwise indicated, all dollar and share amounts (excluding per share amounts) included in these notes to the condensed
consolidated financial statements are in thousands.
In management’s opinion, the condensed
consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary
for a fair statement of its financial position as of March 31, 2017, 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 upon consolidation.
Certain reclassifications have been made to conform to the current period’s
presentation.
Use of Estimates
The preparation of the condensed 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.
Going Concern
The Company assesses its ability to continue
as a going concern at every interim and annual period in accordance with Accounting Standards Codification 205-40. The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The ability to
meet our obligations as they come due and the attainment of sustainable profitability and positive cash flow from operations is
dependent on certain future events. These conditions raise substantial doubt about the Company’s ability to continue as a
going concern for the look-forward period one year from the issuance of these financial statements, even after considering approximately
$10.9 million that was raised from the issuance of common stock in April 2017 (refer to Note 17
Subsequent Events
for additional
information). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We evaluate whether it is probable that our plans to mitigate those conditions will alleviate that substantial doubt at every interim
and annual period and disclose the conditions giving rise to substantial doubt and the results of our evaluation.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
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 to and services performed for customers. Invoices are aged based on contractual terms with the customer.
The Company reviews accounts receivable for collectability and records an allowance for credit losses, as needed. The Company has
not experienced any material losses related to accounts receivable as of March 31, 2017 and December 31, 2016.
Many of the sales contracts with customers
outside of the U.S. are settled in a foreign currency. The Company does not enter into any foreign currency hedging agreements
and is 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, 2017, we had three customers
with an accounts receivable balance totaling 10% or more of our total accounts receivable (11%, 11% and 10%) compared with three
customers as of December 31, 2016 (18%, 16% and 11%).
In the three months ended March 31, 2017,
we had one customer with billed revenue of 10% or more of total billed revenue (26%), compared with four customers
in the three months ended March 31, 2016 (27%, 20%, 11% and 10%).
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 the 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,
the amount of the arrangements 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 separate its multiple element arrangements
into two distinct units of accounting: (1) the device, associated software, original manufacturer warranty and training if required,
and (2) extended support and maintenance. As a result, in the first quarter of 2016, the Company began 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 on or after January 1, 2016, revenue and associated cost of revenue of medical devices is
recognized when delivered, or training has been completed, if required. Revenue for extended maintenance and support agreements
is recognized on a straight line basis over the contractual term of the agreement, which typically ranges from one to four years.
As a result of this change, the Company recognized medical device revenue previously deferred at December 31, 2015 of $6,517 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, or $0.13 per share, in its results of operations for the three month period
ended March 31, 2016. 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 in the same time period.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
Recent Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 that 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. In May 2016, the FASB issued a further update, ASU 2016-12
Revenue from Contracts with Customers
(Topic 606) Narrow-Scope Improvements and Practical Expedients
. ASU 2016-12 clarifies key areas concerning: (1) assessment
of collectability, (2) presentation of sales taxes and other similar taxes collected from customers, (3) non-cash consideration,
(4) contract modifications at transition, (5) completed contracts at transition, and (6) disclosing the accounting change in the
period of adoption. 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 anticipates applying the modified retrospective
transition method and it is still evaluating the likely impact of adopting the pronouncement.
In February 2016, the FASB issued ASU No.
2016-02,
Leases (Topic 842)
which will require lessees to recognize assets and liabilities for leases with lease terms of
more than 12 months. For finance leases, a lessee is required to: (1) recognize a right-of-use asset and a lease liability, initially
measured at the present value of the lease payments, in the statement of financial position, (2) recognize interest on the
lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income, and (3) classify
repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability
and variable lease payments within operating activities in the statement of cash flows. For operating leases, a lessee is required
to: (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments,
in the statement of financial position, (2) recognize a single lease cost, calculated so that the cost of the lease is allocated
over the lease term on a generally straight-line basis, and (3) classify all cash payments within operating activities in the statement
of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2018. The Company is evaluating
the impact that ASU 2016-02 will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued 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. Effective January 1, 2017, the Company adopted
ASU 2016-09 and elected to change its accounting policy to account for forfeitures as they occur so as to more closely align
compensation expense to services provided. The change was applied on a modified retrospective basis with a cumulative effect adjustment
to retained earnings as of January 1, 2017 of $171.
January 2017, the FASB issued ASU No. 2017-04,
Simplifying the Test for Goodwill Impairment.
ASU 2017-04 eliminated the requirement to calculate the implied fair value
of goodwill to measure a goodwill impairment charge. Instead, entities are to record an impairment charge based on the excess of
the carrying amount over its fair value. The new standard will be effective for the Company beginning January 1, 2020 and early
adoption is permitted. The Company does not expect the impact of adopting ASU 2017-04 to be material on its consolidated financial
statements.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
3. Accumulated Other Comprehensive Income
The
change in accumulated other comprehensive income presented on the condensed consolidated balance sheets and the impact of significant
amounts reclassified from accumulated other comprehensive income (loss) on information presented in the condensed consolidated
statements of operations and comprehensive loss for the three month period ending
March 31, 2017
,
are reflected in the table below net of tax:
|
|
Foreign
|
|
|
|
Currency
|
|
|
|
Translation
|
|
Balance at December 31, 2016
|
|
$
|
79
|
|
Other comprehensive loss before reclassification
|
|
|
(30
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
Net current period other comprehensive loss
|
|
|
(30
|
)
|
Balance at March 31, 2017
|
|
$
|
49
|
|
4. 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, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
3,615
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,615
|
|
Contingent consideration liability
|
|
$
|
217
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
217
|
|
Contingent success fee liability
|
|
$
|
117
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
3,546
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,546
|
|
Contingent consideration liability
|
|
$
|
217
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
217
|
|
Contingent success fee liability
|
|
$
|
116
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
116
|
|
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, 2017, which were measured
at fair value on a recurring basis:
|
|
|
|
|
Contingent
|
|
|
Contingent
|
|
|
|
Warrant
|
|
|
Consideration
|
|
|
Success Fee
|
|
|
|
Liability
|
|
|
Liability
|
|
|
Liability
|
|
Balance at December 31, 2016
|
|
$
|
3,546
|
|
|
$
|
217
|
|
|
$
|
116
|
|
Loss on increase in fair value of warrants issued in conjunction with 2015 financing
|
|
|
69
|
|
|
|
-
|
|
|
|
-
|
|
Loss on increase in fair value of obligation
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
$
|
3,615
|
|
|
$
|
217
|
|
|
$
|
117
|
|
Refer to Note 11
Capitalization and Equity Structure –
Warrants
for additional information regarding the valuation of warrants.
5. Inventories, net
Inventories consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Raw materials
|
|
$
|
1,156
|
|
|
$
|
1,193
|
|
Work in process
|
|
|
395
|
|
|
|
198
|
|
Finished goods
|
|
|
370
|
|
|
|
267
|
|
|
|
|
1,921
|
|
|
|
1,658
|
|
Less: inventory reserve
|
|
|
(102
|
)
|
|
|
(102
|
)
|
Inventories, net
|
|
$
|
1,819
|
|
|
$
|
1,556
|
|
6. Deferred Revenues and Cost of Revenues
In connection with our medical device sales
and engineering services, the Company often receives cash payments before the earnings process is complete. In these instances,
the Company records 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.
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, 2017
|
|
|
December 31, 2016
|
|
Customer deposits and advances
|
|
$
|
74
|
|
|
$
|
47
|
|
Deferred rental income
|
|
|
93
|
|
|
|
60
|
|
Deferred extended maintenance and support
|
|
|
1,584
|
|
|
|
1,523
|
|
Total deferred revenues
|
|
|
1,751
|
|
|
|
1,630
|
|
Less current portion
|
|
|
(975
|
)
|
|
|
(825
|
)
|
Deferred revenues, non-current
|
|
$
|
776
|
|
|
$
|
805
|
|
|
|
|
|
|
|
|
|
|
Deferred medical device unit costs
|
|
$
|
46
|
|
|
$
|
-
|
|
Less current portion
|
|
|
(46
|
)
|
|
|
-
|
|
Deferred cost of revenue, non-current
|
|
$
|
-
|
|
|
$
|
-
|
|
7. Intangible Assets
The following table reflects the amortization
of the purchased intangible assets as of March 31, 2017:
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Developed technology
|
|
$
|
1,160
|
|
|
$
|
(516
|
)
|
|
$
|
644
|
|
Customer relationships
|
|
|
70
|
|
|
|
(31
|
)
|
|
|
39
|
|
Customer trade name
|
|
|
380
|
|
|
|
(169
|
)
|
|
|
211
|
|
|
|
$
|
1,610
|
|
|
$
|
(716
|
)
|
|
$
|
894
|
|
Estimated future amortization for the remainder of 2017 is $404
and $490 for 2018.
8. Accrued Liabilities
Accrued liabilities consist of the following:
|
|
March 31
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Salaries, benefits and related expenses
|
|
$
|
1,581
|
|
|
$
|
2,349
|
|
Device maintenance
|
|
|
404
|
|
|
|
483
|
|
Device warranty
|
|
|
157
|
|
|
|
203
|
|
Professional fees
|
|
|
56
|
|
|
|
56
|
|
Equipois earn-out
|
|
|
366
|
|
|
|
355
|
|
Other
|
|
|
183
|
|
|
|
110
|
|
Total
|
|
$
|
2,747
|
|
|
$
|
3,556
|
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
A reconciliation of the changes in the
current portion of maintenance and warranty liabilities for the period ended March 31, 2017 is as
follows:
|
|
2017
|
|
|
|
Maintenance
|
|
|
Warranty
|
|
|
Total
|
|
Balance at December 31, 2016
|
|
$
|
483
|
|
|
$
|
204
|
|
|
$
|
687
|
|
Incurred costs
|
|
|
(79
|
)
|
|
|
(47
|
)
|
|
|
(126
|
)
|
Balance at March 31, 2017
|
|
$
|
404
|
|
|
$
|
157
|
|
|
$
|
561
|
|
9. Long-Term Debt
In December 2016, the
Company entered into a loan agreement and received $7,000 that
bears interest on the outstanding
daily balance at a floating per annum rate equal to the 30 day U.S. LIBOR rate plus 5.41%
. The agreement also allows the
Company to borrow an additional $3,000 if certain conditions are met, which as of March 31, 2017 had not been met.
The loan agreement created a first priority security interest with respect to substantially all assets of the Company, including
proceeds of intellectual property, but expressly excluding intellectual property itself.
The
Company is required to pay accrued interest on the current loan on the first day of each month through and including January 1,
2018. Commencing on February 1, 2018, the Company is required make equal monthly payments of principal, together with accrued and
unpaid interest. The principal balance of the current loan amortizes ratably over 36 months and matures on January 1, 2021, at
which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment
of $245 will be due on the maturity date, of which $24 has accreted as of March 31, 2017 to be paid in 2021 and is included as
a component of note payable in the Company’s consolidated balance sheet.
In
December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which
the Company agreed to pay the lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other
disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with
another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such
merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving
person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for
the Company’s common stock being $8.00 or more for five successive business days. T
he estimated fair value of
the success fee was determined using the Binomial Lattice Model and was recorded as a discount to the debt obligation. The fair
value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in
the condensed consolidated statement of operations and comprehensive loss. The success fee is classified as a liability on the
consolidated balance sheets. At March 31, 2017, the carrying value of the contingent success fee liability was $117.
The
loan agreement includes a liquidity covenant requiring that the Company maintain unrestricted cash and cash equivalents in accounts
of the lender or subject to control agreements in favor of the lender in an amount equal to at least three months of “Monthly
Cash Burn,” which is the Company’s average monthly net income (loss) for the trailing six-month period plus certain
expenses and plus the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month
period. Such amount was determined to be $6,678 as of March 31, 2017, the most current determination, with the amount subject to
change on a month-to-month basis. At March 31, 2017, with cash on hand of $9,426, the Company was in compliance with this liquidity
covenant and all other covenants.
The final payment
fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest result in an effective
annual interest rate of 8.78% for three month period ended March 31, 2017. The final payment fee, the initial fair value of the
success fee and debt issuance costs will be accreted and amortized, respectively, to interest expense using the effective interest
method over the life of the loan.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
The following table presents scheduled principal payments of
our long-term debt, including the accreted portion of the final payment fee due in 2021, as of March 31, 2017:
Period
|
|
Amount
|
|
2017
|
|
$
|
-
|
|
2018
|
|
|
2,139
|
|
2019
|
|
|
2,333
|
|
2020
|
|
|
2,333
|
|
2021
|
|
|
219
|
|
Total principal payments
|
|
|
7,024
|
|
Less issuance costs and debt discount
|
|
|
190
|
|
Long-term debt, net
|
|
$
|
6,834
|
|
|
|
|
|
|
Current portion
|
|
|
389
|
|
Long-term portion
|
|
|
6,635
|
|
Total principal payments
|
|
$
|
7,024
|
|
10. Lease and Note Obligations
The Company has an operating lease agreement
for its headquarters and manufacturing facility in Richmond, California that expires in May 2022. In addition, the Company leases
nominal office space in Germany.
The Company has a note for $200 that it
entered into in connection with the operating lease in Richmond, California to fund leasehold improvements. The note, with an interest
rate of 7% is set to expire in May 2017 and is classified as a component of capital lease obligation, current.
In August 2015, the Company entered into
a long-term capital lease obligation for equipment. The aggregate principal of the lease is $166, with an interest rate of 4.7%,
minimum monthly payments of $3 and a July 1, 2020 maturity. This capital lease is classified as a component of capital lease obligation,
current and other non-current liabilities in the condensed consolidated balance sheets.
The Company estimates future
minimum payments as of March 31, 2017 to be the following:
Period
|
|
Operating Lease
|
|
|
Note Payable
|
|
|
Capital Lease
|
|
|
Total Minimum Payments
|
|
2017 - remainder
|
|
$
|
342
|
|
|
$
|
8
|
|
|
$
|
30
|
|
|
$
|
38
|
|
2018
|
|
|
479
|
|
|
|
-
|
|
|
|
37
|
|
|
|
37
|
|
2019
|
|
|
491
|
|
|
|
-
|
|
|
|
37
|
|
|
|
37
|
|
2020
|
|
|
500
|
|
|
|
-
|
|
|
|
22
|
|
|
|
22
|
|
2021
|
|
|
429
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Thereafter
|
|
|
181
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total minimum payments
|
|
$
|
2,422
|
|
|
|
8
|
|
|
|
126
|
|
|
|
134
|
|
Less interest
|
|
|
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
(9
|
)
|
Present value minimum payments
|
|
|
|
|
|
|
8
|
|
|
|
117
|
|
|
|
125
|
|
less current portion
|
|
|
|
|
|
|
(8
|
)
|
|
|
(35
|
)
|
|
|
(43
|
)
|
Long-term portion
|
|
|
|
|
|
$
|
-
|
|
|
$
|
82
|
|
|
$
|
82
|
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
Rent
expense under the Company’s operating leases was $101 and $96 for the three month periods ending March 31, 2017 and 2016,
respectively.
11. Capitalization and Equity Structure
Reverse Stock Split:
After the close of the stock market on
May 4, 2016, the Company effected a 1-for-7 reverse split of its common stock. As a result, all 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. Common stock outstanding, including the issuance of new
shares of common stock as a result of the conversion of preferred stock and the exercise of stock options and warrants, was affected
by the 1-for-7 reverse split.
Summary:
The Company’s authorized capital
stock at March 31, 2017 consisted of 71,429 shares of common stock and 10,000 shares of convertible preferred stock. At March 31,
2017, 21,902 shares of common stock were issued and outstanding and no shares of convertible preferred stock were issued and outstanding.
Warrants:
Warrant shares outstanding as of December
31, 2016 and March 31, 2017 is as follows:
Source
|
|
Exercise
Price
|
|
|
Term
(Years)
|
|
|
At
December 31,
2016
|
|
|
Issued
|
|
|
Exercised
|
|
|
Expired
|
|
|
At March 31,
2017
|
|
Warrants issued in conjunction with 2015 Series A Preferred financing
|
|
$
|
3.74
|
|
|
|
5
|
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
9-10
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
3,597
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(371
|
)
|
|
|
3,226
|
|
In January 2014, the Company issued various
warrants with a three year life to investors who participated in the Company’s November 2013 private placement of senior
subordinated secured convertible notes, of which warrant representing 371 shares of common stock expired in January 2017 without
having been exercised.
The December 2015 warrants contain a
put-option provision. Under this provision, while the warrants are outstanding, if the Company enters into a Fundamental
Transaction, defined as a merger, consolidation or similar transaction, the Company or any successor entity will, at the
option of each warrant holder, exercisable at any time within 30 days after the consummation of the Fundamental Transaction,
purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the
Black-Scholes value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of
the Fundamental Transaction.
As a result of this put-option
provision, these warrants are classified as a liability and are marked to market at each reporting date.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
The warrant liability is measured at fair
value at each reporting date using certain estimated inputs, which are classified within Level 3 of the valuation hierarchy. The
following assumptions were used in the Black Scholes Option Pricing Model to measure the fair value of the warrants as of March
31, 2017:
Current share price
|
|
$
|
4.10
|
|
Conversion price
|
|
$
|
3.74
|
|
Risk-free interest rate
|
|
|
1.66
|
%
|
Term (years)
|
|
|
3.73
|
|
Volatility of stock
|
|
|
70
|
%
|
At December 31, 2016, the warrants were
valued at $3,546. Due to an increase in the Company’s common stock price from December 31, 2016 to March 31, 2017, the fair
value of the warrants, and associated liability, increased by $69. This amount was recorded as a non-cash expense in the Company’s
condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2017.
12. Stock-based Compensation
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 952 are available for future grant as of March 31, 2017.
The following table summarizes information
about the Company’s stock options outstanding at March 31, 2017, and activity during the three month period then ended:
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Stock
|
|
|
Average
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Awards
|
|
|
Exercise
Price
|
|
|
(Years)
|
|
|
Value
|
|
Balance as of December 31, 2016
|
|
|
2,477
|
|
|
$
|
6.50
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
56
|
|
|
$
|
3.47
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(8
|
)
|
|
$
|
3.05
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(40
|
)
|
|
$
|
8.97
|
|
|
|
|
|
|
|
|
|
Options
cancelled
|
|
|
(19
|
)
|
|
$
|
7.63
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
2,466
|
|
|
$
|
6.39
|
|
|
|
7.31
|
|
|
$
|
801
|
|
Vested and expected
to vest at March 31, 2017
|
|
|
2,466
|
|
|
|
|
|
|
|
7.31
|
|
|
$
|
801
|
|
Exercisable as of March
31, 2017
|
|
|
1,352
|
|
|
|
|
|
|
|
6.06
|
|
|
$
|
723
|
|
As of March 31, 2017, total unrecognized
compensation cost related to unvested stock options was $4,162. This amount is expected to be recognized as stock-based compensation
expense in the Company’s condensed consolidated statements of operations and comprehensive income over the remaining weighted
average vesting period of 2.5 years.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
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,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
|
—
|
|
|
|
—
|
|
Risk-free interest rate
|
|
|
2.05% - 2.40%
|
|
|
|
1.24% - 1.78%
|
|
Expected term (in years)
|
|
|
6-10
|
|
|
|
5-10
|
|
Volatility
|
|
|
80% - 82%
|
|
|
|
77%
|
|
Total stock-based compensation expense
related to options granted to employees and non-employees was included in the condensed consolidated statements of operations and
comprehensive loss as follows:
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Sales and marketing
|
|
$
|
20
|
|
|
$
|
232
|
|
Research and development
|
|
|
101
|
|
|
|
231
|
|
General and administrative
|
|
|
273
|
|
|
|
1,111
|
|
|
|
$
|
394
|
|
|
$
|
1,574
|
|
In connection 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 options 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-based compensation expense of $59 and $774 included in research and development and
general and administrative, respectively, for the three months ended March 31, 2016 in the condensed consolidated statements of
operations and comprehensive loss.
In
June 2015 an employee of the Company received a performance based option grant representing a total of 99,999 shares of common
stock. One of three tranches was to vest on March 31, 2017 if certain revenue targets were attained. As the target was not attained,
$124 of previously recorded stock compensation expense was reversed as a credit in the Company’s condensed consolidated statement
of operations and comprehensive loss under sales and marketing for the three month period ended March 31, 2017
13. Income Taxes
There were no material changes to the unrecognized
tax benefits in the three months ended March 31, 2017, 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
examination.
14. 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.
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
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 sub-license, 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 the developer of certain intellectual
property related to mechanical balance and support arm technologies, which grants the Company an exclusive license with respect
to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company will
be required to pay the developer a single-digit royalty on net receipts, subject to a $50 annual minimum royalty requirement.
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. On July 19, 2016, the
Company received clearance from the FDA to expand/clarify the indications and labeling to expressly include individuals with hemiplegia
due to stroke who have upper extremity function of at least 4/5 in only one arm. The Company’s prior cleared indications
for use statement required that individuals with hemiplegia due to stroke have upper extremity function of at least 4/5 in both
arms.
15. Net Loss Per Share
The following table sets forth the computation of basic and
diluted net loss per share:
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss applicable to common shareholders, basic and diluted
|
|
$
|
(8,302
|
)
|
|
$
|
(6,775
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average number of shares, basic
|
|
|
21,899
|
|
|
|
15,338
|
|
Effect of dilutive warrants
|
|
|
21
|
|
|
|
-
|
|
Weighted-average number of shares, diluted
|
|
|
21,920
|
|
|
|
15,338
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.38
|
)
|
|
$
|
(0.44
|
)
|
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,
|
|
|
|
2017
|
|
|
2016
|
|
Options to purchase common stock
|
|
|
2,466
|
|
|
|
1,979
|
|
Warrants for common stock
|
|
|
1,592
|
|
|
|
4,085
|
|
Common stock issuable upon conversion of preferred shares
|
|
|
-
|
|
|
|
1,309
|
|
Total common stock equivalents
|
|
|
4,058
|
|
|
|
7,373
|
|
Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial
Statements
(In thousands, except per share amounts)
(Unaudited)
16.
Segment Disclosures
The Company has three reportable segments:
Medical Devices, Industrial Sales, and Engineering Services. The Medical Devices segment designs and engineers technology for,
and commercializes, manufactures, and sells exoskeletons for applications in the medical markets. The Industrial Sales segment
designs, engineers, commercializes, and sells exoskeleton devices to allow able-bodied users to perform heavy duty work for extended
periods. 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 the National Science Foundation and the Defense Advanced Research Projects
Agency.
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 others manufacture and distribute unique products. The Company does not consider
net assets as a segment measure and, accordingly, assets are not allocated.
Segment reporting information is as follows:
|
|
Device and related
|
|
|
|
|
|
Total
|
|
|
|
Medical
|
|
|
Industrial
|
|
|
Total
|
|
|
Engineering
|
|
|
All
|
|
Three months ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
870
|
|
|
$
|
538
|
|
|
$
|
1,408
|
|
|
$
|
28
|
|
|
$
|
1,436
|
|
Cost of revenue
|
|
|
721
|
|
|
|
356
|
|
|
|
1,077
|
|
|
|
7
|
|
|
|
1,084
|
|
Gross profit
|
|
$
|
149
|
|
|
$
|
182
|
|
|
$
|
331
|
|
|
$
|
21
|
|
|
$
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
7,922
|
|
|
$
|
135
|
|
|
$
|
8,057
|
|
|
$
|
429
|
|
|
$
|
8,486
|
|
Cost of revenue
|
|
|
6,524
|
|
|
|
145
|
|
|
|
6,669
|
|
|
|
319
|
|
|
|
6,988
|
|
Gross profit
|
|
$
|
1,398
|
|
|
$
|
(10
|
)
|
|
$
|
1,388
|
|
|
$
|
110
|
|
|
$
|
1,498
|
|
Geographic information for revenue based
on location of customer is as follows:
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
United States
|
|
$
|
931
|
|
|
$
|
4,521
|
|
All Other
|
|
|
505
|
|
|
|
3,965
|
|
|
|
$
|
1,436
|
|
|
$
|
8,486
|
|
17.
Subsequent Events
In April 2017, the Company sold in
a registered direct offering an aggregate of 3,732 shares of its common stock, par value $0.001 per share, and warrants to purchase
1,866 shares of common stock with an exercise price of $4.10 per share, at a purchase price of $3.14 for each share and related
warrant. The aggregate gross proceeds of the transaction were approximately $11.7 million and the aggregate net proceeds of the
transaction were approximately $10.9 million. The warrants will become exercisable six months following the issuance date and will
expire five years from the date they become exercisable. The Company intends to use the net proceeds from the transaction for its
operations, including, but not limited to, ongoing investments (i) in clinical, sales and marketing initiatives to accelerate adoption
of the Company in the rehabilitation market, (ii) in research, development and commercialization activities with respect to a robotic
exoskeleton for home use, and/or (iii) in the development and commercialization of able-bodied exoskeletons for industrial use;
and for working capital and other general corporate purposes.
On May 2, 2017, as consideration
for 2016 supply and sales efforts provided by Equipois, LLC, the Company issued a total of 89,286 shares of common stock
pursuant to the terms of its Asset Purchase Agreement with Equipois, LLC dated December 1, 2015.