As filed with the Securities and Exchange Commission on May 7, 2014

 

Registration No. 333-          

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

Ekso Bionics Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   3841   99-0367049

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

1414 Harbour Way South, Suite 1201

Richmond, California 94804 

1-203-723-EKSO (-3576)

 

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Mr. Nathan Harding, CEO

Ekso Bionics Holdings, Inc.

1414 Harbour Way South, Suite 1201

Richmond, California 94804 

1-510-984-1761

 

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copy to:

Barrett S. DiPaolo

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY 10022

(212) 400-6900

 

Approximate date of commencement of proposed sale to the public:   From time to time after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨ Accelerated filer                     ¨
Non-accelerated filer     ¨ (Do not check if a smaller reporting company) Smaller reporting company    þ

 

 Title of Each Class of Securities to be Registered   Amount to be
Registered (1)
  Proposed
Maximum
Offering
Price
Per Share (2)
  Proposed
Maximum
Aggregate
Offering Price (2)
  Amount of
Registration Fee
 
Common stock, par value $0.001 per share  

67,134,768 shares

  $ 2.695    $ 180,928,199.76    $ 23,303.55   

 

  (1) Consists of (a) 31,079,768 outstanding shares of the registrant’s common stock and (b) 36,055,000 shares of the registrant’s common stock issuable upon exercise of common stock purchase warrants.  Pursuant to Rule 416 under the Securities Act of 1933, as amended, to the extent that such common stock purchase warrants provide for a change in the number of shares of common stock into which they are convertible or for which they are exercisable to prevent dilution resulting from stock splits, stock dividends, or similar transactions, this registration statement shall be deemed to cover such additional shares of common stock issuable in connection with any such provision.

 

  (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low prices of the registrant’s common stock as reported by OTC Markets on May 5, 2014.  The shares offered hereunder may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

  

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

  

 
 

 

The information in this prospectus is not complete and may be changed.  The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and the selling stockholders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

 

Subject to completion, dated May 7, 2014

 

 

Ekso Bionics Holdings, Inc.

 

Prospectus

 

67,134,768 Shares

 

Common Stock

 

This prospectus relates to the sale of up to 67,134,768 shares of our common stock, par value $0.001 per share, by the selling stockholders of Ekso Bionics Holdings, Inc., a Nevada corporation, listed in this prospectus.  Of the shares being offered, 31,079,768 are presently issued and outstanding, and 36,055,000 are issuable upon exercise of common stock purchase warrants. The shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

 

The distribution of the shares by the selling stockholders is not subject to any underwriting agreement.  We will not receive any proceeds from the sale of the shares by the selling stockholders.  We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

 

Our common stock is traded on OTC Markets under the symbol “EKSO.” On May 6, 2014, the last reported sale price for our common stock was $2.83 per share.

 

Our business and an investment in our securities involve a high degree of risk.  Before making any investment in our securities, you should read and carefully consider risks described in the “Risk Factors” section beginning on page 8 of this prospectus.

 

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.

 

This prospectus is dated                                  , 2014.

  

 
 

 

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with information that is different from that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholders are offering to sell and seeking offers to buy these securities only in jurisdictions where offers and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction where the offer is not permitted.

 

TABLE OF CONTENTS

 

  Page
   
Prospectus Summary 3
   
The Offering 6
   
Note Regarding Forward-Looking Statements 7
   
Risk Factors 8
   
Selling Stockholders 20
   
Use of Proceeds 34
   
Determination of Offering Price 34
   
Market for Common Equity and Related Stockholder Matters 34
   
Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
   
Description of Business 44
   
Legal Proceedings 51
   
Directors, Executive Officers, Promoters and Control Persons 52
   
Executive Compensation 55
   
Security Ownership of Certain Beneficial Owners and Management 58
   
Certain Relationships and Related Transactions 60
   
Plan of Distribution 66
   
Description of Securities 68
   
Changes in and Disagreements with Accountants 70
   
Disclosure of Commission Position on Indemnification for Securities Act Liabilities 71
   
Legal Matters 71
   
Experts 71
   
Where You Can Find More Information 72
   
Index to Consolidated Financial Statements F-1

 

2
 

 

PROSPECTUS SUMMARY

 

The following summary highlights information contained elsewhere in this prospectus.  This summary is not complete and does not contain all of the information that should be considered before investing in our common stock.  Potential investors should read the entire prospectus carefully, including the more detailed information regarding our business provided below in the “Description of Business” section, the risks of purchasing our common stock discussed under the “Risk Factors” section, and our consolidated financial statements and the accompanying notes to the consolidated financial statements.

 

Unless the context indicates otherwise, all references in this registration statement to “Ekso Bionics Holdings,” the “Company,” “we,” “us” and “our” refer to Ekso Bionics Holdings, Inc., and its wholly-owned consolidated subsidiaries, Ekso Bionics, Inc., and Ekso Bionics Limited; and references to “Ekso Bionics” refer to Ekso Bionics, Inc., and its subsidiary.

 

Overview

 

We are designing, developing and commercializing wearable robots, or “human exoskeletons,” that have a variety of potential applications in the medical, military, industrial, and consumer markets. Our exoskeletons are ready-to-wear, battery-powered devices that are strapped over the user’s clothing, enabling individuals with neurological conditions affecting gait (e.g., spinal cord injury or stroke) to walk again; permitting soldiers to carry heavy loads for long distances while mitigating lower back, knee, and ankle injuries; and allowing industrial workers to perform heavy duty work for extended periods.

 

We are currently focusing primarily on medical applications for people with lower extremity weakness or paralysis. Our products have been listed with the U.S. Food and Drug Administration (“FDA”) and have received a CE Mark (indicating compliance with European Union legislation). We have sold over 40 devices to rehabilitation centers and individual users for rehabilitation since February 2012. We also have a collaborative partnership with Lockheed Martin Corporation (“Lockheed”) to develop products for able-bodied exoskeleton applications.

 

We are at a key point in the growth of its business. We intend to further penetrate the medical market and to begin to penetrate the military and industrial markets over the next several years.

 

Based on technology initially developed by an engineering team from the University of California, Berkeley, our devices employ a number of proprietary, advanced robotics technologies.

 

Organizational History

 

We were incorporated in Nevada as PN Med Group Inc. on January 30, 2012. Our original business was to distribute medical supplies and equipment to municipalities, hospitals, pharmacies, care centers, and clinics throughout the country of Chile. Prior to the Merger (as defined below), our Board determined to discontinue operations in this area and to seek a new business opportunity. As a result of the Merger, we have acquired the business of Ekso Bionics and its subsidiary.

 

Our authorized capital stock currently consists of 500,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of “blank check” preferred stock, par value $0.001. Our common stock is quoted on the OTC Markets (OTCQB) under the symbol “EKSO.”

 

Ekso BionicsTM was incorporated on January 19, 2005, under the laws of the State of Delaware, to design, develop, and commercialize exoskeletons to augment human strength, endurance and mobility. Since its inception, Ekso Bionics has achieved several significant milestones:

 

  · In 2006, Ekso Bionics designed and sold the first practical human exoskeleton.

 

  · In 2009, Ekso Bionics signed its first agreement with Lockheed establishing the companies’ collaborative partnership to ruggedize and commercialize an exoskeleton for military and other able-bodied applications.

 

  · In February 2012, we sold our first exoskeleton suit for medical applications, called Ekso™, for use by complete spinal cord injured (“SCI”) patients at rehabilitation centers.

 

  · In July 2013, Ekso Bionics delivered a key technology upgrade for Ekso called Variable Assist, expanding the potential user population by adding utility for incomplete SCI patients, stroke patients and patients with related neurological disorders who can benefit from gait rehabilitation.

 

  · In December 2013, we delivered our first Ekso GT, a new generation Ekso with added hardware and software functionality, including Variable Assist.

 

3
 

 

On December 16, 2013, we completed a 3.462-for-1 forward split of our common stock in the form of a dividend, with the result that the 6,350,000 shares of common stock outstanding immediately prior to the stock split became 21,983,700 shares of common stock outstanding immediately thereafter. All share and per share numbers in this prospectus relating to our common stock have been adjusted to give effect to this stock split, unless otherwise stated.

 

On December 18, 2013, (i) we changed our name from PN Med Group Inc. to Ekso Bionics Holdings, Inc., and (ii) we increased our authorized capital stock from 75,000,000 shares of common stock, par value $0.001, to 500,000,000 shares of common stock, par value $0.001 (the “common stock”), and 10,000,000 shares of “blank check” preferred stock, par value $0.001.

 

On January 15, 2014, our wholly owned subsidiary, Ekso Acquisition Corp., a corporation formed in the State of Delaware on January 3, 2014 (“Acquisition Sub”) merged (the “Merger”) with and into Ekso Bionics. Ekso Bionics was the surviving corporation in the Merger and became our wholly owned subsidiary. All of the outstanding Ekso Bionics stock was converted into shares of our common stock, as described in more detail below.

 

In connection with the Merger and pursuant to a split-off agreement, we transferred our pre-Merger business to our pre-Merger majority stockholder, in exchange for the surrender by her and cancellation of 17,483,100 shares of our common stock.

 

As a result of the Merger and Split-Off, we discontinued our pre-Merger business and acquired the business of Ekso Bionics, and will continue the business operations of Ekso Bionics as a publicly-traded company under the name Ekso Bionics Holdings, Inc.

 

Also on January 15, 2014, we closed a private placement offering (the “PPO”) of 20,580,000 Units of our securities, at a purchase price of $1.00 per Unit, each Unit consisting of one share of the our Common Stock and a warrant to purchase one share of Common Stock at an exercise price of $2.00 per share and with a term of five years (the “PPO Warrants”). Between January 29, 2014 and February 6, 2014, we issued an additional 9,720,000 Units in subsequent closings of the PPO. Additional information concerning the PPO and PPO Warrants is presented below under “Certain Relationships and Related Party Transactions—The Private Placement Offering.”

 

In addition, in connection with the Merger, we changed our fiscal year from a fiscal year ending on March 31 of each year to one ending on December 31 of each year.

 

The Merger is being accounted for as a “reverse merger,” and Ekso Bionics is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Ekso Bionics and will be recorded at the historical cost basis of Ekso Bionics, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of Ekso Bionics, historical operations of Ekso Bionics and operations of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of our Common Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger.

 

We continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Merger. We believe that as a result of the Merger, we have ceased to be a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).

 

See “Certain Relationships and Related Party Transactions” below for more information about the Merger and related transactions.

 

Capital Needs

 

With the capital raised to date as described above, we believe the Company has funding to implement our business plan, support operations and meet current obligations through the middle of 2015. The Company will determine when and if to proceed with any additional financing in the future, and there can be no assurance financing will be available to us when required on acceptable terms or at all.

 

About This Offering

 

This prospectus relates to the public offering, which is not being underwritten, by the selling stockholders listed in this prospectus, of up to 67,134,768 shares of our common stock.  Of the shares being offered, 31,079,768 are presently issued and outstanding, and 36,055,000 are issuable upon exercise of common stock purchase warrants.  The shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.  We will receive none of the proceeds from the sale of the shares by the selling stockholders.  We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

 

4
 

 

Selected Risks Associated With an Investment in Shares of Our Common Stock

 

An investment in shares of our common stock is highly speculative and is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere in this prospectus. You should carefully consider these risks before making an investment. Some of these risks include: 

 

·We have a limited operating history upon which investors can evaluate our future prospects.

 

·Our products may not be accepted in the market.

 

·We are subject to extensive governmental regulations relating to the manufacturing, labeling and marketing of our products.

 

·The technology of load carriage exoskeletons (such as our HULC® human exoskeleton) is at a very early stage of development, and the technology may not be broadly adopted in military or other markets.

 

·We may be unable to manage our growth and entry into new business areas.

 

·We have a history of losses and we may not achieve or sustain profitability in the future.

 

·If we are unable to obtain additional financing on acceptable terms, we may have to curtail our growth or cease our development plans and operations.

 

·You could lose all of your investment.

 

·You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

 

·There currently is a very limited market for our Common Stock and there can be no assurance that a consistent trading market will ever develop. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.

 

Corporate Information

 

Our principal executive offices are located at 11414 Harbour Way South, Suite 1201, Richmond, California 94804. Our telephone number is 1-510-984-1761. Our website address is www.eksobionics.com. The information on, or that can be accessed through, our website is not part of this prospectus.

 

 

5
 

 

THE OFFERING

 

Common stock currently outstanding   78,445,924 shares (1)
     
Preferred stock currently outstanding   None
     
Common stock offered by the Company   None
     
Common stock offered by the selling stockholders   67,134,768 shares (2)
     
Use of proceeds   We will not receive any of the proceeds from the sales of our common stock by the selling stockholders.
     
OTC Markets symbol   EKSO
     
Risk Factors   You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 8 of this prospectus before deciding whether or not to invest in shares of our common stock.

 

  (1) As of May 6, 2014.
  (2) Consists of 31,079,768 outstanding shares of common stock and 36,055,000 shares of common stock issuable upon exercise of common stock purchase warrants.

 

6
 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this prospectus that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this prospectus may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of commercially viable pharmaceuticals, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time associated with drug development and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of pharmaceuticals and the healthcare industry, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this prospectus appears in the section captioned “Risk Factors” and elsewhere in this prospectus.

 

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this prospectus to reflect any new information or future events or circumstances or otherwise.

  

7
 

 

RISK FACTORS

 

An investment in shares of our common stock is highly speculative and involves a high degree of risk.  We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict.  Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this prospectus.  If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially adversely affected.  In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment.  Only those investors who can bear the risk of loss of their entire investment should invest in our common stock. 

 

Risks Related to our Business and the Industry in Which We Operate

 

We have a limited operating history upon which investors can evaluate our future prospects.

 

Although Ekso Bionics was incorporated in 2005, it did not sell its first Ekso medical device until 2012. Therefore, we have limited operating history upon which an evaluation of our business plan or performance and prospects can be made. The business and prospects of the Company must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business and creating a new industry. The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that the Company can successfully address these challenges. If it is unsuccessful, the Company and its business, financial condition and operating results could be materially and adversely affected.

 

Given the limited operating history, management has little basis on which to forecast future demand for our products from our existing customer base, much less new customers. The current and future expense levels of the Company are based largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately forecast future revenues because the business of the Company is new and its market has not been developed. If the forecasts for the Company prove incorrect, the business, operating results and financial condition of the Company will be materially and adversely affected. Moreover, the Company may be unable to adjust its spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.

 

The industries in which the Company operates are highly competitive and subject to rapid technological change.  If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.

 

The medical technology, industrial robotics and military equipment industries are characterized by intense competition and rapid technological change, and we will face competition on the basis of product features, clinical outcomes, price, services and other factors. Competitors may include large medical device and other companies, some of which have significantly greater financial and marketing resources than we do, and firms that are more specialized than we are with respect to particular markets. Our competition may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing and other resources than we do or may be more successful in attracting potential customers, employees and strategic partners.

 

Our competitive position will depend on multiple, complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. In some instances, competitors may also offer, or may attempt to develop, alternative therapies for disease states that may be delivered without a medical device. The development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. The entry into the market of manufacturers located in low-cost manufacturing locations may also create pricing pressure, particularly in developing markets. Our future success depends, among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological advances, and upon our ability to successfully implement our marketing strategies and execute our research and development plan.

 

8
 

 

Our products may not be accepted in the market.

 

We cannot be certain that our current products or any other products we may develop or market will achieve or maintain market acceptance.  Market acceptance of our products depends on many factors, including the Company’s ability to convince key opinion leaders to provide recommendations regarding our products, convince distributors and customers that our technology is an attractive alternative to other technologies, demonstrate that our products are reliable and supported by us in the field, supply and service sufficient quantities of products directly or through marketing alliances, and price products competitively in light of the current macroeconomic environment, which, particularly in the case of the medical device industry, are becoming increasingly price sensitive.

 

Dependence on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may result in our payment of significant monetary damages or impact offerings in our product portfolios.

 

Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection, we may not be able to prevent third parties from using our proprietary technologies or may lose access to technologies critical to our products. Also, our currently pending or future patent applications may not result in issued patents, and issued patents are subject to claims concerning priority, scope and other issues.

 

Furthermore, we have not filed applications for all of our patents internationally and may not be able to prevent third parties from using our proprietary technologies or may lose access to technologies critical to our products in other countries. These include, in some cases, countries in which we are currently selling products and countries in which we intend to sell products in the future.

 

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products.

 

The industries in which we operate, including, in particular, the medical device industry, are characterized by extensive intellectual property litigation and, from time to time, we might be the subject of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert the time and effort of our management and operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringement against us could result in our payment of significant monetary damages and/or royalty payments or negatively impact our ability to sell current or future products in the affected category and could have a material adverse effect on our business, cash flows, financial condition or results of operations.

 

Some of the patents in the intellectual property portfolio are not within our complete control, which could reduce the value of such patents.

 

Some of our U.S. patent applications (which have associated international applications) are co-owned by the Regents of the University of California Berkeley. The Regents of the University of California Berkeley has licensed its rights under many of these patent applications to us, but we do not have a license to their rights under three of these patent applications. With respect to two of these co-owned patent applications, the Regents of the University of California Berkeley has licensed their rights in the U.S. to an unrelated third party. The third patent application will need to be fully prosecuted before it can be determined which claims are exclusive to us (through a previous license) and which claims the Regents of the University of California Berkeley may license to other entities. We do not have complete control over the prosecution of these patent applications. In addition, the license of patent rights under these patents to third parties could reduce the value of the Company’s patent portfolio and limit any income or license fees that we might receive if we were to attempt to transfer or license our rights under any of our co-owned patents.

 

Enforcing intellectual property rights in foreign nations for military technology may be more problematic than enforcement in other industries.

 

In many countries, governments reserve the right to allow local manufacturers to infringe patents in cases where it is beneficial to their national security to do so. This could result in additional competition for us or our licensees from local manufacturers in foreign countries even though those manufacturers are infringing patents we hold in those countries, which could adversely affect our ability to sell our products in those countries for military use.

 

We are subject to extensive governmental regulations relating to the manufacturing, labeling and marketing of our products.

 

Our medical technology products and operations are subject to regulation by the FDA, the European Union and other governmental authorities both inside and outside of the United States. These agencies enforce laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of our medical products.

 

9
 

 

Under the Federal Food, Drug, and Cosmetic Act, medical devices are classified into one of three classes — Class I, Class II or Class III — depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. We believe our current products are Class I medical devices. Class I devices are those for which safety and effectiveness can be assured by adherence to a set of guidelines, which include compliance with the applicable portions of the FDA's Quality System Regulation, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials.

 

Following the introduction of a product, these agencies will also periodically review our manufacturing processes and product performance. The process of complying with the applicable good manufacturing practices, adverse event reporting, clinical trial and other requirements can be costly and time consuming, and could delay or prevent the production, manufacturing or sale of our products. In addition, if we fail to comply with applicable regulatory requirements, it could result in fines, delays or suspensions of regulatory clearances, closure of manufacturing sites, seizures or recalls of products and damage to our reputation. Recent changes in enforcement practice by the FDA, European Union and other agencies have resulted in increased enforcement activity, which increases the compliance risk for the Company and other companies in our industry. In addition, governmental agencies may impose new requirements regarding registration, labeling or prohibited materials that may require us to modify or re-register products already on the market or otherwise impact our ability to market our products in those countries. Once clearance or approval has been obtained for a product, there is an obligation to ensure that all applicable FDA and other regulatory requirements continue to be met.

 

We may be subject to penalties and may be precluded from marketing our products if we fail to comply with extensive governmental regulations.

 

We believe that our Ekso, Ekso 1.1, and Ekso GT products are FDA Class I medical devices when used in clinical settings. However, the FDA has not made any determination about whether our medical products are Class I medical devices. Such a determination is not necessary in order for us to list a Class I device with the FDA and bring that device to the U.S. market. However, from time to time, the FDA may disagree with the classification of a new Class I medical device and require the manufacturer of that device to apply for approval as a Class II or Class III medical device. In the event that the FDA determines that our medical products should be reclassified as Class II or Class III medical devices, we could be precluded from marketing the devices for clinical use within the United States for months, years or longer, depending on the specific change the classification. Reclassification of our products as Class II or Class III medical devices could significantly increase our regulatory costs, including the timing and expense associated with required clinical trials and other costs.

 

The FDA and non-U.S. regulatory authorities require that our products be manufactured according to rigorous standards. These regulatory requirements may significantly increase our production costs and may even prevent us from making our products in amounts sufficient to meet market demand.  If we change our approved manufacturing process, the FDA may need to review the process before it may be used.  Failure to comply with applicable regulatory requirements discussed could subject us to enforcement actions, including warning letters, fines, injunctions and civil penalties against us, recall or seizure of our products, operating restrictions, partial suspension or total shutdown of our production, and criminal prosecution.

 

Federal, state and non-U.S. regulations regarding the manufacture and sale of medical devices are subject to future changes.  The complexity, timeframes and costs associated with obtaining marketing clearances are unknown.  Although we cannot predict the impact, if any, these changes might have on our business, the impact could be material.

 

Certain of our competitors have reported injuries caused by the malfunction of human exoskeleton devices (in at least one case to the FDA). Injuries caused by the malfunction or misuse of human exoskeleton devices, even where such malfunction or misuse occurs with respect to one of our competitor’s products, could cause regulatory agencies to implement more conservative regulations on the medical human exoskeleton industry, which could significantly increase our operating costs.

 

Product defects could adversely affect the results of our operations.

 

The design, manufacture and marketing of our products involve certain inherent risks. Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of our products can lead to injury or other adverse events. These events could lead to recalls or safety alerts relating to our products (either voluntary or required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product from the market. A recall could result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products. Personal injuries relating to the use of our products could also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product approvals.

 

10
 

 

When a medical human exoskeleton is used by a paralyzed individual to walk, the individual relies completely on the exoskeleton to hold them upright. There are many exoskeleton components that, if they were to fail catastrophically, could cause a fall resulting in severe injury or death of the patient. Such occurrences could bring about costly litigation and could also bring about regulatory activity on the part of the FDA or its foreign counterparts which could interfere with our ability to market our products.

 

When an industrial or military exoskeleton is used by a healthy individual—for example to carry a heavy load—malfunction of the device at an inopportune moment (such as when descending a stairway or navigating a precarious trail) could cause a fall resulting in severe injury or death of the person using the device. Such occurrences could bring about costly litigation and could also bring about regulatory activity on the part of the Occupational Safety and Health Administration or its foreign counterparts which could interfere with our ability to market our products.

 

We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims.

 

The testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. Product liability insurance is expensive and may not be available on acceptable terms, if at all. A successful product liability claim or product recall could inhibit or prevent the successful commercialization of our products, cause a significant financial burden on the Company, or both, which in either case could have a material adverse effect on our business and financial condition.

 

If we are not able to both obtain and maintain adequate levels of third-party reimbursement for our products, it would have a material adverse effect on our business.

 

Healthcare providers and related facilities are generally reimbursed for their services through payment systems managed by various governmental agencies worldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available budget, or a combination of these factors, and coverage and payment levels are determined at each payer’s discretion. The coverage policies and reimbursement levels of these third-party payers may impact the decisions of healthcare providers and facilities regarding which medical products they purchase and the prices they are willing to pay for those products. Thus, changes in reimbursement levels or methods may either positively or negatively impact sales of our products.

 

The Company has no direct control over payer decision-making with respect to coverage and payment levels for our medical device products. Additionally, we expect many payers to continue to explore cost-containment strategies (e.g., comparative and cost-effectiveness analyses, so-called “pay-for-performance” programs implemented by various public and private payers, and expansion of payment bundling schemes such as Accountable Care Organizations, and other such methods that shift medical cost risk to providers) that may potentially impact coverage and/or payment levels for our current products or products we develop.

 

As our product offerings are diverse across healthcare settings, they are affected to varying degrees by the many payment systems. Therefore, individual countries, product lines or product classes may be impacted by changes to these systems.

 

Changes in reimbursement practices of third-party payers could affect the demand for our products and the prices at which they are sold.

 

The sales of our products could depend, in part, on the extent to which healthcare providers and facilities or individual users are reimbursed by government authorities, private insurers and other third-party payers for the costs of our products or the services performed with our products. The coverage policies and reimbursement levels of third-party payers, which can vary among public and private sources and by country, may affect which products customers purchase and the prices they are willing to pay for those products in a particular jurisdiction. Reimbursement rates can also affect the acceptance rate of new technologies. Legislative or administrative reforms to reimbursement systems in the United States or abroad, or changes in reimbursement rates by private payers, could significantly reduce reimbursement for procedures using the Company’s products or result in denial of reimbursement for those products, which would adversely affect customer demand or the price customers may be willing to pay for such products.

 

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Clinical outcome studies regarding our products may not provide sufficient data to either cause third-party payers to approve reimbursement or to make human exoskeletons a standard of care.

 

Our business plan relies on broad adoption of human exoskeletons to provide neuro-rehabilitation in the form of gait training to individuals who have suffered a neurological injury or disorder. Although use of human exoskeletons in neuro-rehabilitation is new, use of robotic devices to provide gait training has been going on for over a decade and the clinical studies relating to such devices have had both positive and negative outcomes. Much of the rehabilitation community has rejected the use of such devices based on the data from some of these studies. Although we believe that human exoskeletons will outperform such robotic equipment, this has not been proven. Furthermore, it may prove impossible to prove an advantage in a timely manner, or at all, which could prevent broad adoption of our products.

 

Part of our business plan relies on broad adoption of the Ekso device to provide “early mobilization” of individuals who have been immobilized by an injury, disease, or other condition. Although the health benefits of other methods of “early mobilization” have been demonstrated in clinical studies in fields such as stroke, those studies did not test early mobilization with human exoskeletons directly. It may be necessary to provide outcome studies on early mobilization with exoskeletons directly in order to convince the medical community of their effectiveness. Such studies have not been designed at this time, and may be too large and too costly for us and our partners to conduct.

 

The technology of load carriage exoskeletons (such as the HULC human exoskeleton) is at a very early stage of development, and the technology may not be broadly adopted in military or other markets.

 

The most recent testing of our HULC technology showed that the metabolic cost of load carriage while wearing the device varied greatly from subject to subject. This implied that the device helped some subjects and hindered others. The source of this phenomenon and whether it will go away with training of the subjects using the device remains unknown and requires further research and development. This phenomenon and others like it could limit the adoption of such devices by militaries or other customers to a certain portion of their personnel or in the worst case could make it impractical to deploy at all. If Lockheed is unable to market the HULC exoskeleton, it would negatively affect our results of operations.

 

We may be unable to attract and retain key employees.

 

The success of the Company depends on our ability to identify, hire, train and retain highly qualified managerial, technical and sales and marketing personnel. In July 2013, thirty Ekso employees were furloughed in order to significantly reduce our cash expenses pending the completion of a financing. Some of these employees have since accepted employment with other firms, and, therefore, will need to be replaced by new hires. In addition, as the Company introduces new products or services, it will need to hire additional personnel. Currently, competition for personnel with the required knowledge, skill and experiences is intense, and the Company may not be able to attract, assimilate or retain such personnel. The inability to attract and retain the necessary managerial, technical and sales and marketing personnel could have a material adverse effect on the business, results of operations and financial condition of the Company.

 

We will experience long and variable sales cycles, which could have a negative impact on our results of operations for any given quarter and may result in volatility in our stock price.

 

The Ekso device has a lengthy sales and purchase order cycle because it is a major capital item and generally requires the approval of senior management at purchasing institutions, which may contribute to substantial fluctuations in our quarterly operating results. Other factors that may cause our operating results to fluctuate include:

 

·general economic uncertainties and political concerns;
·the introduction of new products or product lines;
·product modifications;
·the level of market acceptance of new products;
·the timing of R&D and other expenditures;
·timing of the receipt of orders from, and product shipments to, distributors and customers;
·changes in the distribution arrangements for our products;
·manufacturing or supply delays;
·the time needed to educate and train additional sales and manufacturing personnel; and
·costs associated with defending our intellectual property.

 

In addition to these factors, expenditures are based, in part, on expected future sales.  If sales levels in a particular quarter do not meet expectations, we may be unable to adjust operating expenses quickly enough to compensate for the shortfall of sales, and our results of operations may be adversely affected.

 

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International sales of our products account for a portion of our revenues, which will expose the Company to certain operating risks. If we are unable to successfully manage our international activities, our net sales, results of operations and financial condition could be adversely impacted.

 

Our business currently depends in part on our activities in Europe and other foreign markets, making it subject to a number of challenges that specifically relate to international business activities. These include:

 

·failure of local laws to provide the same degree of protection against infringement of our intellectual property rights;
·protectionist laws and business practices that favor local competitors, which could slow our growth in international markets;
·the expense of establishing facilities and operations in new foreign markets;
·building an organization capable of supporting geographically dispersed operations;
·challenges caused by distance, language and cultural differences;
·challenges caused by differences in legal regulations, markets, and customer preferences, which may limit our ability to adapt our products or succeed in other regions;
·multiple, conflicting, and changing laws and regulations, including complications due to unexpected changes in regulatory requirements, foreign laws, tax schemes, international import and export legislation, trading and investment policies, exchange controls and tariff and other trade barriers;
·foreign tax consequences;
·fluctuations in currency exchange rates and foreign currency translation adjustments;
·foreign exchange controls that might prevent us from repatriating income earned outside the United States;
·imposition of public sector controls;
·political, economic and social instability; and
·restrictions on the export or import of technology.

 

If we are unable to meet and overcome these challenges, then our international operations may not be successful, which could adversely affect our net sales, results of operations and financial condition and limit our growth.

 

We may be unable to manage our growth and entry into new business areas.

 

If the initial response to our exoskeleton products exceeds the Company’s capacity to provide services timely and efficiently, then the Company may need to expand our operations accordingly and swiftly. Management of the Company believes that establishing industry leadership will require the Company to:

 

·test, introduce and develop new products and services including enhancements to our Ekso device;
·develop and expand the breadth of products and services offered;
·develop and expand our market presence through relationships with third parties; and
·generate satisfactory revenues from such expanded products or services to fund the foregoing requirements while obtaining and maintaining satisfactory profit margins.

 

To be able to expand our operations in a cost-effective or timely manner and increase the overall market acceptance of our products and services in this manner, we will need additional capital and technical and managerial human resources. These additional resources may not be available to the Company. Failure of the Company to timely and efficiently expand our operations and successfully achieve the four requirements listed above could have a material adverse effect on the business, results of operations and financial condition of the Company.

 

The disruption or loss of relationships with vendors and suppliers for the components of our products could materially adversely affect our business.

 

Our ability to manufacture and market our products successfully is dependent on relationships with both third party vendors and suppliers. Although most of the raw materials that the Company uses to manufacture our products are readily available from a number of suppliers, we generally procure raw materials and components through purchase orders, with no guaranteed supply arrangements. Our inability to obtain sufficient quantities of various components, if and as required in the future, may subject us to:

 

·delays in delivery or shortages in components that could interrupt and delay manufacturing and result in cancellations of orders for our products;
·increased component prices and supply delays as we establish alternative suppliers;
·inability to develop alternative sources for product components;

 

13
 

 

·required modifications of our products, which may cause delays in product shipments, increased manufacturing costs, and increased product prices; and
·increased inventory costs as we hold more inventory than we otherwise might in order to avoid problems from shortages or discontinuance, which may result in write-offs if we are unable to use all such products in the future.

 

In addition, failure of any one supplier’s components could result in a product recall, which could materially adversely affect our business, operations and cash flows.

 

New product introductions may adversely impact our financial results.

 

We may introduce new products with enhanced features and extended capabilities from time to time. The products will be subject to various regulatory processes, and we will need to obtain and maintain regulatory approvals in order to sell our new products. If a potential purchaser believes that we plan to introduce a new product in the near future or if a potential purchaser is located in a country where a new product that we have introduced has not yet received regulatory approval, planned purchases may be deferred or delayed. As a result, new product introductions may adversely impact our financial results.

 

The acquisition of other companies, businesses, or technologies could result in operating difficulties, dilution, and other harmful consequences.

 

We may selectively pursue strategic acquisitions, any of which could be material to our business, operating results, and financial condition. Future acquisitions could divert management’s time and focus from operating our business. In addition, integrating an acquired company, business or technology is risky and may result in unforeseen operating difficulties and expenditures associated with integrating employees from the acquired company into our organization and integrating each company’s accounting, management information, human resources and other administrative systems to permit effective management. The anticipated benefits of future acquisitions may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all.

 

The impact of United States healthcare reform legislation remains uncertain.

 

In 2010, the Patient Protection and Affordable Care Act (“PPACA”) was enacted into law. The legislation seeks to reform the United States healthcare system. It is far-reaching and is intended to expand access to health insurance coverage, improve quality and reduce costs over time. We expect the new law will have a significant impact upon various aspects of our business operations. The PPACA reduces Medicare and Medicaid payments to hospitals, clinical laboratories and pharmaceutical companies, and could otherwise reduce the volume of medical procedures. These factors, in turn, could result in reduced demand for our products and increased downward pricing pressure. It is also possible that the PPACA will result in lower reimbursements. While the PPACA is intended to expand health insurance coverage to uninsured persons in the United States, the impact of any overall increase in access to healthcare on sales of our products remains uncertain. In addition, the new law imposes a 2.3 percent excise tax on medical devices that will apply to United States sales of our medical device product. Many of the details of the new law will be included in new and revised regulations, which have not yet been promulgated, and require additional guidance and specificity to be provided by the Department of Health and Human Services, Department of Labor and Department of the Treasury. Accordingly, while it is too early to understand and predict the ultimate impact of the new law on our business, the legislation and resulting regulations could have a material adverse effect on our business, cash flows, financial condition and results of operations.

 

Healthcare changes in the United States and other countries resulting in pricing pressures could have a negative impact on our future operating results.

 

In addition to the PPACA, initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare costs, including price regulation and competitive pricing, are ongoing in markets where we will do business. Pricing pressure has also increased in these markets due to continued consolidation among health care providers, trends toward managed care, the shift towards governments becoming the primary payers of health care expenses and laws and regulations relating to reimbursement and pricing generally. Reductions in reimbursement levels or coverage or other cost-containment measures could unfavorably affect our future operating results.

 

14
 

 

Continuing worldwide macroeconomic instability, such as recent recessions in Europe and the debt crisis in certain countries in the European Union, could negatively affect our ability to conduct business in those geographies.

 

Since 2008, the global economy has been impacted by the sequential effects of an ongoing global financial crisis which has caused extreme disruption in the financial markets, including severely diminished liquidity and credit availability.  There can be no assurance that further deterioration will not occur.  Our customers and suppliers may experience financial difficulties or be unable to borrow money to fund their operations which may adversely impact their ability to purchase our products or to pay for them on a timely basis, if at all.  Further, the continuing debt crisis in certain European countries could cause the value of the euro to deteriorate, reducing the purchasing power of our European customers. Failure to receive payment of all or a significant portion of our receivables could adversely affect our results of operations.   In addition, financial difficulties experienced by our suppliers could result in product delays and inventory issues.

 

Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.

 

Natural disasters, terrorist activities, military conflict and other business disruptions could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters are located in California, a seismically active region. A natural disaster in any of our major markets in North America or Europe could have a material adverse impact on our operations, operating results and financial condition. Further, any unanticipated business disruption caused by Internet security threats, damage to global communication networks or otherwise could have a material adverse impact on our operating results.

 

Risks Related to our Financial Condition

 

We have a history of losses and we may not achieve or sustain profitability in the future.

 

Ekso Bionics has incurred losses in each fiscal year since its incorporation in 2005. We anticipate that our operating expenses will increase in the foreseeable future as we continue to invest to grow our business, acquire customers and develop our platform and new functionality. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenues sufficiently to offset these higher expenses.

 

We may not be able to reduce the cost to manufacture our products as planned.

 

Our business plan assumes that exoskeletons can be manufactured more inexpensively than they are currently being manufactured. However, we have not yet found a way to significantly reduce the manufacturing cost of our products and doing so may prove more difficult than expected or even impossible. For example, if expectations for greater functionality of the products drive costs up as other factors drive costs down, the result may be that the overall cost of manufacturing the product stays the same or even increases.

 

Our operating losses and lack of revenues raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.

 

Our historical operating losses and lack of revenues to support our cost structure raise substantial doubt about our ability to continue as a going concern. If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.

 

If we are unable to obtain additional financing on acceptable terms, we may have to curtail our growth or cease our development plans and operations.

 

The operation of our business and our growth efforts will require significant cash outlays and advance capital equipment expenditures and commitments. We will be largely dependent on capital raised through the PPO to implement our business plan and support our operations. We believe that the net proceeds of the PPO will be sufficient to fund us for approximately 18 months. Other than the PPO, at the present time, we have not made any arrangements to raise additional cash. We anticipate for the foreseeable future that cash on hand, cash generated from operations, and the amounts available under lines of credit will not be sufficient to meet our cash requirements, and that we will need to raise additional capital through investments to fund our operations and growth. To date Ekso has been able to raise needed capital for its business through equity and debt investment. We cannot assure you that we will be able to raise additional working capital as needed on terms acceptable to us, if at all.  If we are unable to raise capital as needed, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you may lose all your investment. Financings, if obtained, may be on terms that are dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the price at which you purchase your shares.

 

15
 

 

Potential investors should be aware that the value of an investment in the Company may go down as well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying value.

 

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

 

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the Securities and Exchange Commission (“SEC”) and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

 

Changes in tax laws or exposure to additional income tax liabilities could have a material adverse impact on our financial condition and results of operations.

 

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various jurisdictions outside the U.S.  We are subject to ongoing tax audits in various jurisdictions.  Tax authorities may disagree with certain positions we have taken and assess additional taxes and penalties. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.  However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition.  Additionally, changes in tax laws or tax rulings could materially impact our effective tax rate.  Proposals for fundamental U.S. corporate tax reform, if enacted, could have a material adverse impact on our future results of operations.

 

Investment Risks

 

You could lose all of your investment.

 

An investment in our securities is speculative and involves a high degree of risk. Potential investors should be aware that the value of an investment in the Company may go down as well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying value. You could lose your entire investment.

 

You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders and the purchasers of our Units offered hereby.  The Company will be authorized to issue an aggregate of 500,000,000 shares of Common Stock and 10,000,000 shares of “blank check” preferred stock.  We may issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes.  The future issuance of any such additional shares of our Common Stock may create downward pressure on the trading price of the Common Stock.  We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including at a price (or exercise prices) below the price you paid for your stock.

 

The ability of our Board of Directors to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.

 

Our Board of Directors will be authorized to issue up to 10,000,000 shares of preferred stock with powers, rights and preferences designated by it.  See “Preferred Stock” in the section of this prospectus titled “Description of Securities.” Shares of voting or convertible preferred stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company.  The ability of the Board to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company by tender offer or other means.  Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause.  Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board of Directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally.

 

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There currently is a very limited market for our Common Stock and there can be no assurance that a consistent trading market will ever develop. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.

 

Our Common Stock is quoted on the OTC Markets. The OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on a national securities exchange, which is often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our Common Stock is otherwise rejected for listing, and remains listed on the OTC Markets or is suspended from the OTC Markets, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid and our Common Stock price may be subject to increased volatility.

 

Our Common Stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

 

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction.  Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules.  This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our Common Stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

 

Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, the shares of our Common Stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of our Common Stock. This would also make it more difficult for us to raise capital.

 

17
 

 

An increase in the number of registered shares of our Common Stock will increase our public float and may cause our stock price to decline.

 

With this registration statement, we are registering an additional 67,134,768 shares of Common Stock, consisting of 31,079,768 outstanding shares of the Common Stock and 36,055,000 shares of Common Stock issuable upon exercise of outstanding warrants. The registration of the additional shares of our Common Stock will have the immediate effect of increasing the public float of our Common Stock and any such increase may cause the market price of our Common Stock to decline or fluctuate significantly.

 

We do not anticipate paying dividends on our Common Stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on our Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of Common Stock. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

 

Being a public company is expensive and administratively burdensome.

 

As a public reporting company, we are subject to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires the time and attention of our Board of Directors and management, and increases our expenses. Among other things, we are required to:

 

·maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
·maintain policies relating to disclosure controls and procedures;
·prepare and distribute periodic reports in compliance with our obligations under federal securities laws;
·institute a more comprehensive compliance function, including with respect to corporate governance; and
·involve, to a greater degree, our outside legal counsel and accountants in the above activities.

 

The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the attention of management. There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our Board of Directors, particularly directors willing to serve on an audit committee which we expect to establish.

 

Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.

 

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control over financial reporting. In addition, at such time, if any, as we are no longer a “smaller reporting company,” our independent registered public accounting firm will have to attest to and report on management’s assessment of the effectiveness of such internal control over financial reporting. Based upon the last evaluation conducted as of December 31, 2013, our management at the time concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Specifically, our then-management determined that there were control deficiencies that constituted material weaknesses, including our lack of an independent audit committee, including a financial expert member and lack of appropriate cash controls and information technology controls. While our new management as a result of the Merger believes that our control environment is substantially improved, our independent public accountants, in conducting an audit of Ekso Bionics’ financial statements as of December 31, 2013, identified several control deficiencies that they believed constituted a material weakness, in the aggregate. Our new management has not yet conducted a new formal evaluation of our internal control over financial reporting and has not been able to make its own assessment on whether the internal controls as of 2012 or 2013 were effective.

 

18
 

 

While we intend to diligently and thoroughly document, review, test and improve our internal control over financial reporting in order to ensure compliance with Section 404, management may not be able to conclude that our internal control over financial reporting is effective. Furthermore, even if management were to reach such a conclusion, if our independent registered public accounting firm is not satisfied with the adequacy of our internal control over financial reporting, or if the independent auditors interpret the requirements, rules or regulations differently than we do, then they may decline to attest to management’s assessment or may issue a report that is qualified. Any of these events could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively affect the price of our Common Stock.

 

In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and (if required in future) our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404. We intend to review the effectiveness of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance with Section 404 by the date on which we are required to so comply.

 

***

 

The risks above do not necessarily comprise all of those associated with an investment in the Company. This prospectus contains forward looking statements that involve unknown risks, uncertainties and other factors that may cause the actual results, financial condition, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Factors that might cause such a difference include, but are not limited to, those set out above.

 

19
 

 

SELLING STOCKHOLDERS

 

This prospectus covers the resale from time to time by the selling stockholders identified in the table below of (a) up to 30,300,000 outstanding shares of common stock sold to investors in our 2014 private placement offering of common stock (the “2014 Offering”), (b) up to 2,500,233 outstanding shares of common stock held by certain other stockholders, (c) up to 35,830,000 shares of common stock issuable upon exercise of common stock purchase warrants issued to investors and to the placement agent in our 2014 Offering, and (d) up to 225,000 shares of common stock issuable upon exercise of common stock purchase warrants issued to a former lender.

  

The selling stockholders identified in the table below may from time to time offer and sell under this prospectus any or all of the shares of common stock described under the columns “Shares of common stock owned prior to this Offering and Registered hereby” and “Shares Issuable Upon Exercise of Warrants owned Prior to this Offering and Registered hereby” in the table below.

 

Certain selling stockholders may be deemed to be “underwriters” as defined in the Securities Act. Any profits realized by such selling stockholder may be deemed to be underwriting commissions.

 

The table below has been prepared based upon the information furnished to us by the selling stockholders as of the date of this prospectus.  The selling stockholders identified below may have sold, transferred or otherwise disposed of some or all of their shares since the date on which the information in the following table is presented in transactions exempt from or not subject to the registration requirements of the Securities Act.  Information concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus accordingly.  We cannot give an estimate as to the number of shares of common stock that will actually be held by the selling stockholders upon termination of this offering because the selling stockholders may offer some or all of their common stock under the offering contemplated by this prospectus or acquire additional shares of common stock.  The total number of shares that may be sold hereunder will not exceed the number of shares offered hereby.  Please read the section entitled “Plan of Distribution” in this prospectus.

 

The following table sets forth the name of each selling stockholder, the number of shares of our common stock beneficially owned by such stockholder before this offering, the number of shares to be offered for such stockholder’s account and the number and (if one percent or more) the percentage of the class to be beneficially owned by such stockholder after completion of the offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days after April 30, 2014 (the “Determination Date”), through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person.

 

Unless otherwise set forth below, based upon the information furnished to us, (a) the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the selling stockholder’s name, subject to community property laws, where applicable, (b) no selling stockholder had any position, office or other material relationship within the past three years, with us or with any of our predecessors or affiliates, and (c) no selling stockholder is a broker-dealer or an affiliate of a broker-dealer. Selling stockholders who are broker-dealers or affiliates of broker-dealers are indicated by footnote. We have been advised that these broker-dealers and affiliates of broker-dealers purchased our common stock in the ordinary course of business, not for resale, and at the time of purchase, did not have any agreements or understandings, directly or indirectly, with any person to distribute such common stock. The number of shares of common stock shown as beneficially owned before the offering is based on information furnished to us or otherwise based on information available to us at the timing of the filing of the registration statement of which this prospectus forms a part.

 

20
 

 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Aleksander Ablovatskiy4   20,000    10,000    10,000    0    0 
George Abraham   200,000    100,000    100,000    0    0 
Deepak H.Aggarwal   50,000    25,000    25,000    0    0 
Allan Lipkowitz Revocable Living Trust UAD 8/26/20055   100,000    50,000    50,000    0    0 
Allen Chase Foundation6   100,000    50,000    50,000    0    0 
Animeros Enterprises Limited7   300,000    150,000    150,000    0    0 
Renald & Catherine Anelle   80,000    40,000    40,000    0    0 
Aaron Appel   50,000    25,000    25,000    0    0 
Barclay Armitage   28,000    14,000    14,000    0    0 
B & H Electronics (H.K.) Limited8   1,000,000    500,000    500,000    0    0 
Michael & Julie Barber9   60,000    30,000    30,000    0    0 
Kari D. Battles   30,000    15,000    15,000    0    0 
Bell Family Trust dated 2/2/1995 as Amended, Hester L. Bell Trustee10   400,000    200,000    200,000    0    0 
Bell Family Trust dated 2/2/1995 as Amended, Lon E. Bell Trustee11   125,000    50,000    75,000    0    0 
David W. & Clelia D. Bernhardt12   50,000    25,000    25,000    0    0 
Bialla & Associates Inc. Pension and Profit Sharing Plan13   149,262    50,000    50,000    49,262    * 
Alan Bilzi   100,000    50,000    50,000    0    0 
Bionic Partners, LLC14   6,771,737    2,445,000    2,445,000    1,881,737    2.4%
Jonathan & Gina Blatt15   169,810    50,000    50,000    69,810    * 
David Blau   1,250,000    500,000    750,000    0    0 
Christopher J. and Denise M. Blum16   60,000    30,000    30,000    0    0 
Gregory J. & Heidi H. Borca17   100,000    50,000    50,000    0    0 
David Daniel Boren18   84,445    20,000    20,000    44,445    * 
Kenneth W. Borgnino   40,000    20,000    20,000    0    0 
Andrew S. Brenner   450,000    200,000    250,000    0    0 
Brian J. Brille   500,000    250,000    250,000    0    0 
Brio Capital Master Fund Ltd.19   800,000    400,000    400,000    0    0 
Sergey Brudanin   200,000    100,000    100,000    0    0 
Robert Burkhardt   125,000    50,000    75,000    0    0 
John Busby   500,000    200,000    300,000    0    0 
Capital Ventures International20   300,000    150,000    150,000    0    0 
Scott Cardone21   16,006    0    16,006    0    0 
Gregg E. Chaplin   100,000    50,000    50,000    0    0 
O. Stuart Chase22   150,000    25,000    25,000    0    0 
Daniel B. Chestler   125,000    50,000    75,000    0    0 
Choi Family Trust dated March 15, 200123   200,000    100,000    100,000    0    0 
Joon Nak Choi   200,000    100,000    100,000    0    0 
Claude M. Penchina Revocable Family Trust24   100,000    50,000    50,000    0    0 

  

21
 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Clem, LLC25   200,000    100,000    100,000    0    0 
Joseph Codi   50,000    25,000    25,000    0    0 
Richard D.Cohen   100,000    50,000    50,000    0    0 
Marc Cohn  & Sally Rogoff Cohn   40,000    20,000    20,000    0    0 
Lee Harrison Corbin   225,000    100,000    125,000    0    0 
Howard Cowan   50,000    25,000    25,000    0    0 
Chris Cozzolino26   16,698    0    16,698    0    0 
D. Jonathan Merriman Trust27   100,000    50,000    50,000    0    0 
David S. Uri Revocable Trust dated 12/7/200128   100,000    50,000    50,000    0    0 
Mark D’Azeveo   60,000    30,000    30,000    0    0 
Dafna Lifescience LP29   346,400    173,200    173,200    0    0 
Dafna Lifescience Market Neutral LP30   74,400    37,200    37,200    0    0 
Dafna Lifescience Select LP31   579,200    289,600    289,600    0    0 
David M. Rickey Trust dated May 8, 200232   75,000    30,000    45,000    0    0 
Dave Rickey & Daughters Foundation Charitable Trust33   50,000    20,000    30,000    0    0 
Robert Dayton II   30,000    15,000    15,000    0    0 
Paul DeFeo   50,000    25,000    25,000    0    0 
Michael R. Diaz   75,000    37,500    37,500    0    0 
Alfred J. DiFiore, Jr.   20,000    10,000    10,000    0    0 
Robert W. Dilfer34   103,625    25,000    25,000    53,625    * 
Theodore G. Dimitry   60,000    30,000    30,000    0    0 
Barrett S. DiPaolo35   30,000    15,000    15,000    0    0 
Carl J. Domino   250,000    100,000    150,000    0    0 
Due Mondi Investments, Ltd.36   125,000    50,000    75,000    0    0 
Stephen Dusterdick   50,000    25,000    25,000    0    0 
Jonas A. Edstrom   100,000    50,000    50,000    0    0 
EFD Capital Inc.37   137,158    0    137,158    0    0 
Thomas Eisenberg   100,000    50,000    50,000    0    0 
EMAC SRL38   700,000    350,000    350,000    0    0 
Suzanne B. Engel   50,000    25,000    25,000    0    0 
F&M Star Alliance39   500,000    250,000    250,000    0    0 
Four JR Investments Ltd.40   200,000    100,000    100,000    0    0 
Irwin James and Karen Kay Frankel41   1,000,000    500,000    500,000    0    0 
Robert David Frankel   60,000    30,000    30,000    0    0 
Charles Freeland   200,000    100,000    100,000    0    0 
Leon Frenkel42   200,000    50,000    50,000    0    0 
David Frydrych   220,000    110,000    110,000    0    0 
John D. Gibbs   800,000    400,000    400,000    0    0 
Gibralt Capital Corporation43   1,125,000    500,000    625,000    0    0 
Gottbetter Capital Markets, LLC44   620,912    0    620,912    0    0 

  

22
 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Gottbetter Capital Group, Inc.45   580,623    25,000    50,000    505,623    * 
Peter C. Gould   62,500    25,000    37,500    0    0 
Jonathan P. & Laura Greene   30,000    15,000    15,000    0    0 
Murray W. Grigg   100,000    50,000    50,000    0    0 
Irwin Gruverman   125,000    50,000    75,000    0    0 
Gubbay Investments, LLC46   125,000    50,000    75,000    0    0 
H Investment Company LLC47   500,000    200,000    300,000    0    0 
Jay Haft   100,000    50,000    50,000    0    0 
Larry Haimovitch   100,000    50,000    50,000    0    0 
Marilyn Hamilton48   492,063    200,000    200,000    92,063    * 
Kimberly Hanley49   2,197    0    2,197    0    0 
Hannah Rose Holdings, LLC50   50,000         50,000    0      
Brad Harkavy   20,000    10,000    10,000    0    0 
Robert W. Harrigan   100,000    50,000    50,000    0    0 
Todd Harrigan51   68,400    0    68,400    0    0 
Jeffrey W. & Tamara L. Hayzlett52   100,000    50,000    50,000    0    0 
Hedge Capital Partners LLC53   50,000    25,000    25,000    0    0 
Helmsbridge Holdings Limited54   100,000    50,000    50,000    0    0 
Tim Hermann55   43,698    0    43,698    0    0 
Thomas A. Hillman   50,000    25,000    25,000    0    0 
Byron C. Hughey   30,000    15,000    15,000    0    0 
Daniel W. and Allaire Hummel   90,000    45,000    45,000    0    0 
Alan and Patricia Hunstock56   247,790    50,000    50,000    147,790    * 
Andre Iseli   100,000    50,000    50,000    0    0 
Alec Jaret   50,000    25,000    25,000    0    0 
John P. Funkey Revocable Trust dtd 2/26/9657   32,000    16,000    16,000    0    0 
Jonathan & Gina Blatt Children's Trust58   58,608    20,000    20,000    18,608    * 
Jong T. Choi, Roth IRA59   400,000    200,000    200,000    0    0 
Howard A. & Susan Kalka60   125,000    50,000    75,000    0    0 
Peter Scott Kastner   50,000    25,000    25,000    0    0 
Richard T. Kingston Jr.   50,000    25,000    25,000    0    0 
Mackie Klingbeil   225,000    100,000    125,000    0    0 
Timothy M. Klohck   50,000    25,000    25,000    0    0 
Peter M. Knapp, Jr.   70,000    35,000    35,000    0    0 
Ryan Konik61   17,940    0    17,940    0    0 
Stuart Krieger   300,000    150,000    150,000    0    0 
John C. Kroening   70,000    35,000    35,000    0    0 
Elizabeth Kweon   100,000    50,000    50,000    0    0 
Bill G. Lance   40,000    20,000    20,000    0    0 
David Landskowsky62   101,080    0    101,080    0    0 
William S. Lapp   100,000    50,000    50,000    0    0 

  

23
 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Angela Layton63   179,623    20,000    20,000    139,623    * 
Lee J. Seidler Revocable Trust dtd April 12, 199064   125,000    50,000    75,000    0    0 
Craig L. Leipold   200,000    100,000    100,000    0    0 
Jonathan Kyle Leipold   100,000    50,000    50,000    0    0 
Mark Leopold   100,000    50,000    50,000    0    0 
David Eliot Levin and Julie Scarpelli65   74,629    25,000    25,000    24,629    * 
Michael Levine   60,000    30,000    30,000    0    0 
Roman Livson66   32,700    0    32,700    0    0 
Eliezer Lubitch   400,000    200,000    200,000    0    0 
Lauren Lung   100,000    50,000    50,000    0    0 
Rod Manning67   149,262    50,000    50,000    49,262    * 
Joseph O. Manzi   125,000    50,000    75,000    0    0 
Mark Pacchini Rev. Living Trust dtd 8/21/9268   150,000    75,000    75,000    0    0 
Martillo Finance Ltd.69   200,000    100,000    100,000    0    0 
Mat 9 LLC70   200,000    100,000    100,000    0    0 
Edward T. Maurer   40,000    20,000    20,000    0    0 
Lindsey McGrandy71   1,884    0    1,884    0    0 
Charles & Diane Medici72   50,000    25,000    25,000    0    0 
Merker Family LP73   20,000    10,000    10,000    0    0 
Meryle Evans Family Trust74   100,000    50,000    50,000    0    0 
Oliver Mitchell   100,000    50,000    50,000    0    0 
Andrea I. Nathanson75   5,000    2,500    2,500    0    0 
Nervi Immobiliare SRL76   500,000    250,000    250,000    0    0 
Nexus Direct IRA, LLC FBO John Cotter IRA #09-11125177   200,000    100,000    100,000    0    0 
Northlea Partners, LLLP78   125,000    50,000    75,000    0    0 
Gilbert S. Omenn   140,000    70,000    70,000    0    0 
Opaleye L.P.79   17,000,000    8,500,000    8,500,000    0    0 
OpusPoint Healthcare Innovations Fund L.P.80   800,000    400,000    400,000    0    0 
Lukas and Joanna Partridge81   100,000    50,000    50,000    0    0 
Pauline M. Howard Trust, Candy D'Azevedo TTEE82   30,000    15,000    15,000    0    0 
Malcolm Plett83   16,000    0    16,000    0    0 
Karl and Kelly Post84   100,000    50,000    50,000    0    0 
Itai Preis   40,000    20,000    20,000    0    0 
Martin Prinz85   48,408    0    36,408    12,000    * 
William C. Purdon   60,000    30,000    30,000    0    0 
Stan Rabinovich86   330,000    150,000    150,000    0    0 
Scott Rapfogel87   60,000    30,000    30,000    0    0 
Sofin Raskin   400,000    200,000    200,000    0    0 

  

24
 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Stan Rabinovich, C/F Benjamin Rabinovich UTMA88   20,000    10,000    10,000    0    0 
Stan Rabinovich, C/F Jordan Rabinovich UTMA89   20,000    10,000    10,000    0    0 
Stan Rabinovich, C/F Mia Rabinovich UTMA90   20,000    10,000    10,000    0    0 
Ramat Family Trust91   200,000    100,000    100,000    0    0 
William and Susan Reinhart92   50,000    25,000    25,000    0    0 
Stephen A. Renaud93   850,202    0    850,202    0    0 
Haig Rickerby   50,000    25,000    25,000    0    0 
RMR Wealth Management, LLC94   67,725    0    67,725    0    0 
Kevin Roe95   99,262    25,000    25,000    49,262    * 
Steve Roe96   99,262    25,000    25,000    49,262    * 
Roland F. Hartman - Revocable Trust Agreement between Roland F. Hartman and Roland T. Hartman Trust Dtd. 6/5/199897   50,000    25,000    25,000    0    0 
Frank Ronchetti   10,000    5,000    5,000    0    0 
Sheldon Rose   40,000    20,000    20,000    0    0 
Edward Rosenthal   100,000    50,000    50,000    0    0 
Lindsay A. Rosenwald   200,000    100,000    100,000    0    0 
Stanton J. Rowe   160,000    80,000    80,000    0    0 
RS & VS Ltd.98   50,000    25,000    25,000    0    0 
Eric Rubenstein99   121,209    0    121,209    0    0 
Jonathan Rubinstein & Amy Stevenson100   50,000    25,000    25,000    0    0 
Sack Family Investment Fund101   250,000    100,000    150,000    0    0 
Charles A. Saenger102   142,952    25,000    25,000    92,952    * 
Leo C. Saenger, Jr.   100,000    50,000    50,000    0    0 
Leo C. Saenger, III   50,000    25,000    25,000    0    0 
Daniel Salvas   100,000    50,000    50,000    0    0 
Kally and Nick Savvas103   10,000    5,000    5,000    0    0 
Robert Schoenbacher   50,000    25,000    25,000    0    0 
Benjamin D. Schulman   62,500    25,000    37,500    0    0 
Dean and Elisabeth Sebby   50,000    25,000    25,000    0    0 
Aaron Segal104   29,580    0    29,580    0    0 
Donald P. Sesterhenn   60,000    30,000    30,000    0    0 
Boris Shames   30,000    15,000    15,000    0    0 
Kevin L. Shearan   100,000    50,000    50,000    0    0 
Barry Shemaria   92,500    40,000    52,500    0    0 
Samuel Sherman105   750,000    300,000    450,000    0    0 
Steven Sherman106   2,500,000    1,000,000    1,500,000    0    0 
Michael Silverman107   850,203    0    850,203    0    0 
Steven J. Silverman   900,000    450,000    450,000    0    0 

  

25
 

 

Selling Stockholder  Shares of
common stock
Beneficially
owned Prior to
the Offering
   Shares of
common
stock owned
Prior to this
Offering and
Registered
hereby
   Shares
Issuable Upon
Exercise of
Warrants
owned Prior to
this Offering
and Registered
hereby1
   Shares of
common
stock
Beneficially
Owned Upon
Completion
of the
Offering2
   Percentage of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering3
 
Silverman Insurance Partnership108   2,000,000    1,000,000    1,000,000    0    0 
Terry J. Siman   100,000    50,000    50,000    0    0 
Simpson Family Trust109   149,262    50,000    50,000    49,262    * 
Casimir S. Skrzypczak   40,000    20,000    20,000    0    0 
John D. Smith   50,000    25,000    25,000    0    0 
Richard E. Stites   125,000    50,000    75,000    0    0 
David & Susan Stollwerk110   62,500    25,000    37,500    0    0 
William N. Strawbridge   100,000    50,000    50,000    0    0 
Clayton A. Struve   350,000    150,000    200,000    0    0 
Scott Summit   40,000    20,000    20,000    0    0 
Brian and Karen Sundheim111   50,000    25,000    25,000    0    0 
Swiftwater FOF, LLC112   1,000,000    500,000    500,000    0    0 
The Jonathan S. Bean Family Trust113   200,000    100,000    100,000    0    0 
The Wiesenberg Family Revocable Trust114   50,000    25,000    25,000    0    0 
Mark Tompkins115   4,908,429    1,779,768    1,500,000    1,628,661    2.1%
Triage Capital Management L.P.116   100,000    50,000    50,000    0    0 
Garretson B. Trudeau   350,000    150,000    200,000    0    0 
Venture Lending & Leasing VI, LLC117   1,371,328    0    225,000    1,146,328    1.5%
Andreas Von Buchwaldt   250,000    125,000    125,000    0    0 
Linda K. Wadensten   30,000    15,000    15,000    0    0 
John V. Wagner, Jr.   100,000    50,000    50,000    0    0 
Christopher Washburn   50,000    25,000    25,000    0    0 
James L. & Carolyn J. Welch   100,000    50,000    50,000    0    0 
Lance A. White118   97,842    25,000    25,000    47,842    * 
Craig Whited   550,000    250,000    300,000    0    0 
Michael L. & Solange Whitehead119   50,000    25,000    25,000    0    0 
Jason M. Willis & Amanda K. Willis120     50,000    25,000    25,000    0    0 
Michael L. & Sharon D. Willis121   300,000    150,000    150,000    0    0 
Jackson L. Wilson, Jr.   200,000    100,000    100,000    0    0 
Ariel & Ella Yarnitsky   200,000    100,000    100,000    0    0 
Thomas Zahavi   100,000    50,000    50,000    0    0 
Dov Zakheim   50,000    25,000    25,000    0    0 
Stefan Ziegler   400,000    200,000    200,000    0    0 
Michael Zimmerman   30,000    15,000    15,000    0    0 
Total        31,079,768    36,055,000           

 

 

*Less than 1%

 

1An aggregate of 36,055,000 of the shares of common stock being offered by the selling security holders are issuable upon exercise of common stock purchase warrants.

 

26
 

 

 

 

2Assumes all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of common stock underlying common stock purchase warrants held by the selling stockholders, are sold in the offering and that shares of common stock beneficially owned by such selling stockholder but not being registered by this prospectus (if any) are not sold.

 

3Percentages are based on the 78,445,924 shares of common stock issued and outstanding as of the Determination Date. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock underlying shares of preferred stock, options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days after the Determination Date are deemed outstanding for computing the percentage of the person holding such shares of preferred stock, options or warrants but are not deemed outstanding for computing the percentage of any other person.

 

4Aleksander Ablovatskiy is a former employee of Gottbetter & Partners, LLP, which serves as legal counsel to the Company and is an affiliate of Gottbetter Capital Markets, LLC, a registered broker-dealer.

 

5Allan Lipkowitz is the trustee of Allan Lipkowitz Revocable Living Trust UAD 8/26/2005 and has sole voting and investment power over the shares owned thereby.

 

6O. Stuart Chase is the Headmaster Emeritus of Allen Chase Foundation and has sole voting and investment power over the shares owned thereby.

 

7Vadim Pushkarev has Power of Attorney of Animeros Enterprises Limited and has sole voting and investment power over the shares owned thereby.

 

8Horst J. Pudwill is the director of B&H Electronics (H K) Limited and has sole voting and investment power over the shares owned thereby.

 

9Michael K. Barber and Julie K. Barber are joint tenants and have equal voting and investment power over the shares owned thereby.

 

10Hester L. Bell is the trustee of Bell Family Trust dated 2/2/1995 as Amended, Hester Bell Trustee and has sole voting and investment power over the shares owned thereby.

 

11Lon E. Bell is the trustee of Bell Family Trust dated 2/2/1995 as Amended, Lon E. Bell Trustee and has sole voting and investment power over the shares owned thereby.

 

12David W. Bernhardt and Clelia Bernhardt are joint tenants and have equal voting and investment power over the shares owned thereby.

 

13Vito Bialla is the Chief Executive Officer and trustee of Bialla & Associates, Inc. Pension and Profit Sharing Plan and has sole voting and investment power over the shares owned thereby. Shares beneficially owned includes shares which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 2,270 shares of common stock.

 

14Hugh Regan is the Manager of Bionic Partners, LLC and has sole voting and investment power over the shares owned thereby. Shares beneficially owned includes shares which do not relate to shares purchased in the 2014 Offering.

 

15Shares beneficially owned includes shares held by Jonathan & Gina Blatt which do not relate to shares purchased in the 2014 Offering.

 

16Christopher J. Blum and Denise M. Blum are joint tenants with right of survivorship and have equal voting and investment power over the shares owned thereby.

 

17Gregory J. Borca and Heidi H. Borca are joint tenants and have equal voting and investment power over the shares owned thereby.

 

27
 

 

 

18David Daniel Boren is a member of the Board of Directors of the Company. Shares beneficially owned includes options to purchase 44,445 of Common Stock currently exercisable or exercisable within 60 days of May 1, 2014, warrants to purchase 20,000 shares of Common Stock currently exercisable and 20,000 shares of common stock.

 

19Shaye Hirsch is the director of Brio Capital Master Fund Ltd. and has sole voting and investment power over the shares owned thereby.

 

20Martin Kobinger is the investment manager of Heights Capital Management, Inc., the authorized agent of Capital Ventures International, and has sole voting and investment power over the shares owned thereby.

 

21Scott Cardone is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Cardone received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

22Shares beneficially owned includes shares and warrants of Allen Chase Foundation for which O. Stuart Chase has sole voting and investment power over the shares owned thereby.

 

23Jong Tae Choi is the custodian of Choi Family Trust dated March 15, 2001 and has sole voting and investment power over the shares owned thereby.

 

24Claude M. Penchina is the trustee of Claude M. Penchina Revocable Trust and has sole voting and investment power over the shares held thereby.

 

25Carl Bildner is the Member of Clem LLC and has sole voting and investment power over the shares owned thereby.

 

26Christopher Cozzolino is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Cozzolino received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

27David Jonathan Merriman is the trustee of D. Jonathan Merriman Trust and has sole voting and investment power over the shares owned thereby.

 

28David S. Uri is the trustee of David S. Uri Revocable Trust dated 12/7/2001 and has sole voting and investment power over the shares owned thereby.

 

29Nathan Fischel is the Chief Executive Officer and Fariba Ghodsian is the Chief Investment Officer of Dafna Lifescience Ltd. and they have joint voting and investment power over the shares owned thereby.

 

30Nathan Fischel is the Chief Executive Officer and Fariba Ghodsian is the Chief Investment Officer of Dafna Lifescience Market Neutral Ltd. and they have joint voting and investment power over the shares owned thereby.

 

31Nathan Fischel is the Chief Executive Officer and Fariba Ghodsian is the Chief Investment Officer of Dafna Lifescience Select Ltd. and they have joint voting and investment power over the shares owned thereby.

 

32David Martin Rickey is the trustee of David M. Rickey Trust dated May 8, 2002 and has sole voting and investment power over the shares owned thereby.

 

33David Martin Rickey is the trustee of Dave Rickey & Daughters Foundation Charitable Trust and has sole voting and investment power over the shares owned thereby.

 

34Robert Dilfer is a financial consultant for the Company. Shares beneficially owned includes shares which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 1,359 shares of common stock.

 

35Barrett S. DiPaolo is an employee of Gottbetter & Partners, LLP, which serves as legal counsel to the Company and is an affiliate of Gottbetter Capital Markets, LLC, a registered broker-dealer.

 

36Robert S. Beadle is the President of Due Mondi Investments, Ltd. and has sole voting and investment power over the shares owned thereby.

 

28
 

 

 

37Barbara J. Glenns is the President of EFD Capital Inc. Ms. Glenns is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Ms. Glenns received the warrants in the ordinary course of business for her own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

38Mario Camia is the Chief Executive Officer of EMAC SRL and has sole voting and investment power over the shares owned thereby.

 

39Roman Ryzkhov is the Managing Member of F&M Star Alliance, Inc. and has sole voting and investment power over the shares owned thereby.

 

40Robert D. Burke, MD is the General Partner of Four JR Investments Ltd. and has sole voting and investment power over the shares owned thereby.

 

41Irwin J. Frankel and Karen Frankel are joint tenants and have equal voting and investment power over the shares owned thereby.

 

42Shares beneficially owned includes shares and warrants of Triage Capital Management L.P. for which Leon Frenkel has sole voting and investment power over the shares owned thereby.

 

43Ryan Chen is the Chief Financial Officer of Gibralt Capital Corporation and has sole voting and investment power over the shares owned thereby.

 

44Julio A. Marquez is the President of Gottbetter Capital Markets, LLC and has sole voting and investment power over the shares owned thereby. Gottbetter Capital Markets, LLC is a registered broker-dealer which acted as placement agent for the 2014 Offering. Gottbetter Capital Markets LLC received the warrants as compensation for investment banking services.

 

45Adam S. Gottbetter is the President of Gottbetter Capital Group, Inc. and has sole voting and investment power over the shares held thereby. Gottbetter Capital Group, Inc. is an affiliate of Gottbetter Capital Markets, LLC which served as placement agent for the 2014 Offering. Mr. Gottbetter is the Managing Partner of Gottbetter & Partners, LLP, which serves as legal counsel to the Company. Shares beneficially owned includes shares held by Gottbetter Capital Group, Inc. which do not relate to shares purchased in the 2014 Offering.

 

46David Gubbay is the Manager of Gubbay Investments, LLC and has sole voting and investment power over the shares held thereby.

 

47Pamela M. Baker is the Manager of H Investment Company LLC and has sole voting and investment power over the shares held thereby.

 

48Marilyn Hamilton is a member of the Board of Directors of the Company. Shares beneficially owned includes options to purchase 92,063 of Common Stock currently exercisable or exercisable within 60 days of May 1, 2014, warrants to purchase 200,000 shares of Common Stock currently exercisable and 200,000 shares of common stock.

 

49Kimberly Hanley is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Ms. Hanley received the warrants in the ordinary course of business for her own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

50Matthew Rosenblum is the Managing Member of Hannah Rose Holdings LLC and has sole voting and investment power over the shares held thereby.

 

51Todd Harrigan is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Harrigan received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

52Jeffrey W. Hayzlett and Tamara Hayzlett are joint tenants and have equal voting and investment power over the shares owned thereby.

 

53Allan Rothstein is the Managing Member of Hedge Capital Partners LLC and has sole voting and investment power over the shares held thereby.

 

29
 

 

 

54Anthony Heller is the President of Helmsbridge Holdings Limited and has sole voting and investment power over the shares held thereby.

 

55Tim Hermann is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Hermann received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

56Shares beneficially owned includes shares which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 8,163 shares of common stock held by The Hunstock Living Trust dtd. July 18, 1995 for which Alan Hunstock is the trustee and has sole voting and investment power over the shares held thereby.

 

57John P. Funkey is the trustee of John P. Funkey Revocable Trust dtd 2/26/96 and has sole voting and investment power over the shares held thereby.

 

58H. Joshua Blatt is the trustee of Jonathan & Gina Blatt Children’s Trust and has sole voting and investment power over the shares owned thereby. Shares beneficially owned includes shares held by Jonathan & Gina Blatt Children’s Trust which do not relate to shares purchased in the 2014 Offering.

 

59Jong T. Choi is the custodian of Jong T. Choi Roth IRA and has sole voting and investment power over the shares owned thereby.

 

60Howard A. Kalka and Susan Kalka are tenants in common and have equal voting and investment power over the shares held thereby.

 

61Ryan Konik is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Konik received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

62David Landskowsky is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Landskowsky received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

63Shares beneficially owned include shares held by Angela Layton which do not relate to shares purchased in the 2014 Offering.

 

64Lee J. Seidler is the trustee of Lee J. Seidler Revocable Trust dtd April 12, 1990 and has sole voting and investment power over the shares held thereby.

 

65Shares beneficially owned include shares held by David Eliot Levin and Juliet Scarpelli which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 1,359 shares of common stock.

 

66Roman Livson is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Livson received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

67Shares beneficially owned includes shares held by Rod Manning which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 2,720 shares of common stock.

 

68Mark Pacchini is the trustee of Mark Pacchini Rev. Living Trust dtd 8/21/92 and has sole voting and investment power over the shares owned thereby.

 

69Paul Conway is the Director of Martillo Finance Limited and has sole voting and investment power over the shares owned thereby.

 

70Ralph Pastore is the Manager of Mat 9 LLC and has sole voting and investment power over the shares owned thereby.

 

71Lindsey McGrandy is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Ms. McGrandy received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

30
 

 

 

72Charles Medici and Diane Medici are joint tenants and have equal voting and investment power over the shares held thereby.

 

73Robert Merker is the Managing Member of the General Partner of Merker Family LP, and has sole voting and investment power over the shares owned thereby.

 

74Steven Evans is the trustee of Meryle Evans Family Trust and has sole voting and investment power over the shares held thereby.

 

75Andrea Nathanson is an employee of Gottbetter & Partners, LLP, which serves as legal counsel to the Company and is an affiliate of Gottbetter Capital Markets, LLC, a registered broker-dealer.

 

76Mario Camia is the Chief Executive Officer of Nervi Immobiliare SRL and has sole voting and investment power over the shares owned thereby.

 

77John Cotter is the custodian of Nexus Direct IRA, LLC FBO John Cotter IRA #09-111251 and has sole voting and investment power over the shares owned thereby.

 

78John H. Abeles is the Manager of the General Partner of Northlea Partners LLLP and has sole voting and investment power over the shares held thereby.

 

79James Silverman is the Managing Director of Opaleye, L.P. and has sole voting and investment power over the shares owned thereby.

 

80Michael Weiss is the Manager of the General Partner of Opus Point Healthcare Innovations Fund LP and has sole voting and investment power over the shares held thereby.

 

81Lukas Partridge and Joanna Partridge are joint tenants and have equal voting and investment power over the shares owned thereby.

 

82Cathy D'Azevedo Bathon is the trustee of Pauline M. Howard Trust and has sole voting and investment power over the shares owned thereby.

 

83Malcolm Plett is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Plett received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

84Karl Stephen Post and Kelly Lynn Post are joint tenants and have equal voting and investment power over the shares owned thereby.

 

85Martin Prinz is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Prinz received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

86Shares beneficially owned includes shares of Stan Rabinovich c/f Benjamin Rabinovich UTMA, Stan Rabinovich c/f Jordan Rabinovich UTMA and Stan Rabinovich c/f Mia Rabinovich UTMA for which Stan Rabinovich is the custodian and has sole voting and investment power over the shares held thereby.

 

87Scott Rapfogel is an employee of Gottbetter & Partners, LLP, which serves as legal counsel to the Company and is an affiliate of Gottbetter Capital Markets, LLC, a registered broker-dealer.

 

88Stan Rabinovich is the custodian and has sole voting and investment power over the shares held thereby.

 

89Stan Rabinovich is the custodian and has sole voting and investment power over the shares held thereby.

 

90Stan Rabinovich is the custodian and has sole voting and investment power over the shares held thereby.

 

91Charles S. Ramat is the trustee of Ramat Family Trust and has sole voting and investment power over the shares held thereby.

 

92William L. Reinhardt and Susan I. Reinhardt are joint tenants and have equal voting and investment power over the shares owned thereby.

 

31
 

 

 

93Stephen A. Renaud is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Renaud received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

94Philip Rabinovich is the Managing Partner of RMR Wealth Management, LLC and has sole voting and investment control over the shares held thereby. RMR Wealth Management, LLC is a registered broker-dealer which acted as placement agent for the 2014 Offering. RMR Wealth Management, LLC received the warrants as compensation for investment banking services.

 

95Shares beneficially owned includes shares held by Kevin Roe which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 2,720 shares of common stock.

 

96Shares beneficially owned includes shares held by Steve Roe which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 2,720 shares of common stock.

 

97Roland F. Hartman is the trustee of Roland F. Hartman - Revocable Trust between Roland F. Hartman and Roland T. Hartman Trust Dtd. 6/5/1998 and has sole voting and investment power over the shares owned thereby.

 

98Rodney N. Schorlemmer is the Manager of RS & VS Ltd. and has sole voting and investment power over the shares held thereby.

 

99Eric Rubenstein is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Rubenstein received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

100Jonathan Rubinstein and Amy Stevenson are joint tenants and have equal voting and investment power over the shares owned thereby.

 

101Burton M. Sack is the Managing Member of Sack Family Investment Fund and has sole voting and investment power over the shares held thereby.

 

102Shares beneficially owned includes shares held by Charles Saenger which do not relate to shares purchased in the 2014 Offering.

 

103Nick Savvas and Kally Savvas are joint tenants and have equal voting and investment power over the shares owned thereby. Kally Savvas is an employee of Gottbetter & Partners, LLP, which serves as legal counsel to the Company and is an affiliate of Gottbetter Capital Markets, LLC, a registered broker-dealer.

 

104Aaron Segal is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Segal received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

105Samuel Sherman is the brother of Steven Sherman, who serves as Chairman of the Board of Directors of the Company.

 

106Steven Sherman serves as Chairman of the Board of Directors of the Company.

 

107Michael Silverman is an affiliate of a broker-dealer which acted as placement agent in the 2014 Offering. Mr. Silverman received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.

 

108James Silverman is the trustee of Silverman Insurance Partnership and has sole voting and investment power over the shares owned thereby.

 

109Paul V. Simpson is the trustee of Simpson Family Trust and has sole voting and investment power over the shares owned thereby. Shares beneficially owned includes shares held by Simpson Family Trust which do not relate to shares purchased in the 2014 Offering and warrants to purchase 2,720 shares of common stock.

 

110David Stollwerk and Susan Stollwerk are joint tenants and have equal voting and investment power over the shares held thereby.

 

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111Brian Sundheim and Karen Sundheim are joint tenants and have equal voting and investment power over the shares held thereby.

 

112Adele Glenn Helmers is the Sole Managing Member of Swiftwater FOF, LLC and has sole voting and investment power over the shares owned thereby.

 

113Jonathan S. Bean is the trustee of The Jonathan S. Bean Family Trust and has sole voting and investment power over the shares held thereby.

 

114James H. Wiesenberg is the trustee of Wiesenberg Family Revocable Trust and has sole voting and investment power over the shares held thereby.

 

115Shares beneficially owned includes shares held by Lance White which do not relate to shares purchased in the 2014 Offering.

 

116Leon Frenkel is the Senior Manager of Triage Capital Management L.P. and has sole voting and investment power over the shares held thereby.

 

117Shares beneficially owned includes shares held which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 29,466 shares of common stock. Shares beneficially owned also consists of warrants received by Venture Lending & Leasing VI, LLC in connection with its consent to the sale of the Bridge Notes and waiver of certain events of default under the senior note payable agreement.

 

118Shares beneficially owned include shares held by Lance A. White which do not relate to shares purchased in the 2014 Offering as well as warrants to purchase 1,359 shares of common stock.

 

119Michael Whitehead and Solange Whitehead are joint tenants and have equal voting and investment power over the shares owned thereby.

 

120Jason Michael Willis and Amanda Kathryn Willis are joint tenants and have equal voting and investment power over the shares owned thereby.

 

121Michael L. Willis and Sharon D. Willis are joint tenants and have equal voting and investment power over the shares owned thereby.

 

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USE OF PROCEEDS

 

We will not receive proceeds from sales of common stock made under this prospectus.

 

DETERMINATION OF OFFERING PRICE

 

There currently is a limited public market for our common stock. The selling stockholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution” below for more information.

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information and Holders

 

Our common stock is currently eligible for quotation and trades on the OTC Market under the symbol “EKSO.” The quotation of our common stock began on or about January 17, 2014. There has been very limited trading in our common stock to date.

 

As of May 6, 2014, we had 78,445,924 shares of our common stock issued and outstanding held by approximately 313 stockholders of record. To date, we have not paid dividends on our common stock.

 

We also have outstanding warrants to purchase 36,676,363 shares of our common stock, subject to adjustment in certain circumstances as provided therein. See “Description of Securities” below.

 

The following table sets forth the high and low closing bid prices for our common stock for the fiscal quarter indicated as reported on OTC Markets. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our common stock is very thinly traded and, thus, pricing of our common stock on OTC Markets does not necessarily represent its fair market value.

 

Period  High   Low 
         
Quarter ended March 31, 2014 (beginning January 17, 2014)  $7.65   $2.00 
Quarter ending June 30, 2014 (through May 6, 2014)   3.50    2.27 

 

Dividends

 

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. Other than provisions of the Nevada Revised Statutes requiring post-dividend solvency according to certain measures, there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock.  

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The Company had no equity compensation plans as of the end of fiscal year 2013.

 

On January 15, 2014, our Board of Directors adopted, and our stockholders approved, our 2014 Equity Incentive Plan, which reserves a total of 14,410,000 shares of our common stock for issuance pursuant to awards granted under the 2014 Plan.

 

As of April 30, 2014, options to purchase an aggregate of 10,638,502 shares of our Common Stock have been issued and remain outstanding under the 2014 Plan, leaving 3,771,498 shares available for future awards. See “Description of Securities—Options” below for more information.

  

As described below, incentive awards authorized under the 2014 Plan include, but are not limited to, incentive stock options within the meaning of Section 422 of the internal Revenue Code of 1986, as amended (the “Code”). If an award granted under the 2014 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2014 Plan.

 

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The number of shares of our Common Stock subject to the 2014 Plan, and any number of shares subject to any numerical limit in the 2014 Plan, to the terms of any incentive award or to any combination of the foregoing, is expected to be adjusted in the event of any change in our outstanding our Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

 

Administration

 

The Compensation Committee of the Board, or the Board in the absence of such a committee, will administer the 2014 Plan. Subject to the terms of the 2014 Plan, the Compensation Committee or the Board has complete authority and discretion to determine the terms upon which awards may be granted under the 2014 Plan.

 

Grants

 

The 2014 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Code and stock appreciation rights, as described below:

 

·Options granted under the 2014 Plan entitle the grantee, upon exercise, to purchase up to a specified number of shares from us at a specified exercise price per share. The exercise price for shares of our Common Stock covered by an option generally cannot be less than the fair market value of our Common Stock on the date of grant unless agreed to otherwise at the time of the grant. In addition, in the case of an incentive stock option granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the per share exercise price will be no less than 110% of the fair market value of our Common Stock on the date of grant.

 

·Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the Compensation Committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units.

 

·The Compensation Committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.

 

·The 2014 Plan authorizes the granting of stock awards. The Compensation Committee will establish the number of shares of our Common Stock to be awarded (subject to the aggregate limit established under the 2014 Plan upon the number of shares of our Common Stock that may be awarded or sold under the 2014 Plan) and the terms applicable to each award, including performance restrictions.

 

·Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of our Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of our Common Stock on the date of exercise of the SAR and the market price of a share of our Common Stock on the date of grant of the SAR.

 

Duration, Amendment, and Termination

 

The Board has the power to amend, suspend or terminate the 2014 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year of such change. Unless sooner terminated, the 2014 Plan would terminate ten years after it is adopted.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this prospectus. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this prospectus, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.

 

Overview

 

The following discussion highlights Ekso Bionics’ results of operations and the principal factors that have affected our consolidated financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our consolidated financial condition and results of operations presented herein. The following discussion and analysis is based on Ekso Bionics’ audited financial statements contained in this prospectus, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

As a result of the Merger and the change in our business and operations, from engaging in the business of distributing medical supplies and equipment to municipalities, hospitals, pharmacies, care centers, and clinics throughout the country of Chile, to the business of designing, developing and selling exoskeletons to augment human strength, endurance and mobility, a discussion of the past financial results of PN Med Group Inc. is not pertinent, and under generally accepted accounting principles in the United States, the historical financial results of Ekso Bionics, Inc. (“Ekso Bionics”), the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.

 

The Company has pioneered the field of human robotic exoskeletons to augment human strength, endurance and mobility. Ekso Bionics designs, develops and sells wearable robots, or “human exoskeletons,” that have applications in medical, military, industrial, and consumer markets. Our exoskeletons systems are strapped over the user’s clothing, enabling individuals with neurological conditions affecting gait (e.g., spinal cord injury or stroke) to walk again; permitting soldiers to carry heavy loads for long distances while mitigating lower back, knee, and ankle injuries; and allowing industrial workers to perform heavy duty work for extended periods.

 

Ekso Bionics’ current medical devices or exoskeletons - the Ekso GTTM, or “Ekso” - are used by hospitals on patients with lower extremity weakness or paralysis. Our products have been listed with the U.S. Food and Drug Administration (“FDA”) and have received a CE Mark (indicating compliance with European Union legislation). We have sold over 50 devices to rehabilitation centers and individual users for rehabilitation since February 2012. Ekso Bionics also has a collaborative partnership with Lockheed Martin Corporation to develop products for military applications.

 

Until the February 2012 launch of Ekso Bionics’ first commercial medical exoskeleton, we had devoted substantially all of our efforts to product development and raising capital. Accordingly, we are considered to be in the early commercialization stage.

 

Strategy

 

Ekso Bionics’ long-term goal is to have one million persons stand and walk in Ekso TM exoskeletons by February 2022.

 

The first step to achieving that goal is for us to focus on selling our medical exoskeletons to rehabilitation centers and hospitals in the United States and Europe. Ekso Bionics began that effort with the February 2012 sale of Ekso, an exoskeleton for complete spinal cord injuries (“SCI”). We have expanded that effort with the launch of our Variable Assist software and the announcement of our newest hardware platform, Ekso GT. The Variable Assist software enables users with any amount of lower extremity strength to contribute their own power for either leg to achieve self-initiated walking. The Ekso GT builds on the experience of the Ekso and incorporates the Variable Assist, allowing us to expand our sales and marketing efforts beyond SCI-focused centers to centers supporting stroke and related neurological patients. There are approximately 5,700 registered hospitals in the U.S., providing services to the 12,000 to 14,000 SCI incidences and approximately 650,000 persons who survive a stroke per year.

 

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In parallel to the development and early commercialization of medical exoskeletons, Ekso Bionics has been and continues to work on the development of exoskeletons for able-bodied users. In addition to furthering the field of exoskeletons that can lead to the commercialization of exoskeletons outside our current medical applications, Ekso Bionics’ development work furthers technology that is also potentially applicable for use in future models of the Ekso, including potentially a unit for home use.

 

Critical Accounting Policies, Estimates, and Judgments

 

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

Revenue and Cost of Revenue

 

When collaboration, other research arrangements and product sales include multiple-element revenue arrangements, we account for these transactions by determining the elements, or deliverables, included in the arrangement and determining which deliverables are separable for accounting purposes. We consider delivered items to be separable if the delivered item(s) have stand-alone value to the customer and delivery or performance of the undelivered item is considered probable and substantially in control of the vendor.

 

We recognize revenue when the four basic criteria of revenue recognition are met:

 

·Persuasive evidence of an arrangement exists. Customer contracts and purchase orders are generally used to determine the existence of an arrangement.

 

·The transfer of technology or products has been completed or services have been rendered. Customer acceptance, when applicable, is used to verify delivery.

 

·The sales price is fixed or determinable. We assess whether the cost is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment.

 

·Collectability is reasonably assured. We assess collectability based primarily on the creditworthiness of the customer as determined by credit checks and analysis as well as the customer’s payment history.

 

Beginning in 2012, with the commercialization of the Ekso, we began to recognize revenue from the sales of the Ekso and related services, in addition to our historical revenue streams including collaborative research and development service arrangements, technology license agreements, and government grants.

 

Medical Device Revenue and Cost of Revenue

 

We build medical devices called the Ekso for sale and capitalize into inventory materials, direct and indirect labor and overhead in connection with the manufacture and assembly of these units.

 

In a typical Ekso sales arrangement, we are obligated to deliver to the customer the Ekso unit and related software (the software is essential to the unit’s functionality), post-sale training, technical support and maintenance. Because of the uniqueness of the Ekso unit and its use, none of these deliverables has standalone value to the customer. Accordingly, once a sales arrangement with a fixed or determinable price and reasonably assured payment is in place, the entire sales price is accounted for as a single unit of accounting. The combined total sales price for the delivered and undelivered elements is deferred and amortized to revenue beginning at the completion of training, on a straight line basis over the maintenance period, usually three years, which is the last delivered item.

 

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Because of the limited guidance about how to account for costs associated with a delivered item that cannot be separated from the undelivered items, the accounting for such costs must be based on the conceptual framework and analogies to the limited guidance that does exist. Accordingly, we account for the costs of the delivered items following, by analogy, the guidance in Accounting Standards Codification (“ASC”) 310-20, Nonrefundable Fees and Other Costs (“ASC 310-20”). Under this guidance, upon completion of training, the costs capitalized into inventory including direct material, direct and indirect labor, as well as overhead costs are deferred and then amortized to cost of revenue on the same basis as deferred revenue. Indirect labor and overhead costs are included in inventory because, under the conceptual framework, they add value to the Ekso unit and are otherwise appropriate inventory costs. Since we have an enforceable contract for the remaining deliverables and the entire arrangement is expected to generate positive margins, realization of the capitalized costs is probable and, as such, deferring and amortizing them on the same basis as deferred revenue is appropriate.

 

At the time of shipment to the customer, the related inventory is reclassified to deferred cost of revenue where it is amortized to cost of revenue over the same period that revenue is recognized. All costs incurred subsequent to the date of shipment are expensed as incurred. The cost of medical device revenue includes expenses associated with the manufacture and delivery of devices including materials, payroll, benefits, subcontractor expenses, depreciation of manufacturing equipment, excess and obsolete inventory costs, and shipping charges.

 

Engineering Services Revenue and Cost of Revenue

 

We enter into technology license agreements that typically provide for annual minimum access fees. When these annual minimum payments have separate stand-alone values, we recognize revenue when the technology is transferred or accessed, provided that the technology transferred or accessed is not dependent on the outcome of continuing engineering and/or other development efforts.

 

Collaborative arrangements typically consist of cost reimbursements for specific engineering and development spending, and future product royalty payments. Cost reimbursements for engineering and development spending are recognized as the related project labor hours are incurred in relation to all labor hours and when collectability is reasonably assured. Amounts received in advance are recorded as deferred revenue until the technology is transferred, services are rendered, or milestones are reached. Product royalty payments are recorded when earned under the arrangement.

 

Government grants, which support our research efforts in specific projects, generally provide for reimbursement of approved costs as defined in the notices of grant awards. Grant revenue is recognized as the associated project labor hours are incurred in relation to total labor hours. There are some grants, like the National Science Foundation grants, which we draw upon and spend based on budgets preapproved by the grantor.

 

The cost of engineering services revenue includes payroll and benefits, subcontractor expenses and materials. All costs related to engineering services are expensed as incurred and reported as cost of revenue.

 

Research and Development

 

Research and development costs consist of costs incurred for our own internal research and development activities. These costs primarily include salaries and other personnel-related expenses, contractor fees, facility costs, supplies, and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. Such costs are expensed as incurred.

 

Inventories, net

 

Inventories are recorded at the lower of cost or market value. Cost is principally determined using the average cost method. Parts from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress (“WIP”). Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories would be recorded as an inventory impairment charge to consolidated statement of operations.

 

Stock-based Compensation

 

We measure stock-based compensation expense for all stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes option pricing model and recognize the fair value less estimated forfeitures, on a straight-line basis over the requisite service periods of the awards. Stock-based awards made to non-employees are measured and recognized based on the estimated fair value on the vesting date and are remeasured at each reporting period.

 

Our determination of the fair value of stock-based awards on the date of grant using the Black-Scholes option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Because there is insufficient information available to estimate the expected term of the stock-based awards, we adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin No. 110. On this basis, we estimated the expected term of options granted by taking the average of the vesting term and the contractual term of the option.

 

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We have, from time to time, modified the terms of stock options granted to our employees. We account for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value based measure of the modified award on the date of modification over the fair value of the original award immediately before the modification.

 

Convertible Instruments

 

We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities , (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument.

 

We account for convertible instruments when we have determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Under ASC 470-20, we record, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. We account for convertible instruments (when we have determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC 815.  Under ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract is allocated to the fair value of the derivative. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in results of operations.

 

We also follow ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (i) a fixed monetary amount known at inception (for example, a payable settleable with a variable number of the issuer’s equity shares); (ii) variations in something other than the fair value of the issuer’s equity shares (for example, a financial instrument indexed to the Standard and Poor's S&P 500 Index and settleable with a variable number of the issuer’s equity shares); or (iii) variations inversely related to changes in the fair value of the issuer’s equity shares (for example, a written put option that could be net share settled). Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives, and are carried as a liability at fair value at each balance sheet date with remeasurements reported in interest expense in the accompanying consolidated statements of operations.

 

Warrants Issued in Connection with Financings

 

We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash. For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other income (expense) in the Consolidated Statements of Operations.

 

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Results of Operations

 

The following table presents our results of operations for the periods indicated and as a percentage of total revenue. The year-to-year comparison of results is not necessarily indicative of results for future periods.

 

   Years ended December 31, 
   2013   2013(1)   2012   2012(1) 
             
Revenue:                    
Medical devices  $1,611,709    49%  $566,222    21%
Engineering services   1,690,235    51    2,140,355    79 
Total revenue   3,301,944    100    2,706,577    100 
                     
Cost of revenue:                    
Cost of medical devices   1,460,692    44    553,429    20 
Cost of engineering services   1,253,942    38    1,782,848    66 
Total cost of revenue   2,714,634    82    2,336,277    86 
                     
Gross profit   587,310    18    370,300    14 
                     
Operating expenses:                    
General and administrative   3,913,047    119    4,381,067    162 
Research and development   2,677,310    81    4,304,317    159 
Sales and marketing   4,291,282    130    5,925,905    219 
Total operating expenses   10,881,639    330    14,611,289    540 
                     
Loss from operations  $(10,294,329)   (312)%  $(14,240,989)   (526)%
                     
Other income (expense):                    
Interest expense   (1,726,455)   (52)   (736,346)   (27)
Interest income   5,225        10,692     
                     
Non-cash gain on changes in the fair value of warrants   186,075    6    17,126     
Other expense, net   (57,890)   (2)   (92,441)   (3)
Total other expense, net   (1,593,045)   (48)   (800,969)   (30)
                     
Net loss  $(11,887,374)   (360)%  $(15,041,958)   (556)%

(1)Amounts may not sum due to rounding.

 

The following tables present our revenue and operating expenses for the periods indicated.

 

Revenue

   Years Ended
December 31,
     
   2013   2012   $ Change 
Medical devices  $1,611,709   $566,222   $1,045,487 
Engineering services   1,690,235    2,140,355    (450,120)
Total revenue  $3,301,944   $2,706,577   $595,367 

 

Medical device revenue increased $1,045,487 or approximately 185%, due to an increase in recognized revenue related to 2012 sales and to a lesser extent to the revenue related to 2013 as medical device revenue is generally recognized over the period of the device maintenance service agreement or three years from the delivery date of the device. Engineering services revenue decreased $450,120 or approximately 21% primarily due to lower development revenue related to the expiration of a four-year agreement with a single customer and a shift in resources to research and development, partially offset by an increase of approximately $186,000 related to federal agency contracts.

 

 

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Costs and Expenses

 

Cost of Revenue

   Years Ended
December 31,
     
   2013   2012   $ Change 
     
Medical devices  $1,460,692   $553,429   $907,263 
Engineering services   1,253,942    1,782,848    (528,906)
Total  cost of revenue  $2,714,634   $2,336,277   $378,357 

  

Medical device cost of revenue increased $907,263 or approximately 164%, due to an increase in recognized cost of revenue related to 2012 sales and to a lesser extent to the cost of revenue related to 2013 sales as cost of medical device revenue is generally recognized over the period of the device maintenance service agreement. In addition, there was an increase of $250,000 in medical device cost of revenue related to a scheduled retrofit of previously sold devices and an increase of $234,367 related to service agreements. Engineering services cost of revenue decreased $528,906 or approximately 30% primarily due to lower development costs related to the expiration of an agreement with a single customer and the shift in resources to research and development.

 

General and Administrative

   Years Ended
December 31,
     
   2013   2012   $ Change 
             
General and administrative  $3,913,047   $4,381,067   $(468,020)

 

General and administrative expenses decreased $468,020 or approximately 11% primarily due to a decrease in employee-related expenses driven by a reduction in force in the third quarter of 2013 in order to reduce the Company’s cash burn prior to the completion of the PPO in January 2014.

 

Research and Development

   Years  Ended
December 31,
     
   2013   2012   $ Change 
             
Research and development  $2,677,310   $4,304,317   $(1,627,007)

 

Research and development expenses decreased $1,627,007 or 38% primarily due to lower employee-related costs driven by the reduction in force in the third quarter of 2013.

 

Sales and Marketing

   Years Ended
December 31,
     
   2013   2012   $ Change 
             
Sales and marketing  $4,291,282   $5,925,905   $(1,634,623)

 

Sales and marketing expenses decreased $1,634,623 or 28% primarily due to lower employee-related costs largely in marketing, and other marketing-related expenses driven by the reduction in force in the third quarter of 2013.

 

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Other Income (Expense)

   Years Ended
December 31,
     
   2013   2012   $ Change 
Interest expense  $(1,726,455)  $(736,346)  $(990,109)
Interest income  $5,225   $10,692   $(5,467)
                
Non-cash gain on changes in the fair value of warrants   186,075    17,126    168,949 
Other expense, net   (57,890)   (92,441)   34,551 
Total  other expense, net  $(1,593,045)  $(800,969)  $(792,076)

 

Total other expense, net increased $792,076 or 99% primarily as a result of a full year of interest and accretion of the discount in 2013 on the $3.5 million loan we entered into in 2012, along with the interest on a bridge loan we entered into in 2013, partially offset by the non-cash gain on the change in fair value of the warrant liability.

 

Financial Condition, Liquidity and Capital Resources

 

Since the Company’s inception, we have devoted substantially all of our efforts toward the development of exoskeletons for the medical, military and industrial markets and, more recently, toward the commercialization of our medical exoskeletons to rehabilitation centers; and toward raising capital. Accordingly, we are considered to be in the early commercialization stage. We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and convertible and promissory notes, as well as from government research grant awards and strategic collaboration payments.

 

Cash and Working Capital

 

Since the Company’s inception, we have incurred recurring net losses and negative cash flows from operations. As of December 31, 2013, we had a working capital deficit of $8.9 million, an accumulated deficit of $38.0 million and a stockholders’ deficit of $36.4 million. We have incurred net losses of $11.9 million and $15.0 million for the years ended December 31, 2013 and 2012, respectively.

 

Liquidity and Capital Resources

 

Since the Company’s inception, we have satisfied our operating cash requirements from proceeds associated with non-recurring engineering and development projects and from grants. More recently, beginning in December 2010, we financed our operations primarily from the private placements of preferred stock and convertible debt sold principally to outside investors.

 

We sold approximately $8.0 million of preferred stock to outside investors between December 2010 and June 2011, and approximately $9.0 million of preferred stock to outside investors between December 2011 and March 2012. Between May 2013 and August 2013, we sold approximately $10.8 million of preferred stock with warrants to purchase common stock. In November 2013, we secured $5.0 million through the issuance of convertible bridge notes, which were subsequently converted into common stock and common stock warrants in our January 2014 PPO when we raised an additional $25.3 million (excluding the conversion of the November 2013 convertible bridge notes) from January 15 through February 6, 2014. We believe that the Merger will provide additional opportunities to issue securities and raise capital in the future.

 

Immediately after the closing of the Merger and private placement discussed above on January 15, 2014, we had approximately $11.0 million in cash, after payment of transaction-related expenses of approximately $2.3 million and the repayment in full of our $2.5 million senior note payable from the proceeds of the offering. We subsequently closed two additional private placement financings resulting in total gross proceeds of $9.8 million, not including deductions for placement agent fees of approximately $1.0 million. During the next two years, we expect to spend approximately $9.0 million on sales and marketing expenses (including regulatory, clinical and related expenses) in support of our efforts to increase our product sales to rehabilitation hospital customers. We also expect to use approximately $12.0 million to pay general and administrative expenses to support our ongoing research and development efforts.

 

We believe our cash resources as of March 31, 2013, along with the proceeds from the PPO of $25.3 million, are sufficient to implement our current business plan, support operations, fund research and development and meet current obligations through the middle of 2015, assuming our monthly cash burn rate does not significantly increase above the current monthly cash burn of approximately $1 million. We plan to raise additional capital to finance our operations beyond the middle of 2015. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to reduce our discretionary overhead costs substantially, including research and development, general and administrative and sales and marketing expenses or otherwise curtail operations.

 

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Cash and Cash Equivalents

 

The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.

   Years Ended 
   December 31, 
   2013   2012 
         
Cash, beginning of period  $1,738,662   $557,874 
Net cash used in operating activities   (9,063,577)   (12,663,145)
Net cash used in investing activities   (379,223)   (864,838)
Net cash provided by financing activities   8,509,444    14,708,771 
Cash, end of period  $805,306   $1,738,662 

 

Net Cash Used in Operating Activities

 

For the year ended December 31, 2013, net cash used in operating activities was $9,063,577. This consisted primarily of our net loss of $11,887,374 and the non-cash gain due to changes in the fair value of the warrant liabilities of $186,075. This was partially offset by other non-cash charges of $799,194 related to recording the convertible Bridge Notes at fair value, $468,906 in depreciation and amortization, $390,617 in stock-based compensation expense, $169,248 in the amortization of debt discounts, $230,805 in accrued interest and a net increase in changes in operating assets and liability of $973,528. The net increase in the changes in operating assets and liabilities can be attributed primarily to a $1,163,626 increase in customer advances and deferred revenue primarily due to an increase in the number of medical devices shipped in 2013 compared to 2012.

 

For the year ended December 31, 2012, net cash used in operating activities was $12,663,145. This consisted primarily of our net loss of $15,041,958 offset by non-cash charges totaling $1,254,381 which primarily related to $333,466 in stock-based compensation charges and $342,708 in depreciation and amortization expense. Our net loss was also offset by an increase in the changes to our operating assets and liabilities of $1,124,432. This net increase in our operating assets and liabilities was due primarily to a $2,602,311 increase in customer advances and deferred revenue which was due to an increase in the number of medical devices shipped in 2012 compared to 2011, and partially offset by a decrease in deferred cost of revenue of $1,130,246.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $379,223 and 864,839 during the years ended December 31, 2013 and 2012, respectively and primarily related to equipment purchases.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities was $8,509,444 and $14,708,771 for the years ended December 31, 2013 and 2012, respectively. The increase in cash for 2013 was primarily due to the proceeds from our Series B convertible preferred stock, warrants and convertible bridge note financings in November 2013. The increase in cash for 2012 was primarily the result of our series A-2 convertible preferred stock financing in 2012.

 

Off-Balance Sheet Arrangements

 

Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of December 31, 2013 we had no such arrangements. There has been no material change in our contractual obligations other than in the ordinary course of business since our fiscal year ended December 31, 2013.

 

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Contractual Obligations and Commitments

 

In the table below, we set forth our enforceable and legally binding obligations and future commitments, as well as obligations related to all contracts that we are likely to continue, regardless of the fact that they were cancelable as of December 31, 2013. Some of the amounts that we include in this table are based on management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties, and other factors. Because these estimates and assumptions are necessarily subjective, the obligations we will actually pay in future periods may vary from those reflected in the table.

 

   Total   Less than
1 Year
   1-3 Years   4-5 Years   After
5 Years
 
Senior Note Payable (1)  $2,552,632   $1,768,712   $783,920    -    - 
Facility Operating  Lease   1,282,632    375,404    750,809   $156,419    - 
Leasehold Improvement Loans   144,041    38,665    85,917    19,459    - 
Other   17,112    4,379    9,399    3,334    - 
Total  $3,996,417   $2,287,160   $1,630,045   $179,212    - 

 

(1) The senior note payable was repaid in full on January 15, 2014.

 

DESCRIPTION OF BUSINESS

 

Immediately following the Merger, the business of Ekso Bionics TM became our business. Ekso Bionics was formed to design, develop and commercialize wearable robots, or “exoskeletons,” that have a variety of applications in the medical, military, industrial, and consumer markets.

 

History

 

As described above, we were incorporated in Nevada as PN Med Group Inc. on January 30, 2012. Our original business was to distribute medical supplies and equipment to municipalities, hospitals, pharmacies, care centers, and clinics throughout the country of Chile. Prior to the Merger, our Board determined to discontinue operations in this area and to seek a new business opportunity. As a result of the Merger, we have acquired the business of Ekso Bionics and its subsidiary.

 

Our authorized capital stock currently consists of 500,000,000 shares of Common Stock, par value $0.001, and 10,000,000 shares of “blank check” preferred stock, par value $0.001. Our Common Stock is quoted on the OTC Markets (OTCQB) under the symbol “EKSO.”

 

Our principal executive offices are located at 1414 Harbour Way South, Suite 1201, Richmond, California 94804, USA. Our telephone number is 1-510-984-1761. Our website address is www.eksobionics.com .

 

Ekso Bionics was incorporated on January 19, 2005, under the laws of the State of Delaware, to design, develop, and commercialize human robotic exoskeletons to augment human strength, endurance and mobility. Since its inception, Ekso Bionics has achieved several significant milestones:

 

·In 2006, Ekso Bionics designed and sold the first practical human exoskeleton.

 

·In 2009, Ekso Bionics signed its first agreement with Lockheed establishing the companies’ collaborative partnership to ruggedize and commercialize a human exoskeleton for military and other able-bodied applications. In July 2013, we entered into a new agreement with Lockheed to further strengthen the collaborative efforts in non-medical applications.

 

·In February 2012, we sold our first human exoskeleton suit for medical applications, called Ekso™ to a rehabilitation center for use by patients with complete spinal cord injuries (“SCI”).

 

·In July 2013, Ekso Bionics delivered a key technology upgrade for Ekso called Variable Assist, expanding the potential user population by adding utility for incomplete SCI patients, stroke patients and patients with related neurological disorders who can benefit from gait training and rehabilitation.

 

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·In December 2013, we delivered our first Ekso GTTM (gait training), a new generation Ekso with added hardware and software functionality, including Variable Assist.

 

Overview

 

Ekso Bionics designs, develops and sells wearable robots, or “human exoskeletons,” that have applications in medical, military, industrial, and consumer markets. Our exoskeletons systems are strapped over the user’s clothing, enabling individuals with neurological conditions affecting gait (e.g., spinal cord injury or stroke) to walk again; permitting soldiers to carry heavy loads for long distances while mitigating lower back, knee, and ankle injuries; and allowing industrial workers to perform heavy duty work for extended periods.

 

Our Ekso GT is used by hospitals on patients with lower extremity weakness or paralysis. Our products have been listed with the U.S. Food and Drug Administration (“FDA”) and have received a CE Mark (indicating compliance with European Union legislation). We have sold over 50 devices to rehabilitation centers and individual users for rehabilitation since February 2012. We also have a collaborative partnership with Lockheed to develop products for able-bodied exoskeleton applications.

 

We believe the Company is at a key point in the growth of its business. From inception to December 2013, Ekso Bionics has accumulated over $38 million of losses and in July 2013 furloughed 30 of its 71 employees in order to extend operations to the end of 2013. In November 2013, we completed a bridge financing, then in January and February 2014, the Company completed the Merger and PPO, resulting in $30.3 million in gross proceeds. With the additional capital resulting from the Merger and PPO, the Company believes that it now has the resources to further penetrate the medical market and to begin to expand operations in the military and industrial markets over the next several years.

 

Based on technology initially developed by an engineering team from the University of California, Berkeley, Ekso Bionics’ devices employ a number of proprietary, advanced robotics technologies.

 

Ekso Bionics’ Medical Technology

 

The Company’s most current product, the Ekso GT, is a wearable bionic suit that provides individuals with spinal cord injuries, stroke and other lower-extremity paralysis or weakness the ability to stand and walk over ground with a full weight-bearing, reciprocal gait using a cane, crutches or a walker under the supervision of a physical therapist. Walking is achieved by the shifting of the user’s body to activate sensors in the device that initiate steps. Battery-powered motors drive the legs, replacing deficient neuromuscular function. First-time users can expect to walk with aid from the device the first time they put on the Ekso exoskeleton (after passing an assessment), while an experienced user can transfer to or from their wheelchair and don or remove Ekso in less than five minutes.

 

By allowing individuals with spinal cord injuries to stand and walk in a full weight-bearing setting, we believe the Ekso exoskeleton offers potential healthcare benefits that may reduce post-injury medical costs through reduction in secondary complications such as pressure sores, urinary tract infections, bowel problems, pneumonia and other respiratory issues, bone loss/osteoporosis, cardiovascular disease and psychological disorders. For people with some motor ability intact (for example, after a stroke or an incomplete spinal cord injury), we believe Ekso offers the potential to help them re-learn to walk again by teaching them proper step patterns and weight shifts using a task-based platform.

 

Ekso Bionics’ Engineering Services (also known as Ekso Labs)

 

In addition to the design, development and commercialization of exoskeletons for medical applications, Ekso Bionics performs research and development work on human exoskeletons and related technologies paid for by grant funding, by collaboration partners such as Lockheed, or by engineering services customers such as the U.S. military.

 

In addition to furthering exoskeleton technology into markets outside Ekso Bionics’ current medical applications, this work has potential applications in future models of the Ekso human exoskeleton. Many of the research projects funded by grants are focused on researching future medical applications and capabilities not yet ready for commercial development. Other projects, often funded by commercial partners or the U.S. military, focus on able-bodied human exoskeleton applications. One such development project is the HULC® (Human Universal Load Carrier), a robotic exoskeleton designed for Lockheed and potential military applications to augment strength and endurance, allowing users to carry up to 200 pounds over long distances and rough terrain. Similarly, industrial models that Ekso Bionics is developing are intended to increase an individual’s workload, endurance and efficiency, allowing workers to carry heavy objects for much longer. The goal of these technologies is to increase worker productivity while at the same time helping to prevent employee injuries. Both the HULC and our other industrial exoskeleton products are in the developmental stage.

 

To date, the majority of our engineering services revenue has been in the form of grants. The Company currently has four grants underway, representing approximately $3.75 million in total funding. Grantors include the U.S. National Science Foundation, the U.S. Defense Advanced Research Projects Agency (DARPA), and the U.S. Department of Defense.

 

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The Technology

 

Ekso Bionics has established an extensive intellectual property (“IP”) portfolio that includes various U.S. patents and patent applications, including seven patents that have been granted, 20 patent applications that are currently pending, which means a complete application has been filed with the applicable patent authority and additional action is pending, and 3 provisional patent filings, which means that we have filed a short form application to establish an early filing date in anticipation of completion and submission of a complete application. Some of these patents and patent applications are owned either solely by or jointly with the University of California, as further described below.  Many of these have also been filed internationally as appropriate for their respective subject matter and have begun to issue.  Ekso Bionics’ patent portfolio includes product and method type claims, since the devices that Ekso Bionics produces and the processes performed by those devices are patentable.  Our patents encompass technologies relevant to our devices, including medical exoskeletons, commercial exoskeletons, actuators, and strength-enhancing exoskeletons.  The earliest priority date of the portfolio reaches back to 2003, and new applications continue to be filed.

 

Two license agreements and one amendment constitute the licenses from the University of California for various patents and applications relevant to the business of Ekso Bionics.  The table below indicates the cross section of patents by issuing status and license status.

 

   Issuing Status 
License Status  Issued
Patents
   Pending
Applications
   Provisional
Applications
 
Owned by University of California, exclusively licensed to Ekso Bionics   6    -    - 
Co-owned with University of California, exclusively licensed to Ekso Bionics   1    3    - 
Co-owned with University of California   -    3    - 
Sole ownership by Ekso Bionics   -    14    3 
Total: 30   7    20    3 

 

The exclusive license with the Regents of the University of California (“RUC”) consists of two agreements and one amendment covering ten patent cases, seven of which have issued and three of which remain in prosecution (the “RUC License Agreements”).  Inventions covered by a further three patent applications are co-owned by Ekso Bionics and RUC, with no license agreement between Ekso Bionics and RUC.  As a result, RUC may license its rights in these patents to a third party.  With respect to two of these co-owned patent applications, RUC has licensed their rights in the U.S. to an unrelated third party.  The third patent application will need to be fully prosecuted before it can be determined which claims are exclusive to us (through a previous license) and which claims RUC may license to other entities. The RUC License Agreements provide Ekso Bionics the right to grant sub-licenses. We believe that the breadth of the coverage across various bionic systems and technologies, together with our freedom to grant sub-licenses under the RUC License Agreements gives us the potential to generate licensing revenue in fields outside our present areas of commercialization, To date we have generated approximately $1 million in such licensing revenue. Pursuant to the RUC License Agreements, Ekso Bionics initially paid RUC consideration consisting of $5,000 in cash and 310,400 common shares of Ekso Bionics, and is also committed to pay a 1% royalty on sales, including sales generated by sublicenses. We do not pay royalties to RUC on products sold or to be resold to the U.S. government.

 

A remaining 17 cases are solely owned by Ekso Bionics. In some cases, as a result of government funding received by Ekso Bionics, the patents have a government use license, granting the U.S. government a non-exclusive, non-transferable, irrevocable, paid-up license for use of the inventions for or on behalf of the U.S. government, as is typical in the case of government sponsored research.

 

Ekso in the Medical Market

 

Ekso is a robotic exoskeleton, or wearable robot, used in the medical market to enable individuals living with lower extremity paralysis or weakness, due to such neurological conditions as stroke or spinal cord injury, to stand and walk over ground with a full weight-bearing, reciprocal gait under the supervision of a physical therapist. The suit is strapped over the users´ clothing, accommodates a wide range of patient sizes and clinical presentations, and is currently used primarily in a clinic or rehabilitation setting. With medical clearance, the suit typically facilitates walking for individuals who are non- or pre-ambulatory post-stroke, or with up to C7 (cervical spinal nerve 7) complete or any level of incomplete SCI, along with other neurological conditions.

 

For those with medical clearance and who pass a physical examination, first-time users can expect to walk in Ekso in their first session, and we expect that an experienced user can transfer to/from their wheelchair and don or doff the Ekso in less than five minutes. Walking is achieved by the user shifting his or her weight to activate sensors in the device that initiate the steps, or with the push of a button on a handheld user interface. Battery-powered motors drive the legs, replacing deficient neuromuscular function.

 

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For people with complete paralysis from a spinal cord injury, for example, walking in Ekso provides the powerful benefit of seeing the world eye-to-eye again and we believe may facilitate the reduction of complications commonly associated with life in a wheelchair, such as bowel and bladder dysfunction, loss of bone density, muscle spasticity, neuropathic pain and pressure sores. For patients with some motor ability intact (for example after a stroke or an incomplete spinal cord injury), Ekso may help them re-learn proper step patterns and weight shifts using a task-based platform, which we believe could be important for people who have the potential to re-learn to walk.

 

In 2012 Ekso Bionics delivered its first robotic exoskeleton for medical and rehabilitation purposes to Craig Hospital, a world-renowned institution in Englewood, Colorado, that specializes in the neuro-rehabilitation and research of patients with SCI and traumatic brain injury (“TBI”). By the end of 2013, Ekso Bionics had achieved two major Ekso software upgrades as well as two hardware upgrades. Among these advancements, our new Variable Assist software provides the ability for patients with any amount of lower extremity strength to contribute their own power from either leg to achieve self-initiated walking. The amount of assistance Ekso provides can be set to provide a specific amount of power, or to allow the Ekso to dynamically adjust to the patient’s needs in real-time in order to follow the patient’s progression with his or her rehabilitation.

 

Medical Market Strategy

 

Our initial go-to-market strategy in the medical market, which began in the first quarter of 2012, was to establish proof of concept and credibility among thought leaders and renowned rehabilitation centers specializing in SCI across the U.S. and Europe, and to initiate preliminary studies on safety and efficacy. In this early phase of technology diffusion, the first two generations of the Ekso robotic exoskeleton provided full power assistance to facilitate walking for individuals with as much as complete lower extremity paralysis, and the clinical focus was primarily spinal cord injury.

 

We initiated our second, and current, go-to-market strategy in the medical market in July 2013. The goal of our current go-to-market strategy is to broaden the addressable market and drive deeper adoption among the neuro-rehabilitation community by adding more utility to the Ekso robotic exoskeleton as a technology platform. Advancements in both software and hardware are represented in the introduction of Ekso GT with Variable Assist. In their pursuit of the best possible outcomes for patients with a wider spectrum of clinical presentations, such as hemiparesis (weakness on one side of the body) after stroke or TBI, therapists now have more opportunities to explore therapeutic interventions and various impacts of patient/technology interaction, and to adjust therapy as the patient regains function. This means the Ekso robotic exoskeleton has the potential to go beyond helping people with paralysis to stand and walk, but also to provide a game-changing tool that may help those with some motor ability intact to learn to walk again.

 

Once we increase the adoption of Ekso among the medical community in rehabilitation settings, we may seek to develop a device optimized for an individual’s personal use, allowing users to perform rehabilitation in their home and to have a mobility option for activities of daily living; however, our exploration of this potential market is in the very early stages.

 

Potential Market for our Medical Products

 

Today, primary current and potential customers are SCI and stroke in-patient and outpatient rehabilitation centers in North America and Europe. According to the National Spinal Cord Injury Statistical Center, there are approximately 12,000 to 14,000 incidences of spinal cord injuries every year in the U.S., and the total U.S. SCI population is approximately 264,0001. The Christopher and Dana Reeve Foundation estimates the total U.S. SCI population to be significantly higher, up to 1,200,0002. Considering the range of paraplegics and quadriplegics receiving therapy using the Ekso robotic exoskeleton, either by Ekso Bionics or its customers, the Company estimates that approximately 73% of the U.S. SCI population can potentially use an Ekso robotic exoskeleton in such rehabilitation settings.

 

Additionally, there are approximately 5,700 registered hospitals in the U.S.3, many of which provide stroke care, and over 1,000 of which are listed as primary stroke centers4. There are approximately 800,000 strokes every year in the U.S., of which 650,000 patients survive, and approximately 7,000,000 stroke survivors in the U.S.5

 

 

1National Spinal Cord Injury Statistical Center (NSCISC). Spinal cord injury facts and figures at a glance. Birmingham (AL): University of Alabama at Birmingham; 2012 Feb. 2 p. Also available: https://www.nscisc.uab.edu/PublicDocuments/fact_figures_docs/Facts%202013.pdf

 

2The Christopher and Dana Reeve Foundation, Paralysis Facts and Figures. Available http://www.christopherreeve.org/site/ c.mtKZKgMWKwG/b.5184255/k.6D74/Prevalence_of_Paralysis.htm

 

3The American Hospital Association., Fast Facts on US Hospitals; http://www.aha.org/research/rc/stat-studies/ fast-facts.shtml

 

4The Joint Commission, Facts about Primary Stroke Center Certification: http://www.jointcommission.org/certification/primary_stroke_centers.aspx

 

5National Stroke Association, http://www.stroke.org/site/PageServer?pagename=rehabt

 

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In terms of the market in Europe, there are approximately 12,000 private and public hospitals, of which an estimated 4,600 are classified as acute care facilities6.

 

Our goal is to penetrate the rehabilitation centers, hospitals and similar facilities to become an integral part of their neuro-rehabilitation programs. The Company believes that each facility has the potential to purchase 1-5 units, with the expectation that the useful life – or replacement cycle – of the units will range from 3-5 years in such clinical settings.

 

During 2014, we expect to deepen our understanding of the proper protocols, and potential benefits, of using Ekso for gait training and rehabilitation, and the corresponding value propositions for our customers. The Company will further investigate the potential for use beyond SCI and stroke, including multiple sclerosis, TBI, amyotrophic lateral sclerosis, Parkinson’s and other neurological conditions that inhibit gait. We will also expand sales and marketing efforts beyond North America and Europe through partnering with country/region specific robotic/medical device distributors. See “Current Sales and Marketing Efforts” below for more details.

 

Clinical Research

 

Ekso Bionics believes an important factor in further technology adoption is demonstrating clinical evidence to support the Ekso for use in rehabilitation, gait training and wellness. There is a compendium of existing studies examining the extra health care costs of SCI patients. These studies calculate the costs of re-hospitalization, secondary complications and quality of life challenges facing such patients.

 

We are eager for further initiation of clinical research that will demonstrate evidence of the health benefits of walking in the Ekso robotic exoskeleton. To that end, some of our early clinical customers are undertaking research to evaluate the use of exoskeletons in general and the Ekso robotic exoskeleton in particular.  Centers that have announced publicly that they are undertaking such studies that include the Ekso robotic exoskeleton are: the Kessler Foundation, Santa Clara Valley Medical Center, The Miami Project to Cure Paralysis of the University of Miami, Rehabilitation Institute of Chicago (“RIC”), and Glostrup Hospital in Europe; with Kessler, Santa Clara and RIC having already presented initial favorable findings indicating that the device is safe to use7 and that there are positive results in function with training, increase in oxygen consumption and ventilation. Increased muscle firing in lower leg muscles was also noted, which requires further study8.

 

In the much larger area of stroke treatment, Ekso Bionics also plans to build a portfolio of clinical data intended to demonstrate that the Ekso human exoskeleton can allow gait training to occur earlier in the treatment schedule, that it can mobilize much more difficult patients than traditional training, and that it will be an effective gait training device. Though the Company has only recently entered the stroke field (with the release of the Variable Assist upgrade package in July 2013), the two top rehabilitation centers in the United States (according to US News and World Report rankings), the Rehabilitation Institute of Chicago and Kessler Foundation, are initiating Ekso human exoskeleton studies in this area. As in the field of spinal cord injury, the field of stroke has a large body of existing research, and there is broad evidence that early mobilization of stroke patients (by traditional manual means) results in lower secondary complications and lower length of stay. Ekso Bionics currently benefits from this existing data by demonstrating to customers that the Ekso human exoskeleton can mobilize more patients earlier, and we are evaluating the feasibility of direct research to link the Ekso directly to such outcomes.

 

Current Sales and Marketing Efforts

 

Ekso Bionics historically focused its sales efforts on key SCI centers in the U.S. and Europe. In 2013, the Company began to expand its sales efforts, and today the sales and marketing team consists of:

 

·Eight direct sales persons (six in the U.S., two in Europe)

 

·Five distributors (Mexico, Italy, Poland, Finland and Turkey)

 

·Six clinical professionals/physical therapists (four in the U.S., two in Europe)

 

 

 

6Based on a 2010 presentation by Paul Garassus, M.D., the Vice President of the French Health Economic Society and member of the European Private Hospitals Union, http;//www.worldofhealthit.org/sessionhandouts/documents/PS21-4-Garassus.pdf

 

7Kolakowsky-Hayner et al., J Spine 2013, S4.

 

8Gail Forrest, PhD., presented at the Academy of Spinal Cord Injury Professionals (ASCIP), Sept., 2012 

 

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·Four marketing professionals (three in the U.S. and one in Europe)

 

·Three customer relations personnel.

 

The Company plans on continuing to build the sales and marketing team, with a particular emphasis on adding distributors in target markets/countries and on increasing marketing and clinical efforts.

 

To succeed in the medical market, we believe we need to better address the concerns of a series of stakeholders at each potential customer. These include: the customer’s CEO/CFO (vision and economics), Medical/Research Director (moving their field/reputation forward), clinical staff (achieving improved patient outcomes), user groups (improving the well-being of patients) and foundation director (seeking ways to ensure successful and more frequent donor/capital campaigns).

 

The sales cycle to build consensus among these stakeholders and achieve a sale of a device(s) is generally three to 12 months. We believe our ability to accelerate the sales cycle and accelerate adoption will also be based, in part, on our ability to build on our (and our partners’) early efforts to expand clinical evidence.

 

Exoskeleton Technology for Able-Bodied Applications

 

Ekso Bionics’ original exoskeleton technology was an evolution of the RUC technology related to able-bodied augmentation, enabling healthy individuals to carry heavy loads.

 

The Ekso Bionics’ team’s original exoskeleton design, called ExoHiker TM , was completed in February 2005 and was intended to help hikers carry heavy loads over extended periods of time. The ExoHiker demonstrated load carriage at power consumption levels that were approximately 1,000 times lower than the state-of-the-art human exoskeletons of the time. There was no user interface required to operate the device. Instead, ExoHiker responded to the movements of the person wearing the device. It could be easily strapped on or off, and it had a small handheld LCD display used to configure the device. The ExoHiker weighed approximately 30 pounds and operated at an average speed of 2.5 miles per hour for 42 miles with one 80 watt-hour lithium polymer battery.

 

ExoHiker evolved into the ExoClimber TM, which injected power when ascending stairs and climbing steep slopes. It weighed 50 pounds and could assist the wearer to ascend 600 feet vertically with a 150-pound load. Neither ExoHiker nor ExoClimber was commercialized. The third generation device is called the Human Universal Load Carrier (HULC) and includes hip actuation used to assist the user in swinging his or her legs during walking, even on level ground.

 

This development of able-bodied, powered and non-powered exoskeletons continues with funding from government grants and engineering contracts for Lockheed and U.S. government customers. Investing in the ongoing development of exoskeleton technology through these non-dilutive forms of funding is intended to help Ekso Bionics remain at the forefront of this nascent bionic robotics technology, working with leaders in complementary fields such as materials, battery and sensor technology.

 

One of Ekso Bionics’ development partners for able-bodied applications is Lockheed, for whom the Company continues to provide research and development services. The Company’s collaboration with Lockheed focuses on anthropomorphic exoskeleton technology used to augment the strength and endurance of people.  For the commercial (able-bodied) field of use, the Company and Lockheed have co-exclusive rights, with the Company having the right to sub-license technology and Lockheed having the right to sub-license only with our consent.  For the government (able-bodied) field of use, Lockheed and the Company have co-exclusive rights to military markets through 2017.  So long as certain annual minimum obligations are met, Lockheed will obtain exclusive rights to the government market after 2017. 

 

Since 2008, Lockheed has purchased approximately $6 million in non-recurring engineering services from Ekso Bionics and paid $1 million in licensing fees for the further development of the HULC and other exoskeletons. More recently, Lockheed and Ekso Bionics initiated development of a non-powered exoskeleton called MANTISTM.  MANTIS is designed to allow industrial workers in a dynamic and unstructured work environment to achieve their tasks with reduced musculoskeletal injuries related to lifting and working with heavy tools. Although the Company believes the MANTIS and similar industrial exoskeletons have the potential to help prevent workforce injuries, improve productivity and over time reduce workmen’s compensation and related costs, the Company has invested little of its own resources to date on these efforts. The focus of our work so far has been in building an IP portfolio that will help us enter that market at a future date.

 

It is important to note that both the HULC and industrial exoskeleton products are in the developmental stage. Nevertheless, Ekso Bionics plans to continue to pursue able-bodied exoskeleton technology and will seek to commercialize products on its own or with partners when and if appropriate.

 

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In December 2013, the Company was awarded a twelve-month, $1 million fixed-price contract by United States Special Operations Command (USSOCOM) to develop design, build, test and deliver a next generation military exoskeleton prototype.  The statement of work describes four milestones divided into tasks and sub-tasks, with required accomplishments and progress payments associated with each milestone. Each milestone must be successfully accomplished and verified in order to receive payment and proceed to the next sub-task. The first four milestones relate to the development and delivery of a functional prototype exoskeleton device that significantly reduces the load on users while introducing a negligible metabolic impact and meets other specifications set forth in the agreement. Payments for these milestones are $150,000, $200,000, $250,000 and $250,000 for each of the first four milestones. The final task of the project relates to the submission of a report summarizing testing results and a recommended path forward for which the payment is $146,000. This is the first award granted under USSOCOM's TALOS (Tactical Assault Light Operator Suit) project.

 

Governmental Regulation and Product Approval

 

U.S. Regulation

 

Ekso Bionics’ medical technology products and operations are subject to regulation by the U.S. Food and Drug Administration (“FDA”) and various other federal and state agencies, as well as by foreign governmental agencies. These agencies enforce laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of the Company’s medical device products.

 

Under the U.S. Federal Food, Drug, and Cosmetic Act, medical devices are classified into one of three classes — Class I, Class II or Class III — depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. Our current medical products are categorized as Class I. Class I devices are those for which safety and effectiveness can be assured by adherence to a set of guidelines, which include compliance with the applicable portions of the FDA's Quality System Regulation (“QSR”), facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials (the “General Controls”).

 

Ekso Bionics actively maintains FDA 21 CFR Part 820 Quality System Regulation and ISO 13485:2003 Quality Management Systems that establish standards for its product design, manufacturing, and distribution processes. Following the introduction of a product, the FDA and foreign agencies engage in periodic reviews of our quality systems, as well as product performance and advertising and promotional materials. These regulatory controls, as well as any changes in FDA policies, can affect the time and cost associated with the development, introduction and continued availability of new products. Where possible, Ekso Bionics anticipates these factors in our product development processes. These agencies possess the authority to take various administrative and legal actions against the Company, such as product recalls, product seizures and other civil and criminal sanctions.

 

Foreign Regulation

 

In addition to regulations in the United States, Ekso Bionics will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not the Company obtains FDA approval for a product, Ekso Bionics must obtain approval of a product by the comparable regulatory authorities of foreign countries before the Company can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

 

The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

 

Research and Development

 

The Company engages in research and development in an effort to enhance the effectiveness, ease of use, safety and reliability of its medical, commercial, and strength-enhancing exoskeletons and to expand the applications for its products. The Company’s research and development expenditures were $2.7 million and $4.3 million in 2013 and 2012, respectively. In addition, as part of its engineering services, which are paid for by grant funding, by collaboration partners, or by engineering services customers, the Company incurred research and development costs associated with its engineering services revenue of $1.3 million and $1.8 million in 2013 and 2012, respectively.

 

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Competition

 

The medical technology, industrial robotics and military equipment industries are characterized by intense competition and rapid technological change. We believe a number of other companies are developing competitive technology and devices for both the medical and able-bodied fields of use, and many of these competitors have significantly more financial and other resources than we possess.

 

In the medical field, we face competition from companies that are focused on technology for rehabilitation of patients suffering from stroke and related neurological disabilities as well as from companies that focus on SCI. In stroke, Cyberdyne is developing over-ground exoskeletons, and Hocoma, AlterG, Aretech and Reha Technology are selling treadmill-based gait therapies. In SCI, Argo Medical Technologies and Rex Bionics sell over-ground exoskeletons. Parker Hannifin has announced plans to sell over-ground exoskeletons beginning in 2015.

 

Technologies developed by competitors in the areas of stroke rehabilitation and SCI represent therapeutic interventions with utility at varying points of the continuum of care. Clinically, the Ekso is unique in its broad ability to mobilize pre- or even non-ambulatory patients using a full weight bearing, over ground, task-based platform. From a practice management perspective, the Ekso is less expensive than many other systems, has a smaller footprint, the ability to move around the hospital, and uses standard power requirements that make it easy to integrate into existing infrastructure. Other over-ground exoskeletons were initially designed as an individual user’s alternative to a wheelchair with the primary goal of providing a means for patients to achieve mobility reliant on the device. By contrast, the Ekso’s design accommodates patients with complete paraplegia and additionally includes features that are optimized to assist therapists in helping patients with some motor ability learn to walk again in a clinical setting, treating several patients and indications in a single day.

 

Notwithstanding the foregoing, the most pressing challenges Ekso Bionics faces are not necessarily competitive technologies, but rather achieving rapid market awareness and adoption of this emerging technology while acclimating prospects to a fundamentally new paradigm in neuro-rehabilitation and mobility. In addition, there is the matter of securing the funds for acquisition in environments where capital expenses of this magnitude are not common in the rehabilitation department of a clinic.

 

In the able-bodied field, Raytheon, Panasonic, Honda and Cyberdyne are each developing some form of exoskeleton for military and industrial applications.

 

The field of robotic exoskeleton technology remains in infancy. As this field develops, we believe we will face increased competition on the basis of product features, clinical outcomes, price, services and other factors. Our competitive position will depend on multiple, complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. In some instances, competitors may also offer, or may attempt to develop, alternative therapies for disease states that may be delivered without a medical device.

 

Employees

 

We employ 60 persons on a full time basis, including six in Europe. The Company currently plans to hire an additional 10 to 15 full time employees within the next three months, whose principal responsibilities will be the support of our sales, marketing, research and development, and clinical development activities. Should the Company secure further contracts for engineering services for our government work/clients, we would seek to hire further engineering personnel.

   

Description of Properties

 

Our principal executive offices are currently located at 1414 Harbour Way South, Suite 1201, Richmond, CA 94804, where the Company leases approximately 45,000 square feet. The Company believes this facility is adequate for its current needs, including providing the space and infrastructure to assemble Ekso exoskeletons and to accommodate its development work for able-bodied applications per its current operating plan.

 

Ekso Bionics does not own any real property.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

 

We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

 

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

Directors and Executive Officers

 

Below are the names of and certain information regarding the Company’s current executive officers and directors who were appointed effective as of the closing of the Merger:

 

Name   Age   Position   Date Named to Board of
Directors/as Executive Officer
Steven Sherman   68   Director and Chairman of the Board   January 15, 2014
Nathan Harding   46   Director and Chief Executive Officer   January 15, 2014
Dan Boren   40   Director   January 15, 2014
Marilyn Hamilton   65   Director   January 15, 2014
Jack Peurach   48   Director   January 15, 2014
Max Scheder-Bieschin   52   Chief Financial Officer   January 15, 2014
Russ Angold   37   Chief Technology Officer   January 15, 2014
Frank Moreman   55   Chief Operating Officer   January 15, 2014

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

 

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

 

Executive officers are appointed by the Board of Directors and serve at its pleasure.

 

Each of our directors was elected pursuant to an agreement between Pedro Perez Niklitschek, our sole director before the Merger, and Ekso Bionics. The principal occupation and business experience during the past five years for our executive officers and directors is set forth below. In addition, for each director, set forth below is a summary of the specific experience, qualifications, attributes or skills that led to the conclusion by Ekso Bionics that the person should serve as a director of the Company.

 

Directors

 

Steven Sherman – Director and Chairman of the Board of Directors

Mr. Sherman has served on the Board of Directors of Ekso Bionics since December 2013. Since 1988, Mr. Sherman has been a member of Sherman Capital Group, a Merchant Banking organization with a portfolio of private and public investments. In addition to Ekso Bionics, Mr. Sherman is currently Chairman of Purple Wave Inc. Mr. Sherman is a founder of Novatel Wireless, Inc., Vodavi Communications Systems Inc. and Main Street and Main Inc. Previously, Mr. Sherman has served as a director of Telit; Chairman of Airlink Communications, Inc. until its sale to Sierra Wireless, Inc.; Chairman of Executone Information Systems; and as a director of Inter-Tel (Delaware) Incorporated. Mr. Sherman was appointed to the Board at the request of Ekso Bionics in connection with the reverse merger due to, among other factors, his extensive business experience and his financial and investment expertise.

 

Nathan Harding – Director and Chief Executive Officer

Mr. Harding is the co-founder of Ekso Bionics and has served as the Chief Executive Officer since November 2012. From 2005 to 2012, Mr. Harding served in various positions including Chief Executive Officer, Chief Operating Officer, and Chief Project Officer.  He is also a co-inventor of the Company's core exoskeleton technology. Prior to his work at Ekso Bionics, Mr. Harding worked as a Mechanical Engineer at Carnegie Mellon's Field Robotics Center from 1989 to 1990, and Redzone Robotics in 1991. He served in various roles including Mechanical Engineering Manager at Berkeley Process Control from 1994 to 2003, and served as a consultant to the Berkeley Robotics and Human Engineering Laboratory from October 2003 until co-founding Ekso Bionics in 2005. Mr. Harding holds ten U.S. patents and has another eight pending. Mr. Harding received his bachelor's degree in Mechanical Engineering and Economics from Carnegie Mellon University in Pittsburgh and his master's in Mechanical Engineering from the University of California, Berkeley. Mr. Harding was appointed to the Board at the request of Ekso Bionics in connection with the reverse merger due to, among other factors, his background in the medical technology, industrial robotics and military equipment industries, his role in developing the Company’s core exoskeleton technology and his position as President and Chief Executive Officer of the Company.

 

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Dan Boren – Director

Mr. Boren has served on the Board of Directors of Ekso Bionics since April 2013. Since January 2013, Mr. Boren has served as the President of Corporate Development for the Chickasaw Nation. Prior to that role, Mr. Boren served as the elected representative of Oklahoma's 2nd Congressional District in the U.S. House of Representatives from 2005 through 2013. Before his election to the U.S. House of Representatives, Mr. Boren was elected to the Oklahoma House of Representatives from 2002 to 2004. Mr. Boren earned his B.S. in Economics at Texas Christian University and went on to obtain an M.B.A. at University of Oklahoma. Mr. Boren was appointed to the Board at the request of Ekso Bionics in connection with the reverse merger due to, among other factors, his experience in governance matters and his nomination by CNI Commercial LLC pursuant to their contractual right to nominate a director for election to the Board of Directors.

 

Marilyn Hamilton – Director

Ms. Hamilton has served on the Board of Directors of Ekso Bionics since January 2012.  In 2009, Ms. Hamilton founded StimDesigns LLC, a neurotechnology company that develops and distributes neuromuscular training devices for rehabilitation and has served as CEO from 2009 to present.  In 2007, Ms. Hamilton launched Envision, a professional speaking and medical business consulting company, and has served as its CEO from 2007 to present. Prior to this role, Ms. Hamilton co-founded Motion Designs Inc. in 1979, a manufacturing and marketing company that pioneered innovative custom, ultra-lightweight Quickie wheelchairs that revolutionized the industry.  She served in various executive roles in sales, marketing and product development until it was sold ultimately to Sunrise Medical Inc., where Ms. Hamilton served as Global VP. In 1990 Ms. Hamilton founded Winners on Wheels, a coed-scouting program for children in wheelchairs; in 2003 she co-founded Discovery through Design and served as Chairwomen, raising awareness and funds for spinal cord injury research and women's health; and for nine years she served as a founding board member and current emeritus board member of The California Endowment, charged with expanding access to affordable, quality healthcare for underserved populations and to promote improvements in the health status of all Californians.  Ms. Hamilton is currently an advisory board member of the National Center for Medical Rehabilitation Research at the National Institute of Health and has been a member of The Committee of 200 business women since 1993 whose mission is to foster, celebrate and advance women's leadership in private and public companies. Ms. Hamilton was appointed to the Board at the request of Ekso Bionics in connection with the reverse merger due to, among other factors, her 35 years of leadership expertise in business, the medical rehab industry, and her dedication to, and organizational and governance experience gained from non-for-profit service. Ms. Hamilton holds a bachelor of sciences degree in Education and Secondary Teaching Credential from California Polytechnic State University, San Luis Obispo.

 

Jack Peurach – Director

Mr. Peurach has served on the Board of Directors of Ekso Bionics since January 2012. Since 2011, Mr. Peurach has been the Executive Vice President, Products for SunPower Corp (NASDAQ: SPWR), where he is responsible for all aspects of SunPower's PV modules and residential, commercial and utility PV systems. Prior to this role, from 2009 to 2011, Mr. Peurach served as Executive Vice President, Research and Development for SunPower, where he led the research and development efforts of the PV Cells, Modules and Systems. From 2008 to 2009, Mr. Peurach was the Vice President of the Advanced Product Development Group, and from 2007 to 2008, Mr. Peurach was the Senior Director of Product Development at SunPower. Prior to SunPower's acquisition of PowerLight in 2007, Mr. Peurach served as PowerLight's Vice President of Product Development. Earlier in his career, Mr. Peurach was a strategy consultant for Mercer Management Consulting and director of engineering at Berkeley Process Control, Inc. He holds a Bachelor of Science degree in mechanical engineering from Michigan State University, a Master of Science degree in mechanical engineering from the University of California, Berkeley, and a Master of Business administration, finance and entrepreneurship from the Wharton School, University of Pennsylvania. Mr. Peurach was appointed to the Board at the request of Ekso Bionics in connection with the reverse merger due to, among other factors, his product development experience and strategic insight.

 

Executive Officers

 

Russ Angold – Chief Technology Officer

Mr. Angold is the Co-Founder and has served as the Chief Technology Officer of Ekso Bionics since December 2011. From the founding of Ekso Bionics until December 2011, Mr. Angold served as Vice President of Engineering. Prior to joining Ekso Bionics, Mr. Angold held various engineering positions at Rain Bird Corporation, Berkeley Process Control and the Irrigation Training and Research Center in San Luis Obispo, California. Mr. Angold is also the Founding President and Chairman of the Bridging Bionics Foundation. Mr. Angold is a registered Professional Mechanical Engineer and holds a bachelor’s degree in BioResource and Agricultural Engineering from California Polytechnic State University, San Luis Obispo.

 

Frank Moreman – Chief Operating Officer

Mr. Moreman has served as the Chief Operating Officer since November 2012. Previously, Mr. Moreman served as our Vice President of Manufacturing from July 2011 until November 2012. From January 2010 until joining Ekso Bionics, Mr. Moreman was an independent consultant, helping Silicon Valley companies in the areas of management development and manufacturing capabilities. From August 2008 until January 2010, Mr. Moreman was the Division Vice President for Sanmina-SCI's Semiconductor and Industrial Division, with manufacturing plants throughout the United States and China. From October 2002 until being acquired by Ultra Clean Technology in July 2006, Mr. Moreman was Chief Operating Officer and Owner of Sieger Engineering, a contract manufacturer serving the semiconductor and medical equipment markets.  Following the acquisition, Mr. Moreman remained with Ultra Clean as Vice President of Materials, Quality, and IT until leaving to join Sanmina in 2008. Mr. Moreman received his BS in Mechanical Engineering from the United States Naval Academy.

 

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Max Scheder-Bieschin – Chief Financial Officer

Mr. Scheder-Bieschin joined Ekso Bionics in January 2011 as its Chief Financial Officer. From November 2009 until he joined Ekso Bionics, Mr. Scheder-Bieschin was an independent consultant for a number of emerging technology companies, including Ekso Bionics. From March 2007 to October 2009, he was co-founder and CEO of Barefoot Motors, a designer and manufacturer of electric all-terrain vehicles. From October 2005 to February 2007, Mr. Scheder-Bieschin served as President of ZAP, a publicly-traded distributor of electric vehicles. From August 1997 to March 2004, Mr. Scheder-Bieschin lived in Frankfurt, serving in senior investment banking roles for BHF-Bank, ING Barings and Deutsche Bank. Mr. Scheder-Bieschin received his BA in economics from Stanford University. He attended New York University and Stanford University’s Executive Program.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” Nevertheless, our Board has determined that Messrs. Sherman, Boren and Peurach and Ms. Hamilton are independent directors under the applicable standards of the SEC and the Nasdaq stock market.

 

Family Relationships

 

There are no family relationships among our Directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has been involved in any of the following events during the past ten years:

 

·any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

·any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

·being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or

 

·being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Audit Committee

 

The Audit Committee currently consists of Messrs. Sherman (Chairman) and Boren. Each member of the Audit Committee is financially sophisticated, as defined by the Marketplace Rules of NASDAQ, and able to read and understand fundamental financial statements, including the Company’s consolidated balance sheet, consolidated statement of income and consolidated statement of cash flows. The Board of Directors has determined that Steven Sherman is an “audit committee financial expert” within the meaning of Item 407(d)(5) for SEC regulation S-K.

 

Compensation Committee; Compensation Committee Interlocks and Insider Participation

 

The Compensation Committee was formed by the Board in February 2014, and currently consists of Messrs. Peurach (Chairman) and Sherman. Prior to February 2014, the Company did not have a Compensation Committee.

 

No executive officer of the Company has served as a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as director of the Company during 2013.

 

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Other Committees

 

We do not currently have a separately-designated standing nominating committee. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described below, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our Board, it is not practical for us to have committees other than those described above, or to have more than two directors on such committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and our committees and allocate responsibilities accordingly.

 

Director Nomination Agreement

 

Prior to the consummation of the Merger, the Company entered into a director nomination agreement with Ekso Bionics’ largest shareholder, CNI Commercial LLC (“CNI”). See “Certain Relationships and Related Party Transactions.”

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following table sets forth information concerning the total compensation paid or accrued by us and by Ekso Bionics during the last two fiscal years indicated to (i) all individuals that served as our or Ekso Bionics’ principal executive officer or acted in a similar capacity for us or Ekso Bionics at any time during the most recent fiscal year indicated; (ii) the two most highly compensated executive officers who were serving as executive officers of us or Ekso Bionics at the end of the most recent fiscal year indicated; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer of us or Ekso Bionics at the end of the most recent fiscal year indicated.

  

Name &
Principal
Position
  Fiscal
Year
ended
March 31,
    Salary
($)
    Option
Awards($)
    Total ($)  
Pedro Perez Niklitschek,     2013                    
CEO of the Company (1)     2012                    
                                 
Miguel Molina Urra,     2013                    
Secretary of the Company (1)     2012                    

 

Name &
Principal
Position
  Fiscal
Year
ended
December 31,
    Salary
($)
    Option
Awards($)(2)
    Total ($)  
Nathan Harding,     2013       137,752       6,966       144,718  
CEO of Ekso Bionics     2012       209,549       87,097        296,646  
                                 
Max Scheder-Bieschin,     2013       144,768       6,966       151,734  
CFO of Ekso Bionics     2012       200,445       87,097       287,542  
                                 
Russ Angold,     2013       151,933       6,966       158,899  
CTO of Ekso Bionics     2012       213,945       87,097        301,042  
                                 
Frank Moreman,     2013       165,938       95,066       261,004  
COO of Ekso Bionics     2012       218,757       17,419        236,176  

 

(1)On January 15, 2014, Messrs. Perez Niklitschek and Molina Urra resigned from these positions.

(2)The amounts in the "Option Awards" column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the provisions of ASC 718. The assumptions that we used to calculate these amounts are discussed in Note 14 to our financial statements included in this prospectus. In connection with the Merger, the exercise prices for all outstanding options were adjusted to reflect the conversion ratio used in the Merger.

 

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans, except that the Company maintains a 401(k) plan in which all eligible employees may participate by making elective deferral contributions to the plan. The Company does not make any matching contributions to the plan.

 

Except as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

 

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Outstanding Equity Awards at Fiscal Year-End

 

We have one compensation plan approved by our stockholders, the 2014 Plan. As of the end of our last completed fiscal year, we had not granted any awards under the 2014 Plan. In connection with the Merger, options to purchase 4,978,645 shares of Ekso Bionics common stock were converted into options to purchase 7,586,459 shares of our Common Stock. Options to purchase an aggregate of 2,300,000 shares of our Common Stock were awarded following the closing of the Merger to our executive officers and directors. See “Description of Securities—Options” below for more information.

 

The following table sets forth certain information concerning stock options held by the Named Executive Officers as of December 31, 2013.  

 

Name  Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
   Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
   Option
Exercise
Price
($)(1)
   Option
Expiration
Date
 
Pedro Perez Niklitschek                
Miguel Molina Urra                
Nathan Harding   111,110(2)   155,555   $0.5381    4/24/2022 
Nathan Harding   0(3)   20,513   $0.5381    7/15/2023 
Max Scheder-Bieschin   177,777(2)   66,031   $0.3898    1/10/2021 
Max Scheder-Bieschin   128,888(2)   84,444   $0.3898    7/20/2021 
Max Scheder-Bieschin   111,110(2)   155,555   $0.5381    4/24/2022 
Max Scheder-Bieschin   0(3)   20,513   $0.5381    7/15/2023 
Russ Angold   111,110(2)   155,555   $0.5381    4/24/2022 
Russ Angold   0(3)   20,513   $0.5381    7/15/2023 
Frank Moreman   92,063(2)   60,317   $0.3898    7/11/2021 
Frank Moreman   22,222(2)   31,111   $0.5381    4/24/2022 
Frank Moreman   0(3)   279,940   $0.5381    7/15/2023 

 

 

(1)Reflects the exercise price of the options after taking into account the adjustment of the exercise price in connection with the Merger to reflect the conversion ratio used in the Merger.

 

(2)Option becomes exercisable as to 25% of the total number of shares on the first anniversary of the date of grant, and thereafter vests in equal monthly installments for 36 months.

 

(3)Option becomes exercisable as to 12.5% of the total number of shares on the six-month anniversary of the date of grant, and thereafter vests in equal monthly installments for 42 months.

  

Employment Agreements

 

On January 15, 2014, in connection with the Merger, we entered into a two-year employment agreement with each of Messrs. Harding, Scheder-Bieschin, Angold and Moreman (each, a “named executive officer”).  After the initial two-year term, the agreements shall be automatically renewed for successive one year periods unless terminated by a party on at least 30 days written notice prior to the end of the then-current term. The base salary for each of Messrs. Harding, Scheder-Bieschin, Angold and Moreman is $275,000, $225,000, $225,000 and $225,000, respectively, in each case subject to increase as determined by our Board of Directors. 

 

Each of our named executive officers other than Mr. Harding is eligible, at the discretion of Chief Executive Officer or Board of Directors, to receive an annual bonus of up to 30% of his annual base salary based on us achieving certain operational, financial or other milestones (the “Milestones”) established by our Chief Executive Officer or Board of Directors in consultation with the named executive officer. Mr. Harding is eligible, at the discretion of our Board of Directors, to receive an annual bonus of up to 50% of his annual base salary based on us achieving the Milestones established by our Board of Directors in consultation with Mr. Harding. All or any portion of the annual bonus may be paid in cash, securities or other property.

 

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Each of our named executive officers is entitled to receive perquisites and other fringe benefits that may be provided to, and is eligible to participate in any other bonus or incentive program established by us, for our executives. Each named executive officer and his dependents are also entitled to participate in any of our employee benefit plans subject to the same terms and conditions applicable to other employees. Each named executive officer will be entitled to be reimbursed for all reasonable travel, entertainment and other expenses incurred or paid by him in connection with, or related to, the performance of his duties, responsibilities or services under his employment agreement, in accordance with policies and procedures, and subject to limitations, adopted by us from time to time.

 

In connection with the Merger, we granted options to purchase 900,000 shares of our common stock to Mr. Harding, options to purchase 350,000 shares of our common stock to Mr. Moreman and options to purchase 300,000 shares of our common stock to each of Messrs. Angold and Scheder-Bieschin, in each case exercisable at a price of $1.00 per share, under our 2014 Plan. The options will become exercisable over a 4-year period, with 1/4 of the shares becoming exercisable on the first anniversary of the date of grant and with 1/48 of the shares becoming exercisable at the end of each month thereafter, and subject to Change of Control (as defined in his employment agreement), provided that the named executive officer is employed by us or any of our subsidiaries on each vesting date.

 

In the event that a named executive officer is terminated by us without Cause (as defined in his employment agreement) or he resigns for Good Reason (as defined in his employment agreement) during the term of his employment, the named executive officer would be entitled to (x) an amount equal to his annual base salary then in effect (payable in accordance with the Company’s normal payroll practices) for a period of 12 months commencing on the effective date of his termination (the “Severance Period”), plus any accrued but unused vacation, and (y) if and to the extent the Milestones are achieved for the annual bonus for the year in which the Severance Period commences (or, in the absence of Milestones, our Board of Directors has, in its sole discretion, otherwise determined an amount of the named executive officer’s annual bonus for such year), an amount equal to such annual bonus pro-rated for the portion of the performance year completed before the named executive officer’s employment terminated, (z) any of his stock options, restricted stock or similar incentive equity instruments, including the option grant summarized above, that would first have become vested or exercisable during the Severance Period if the named executive officer continued to be employed by the Company. For the duration of the Severance Period, the named executive officer will also be eligible to participate in our group health plan on the same terms applicable to similarly situated active employees during the Severance Period, provided he was participating in such plan immediately prior to the date of employment termination, and each other benefit program to the extent permitted under the terms of such program (collectively, the “Termination Benefits”). If a named executive officer’s employment is terminated during the term by us for Cause, by the named executive officer for any reason other than Good Reason or due to his death, then he will not be entitled to receive the Termination Benefits, and shall only be entitled to the compensation and benefits which shall have accrued as of the date of such termination (other than with respect to certain benefits that may be available to the named executive officer as a result of a “disability” (as defined in his employment agreement)).

  

Director Compensation

 

Non-employee directors’ compensation generally is determined and awarded by the Board. The Board is responsible for, among other things, reviewing, evaluating and designing a director compensation package of a reasonable total value, typically based on comparisons with similar firms, and aligned with long-term interests of the stockholders of the Company, and reviewing director compensation levels and practices and considering, from time to time, changes in such compensation levels and practices. These matters also include making equity awards to non-employee directors from time to time under the Company’s equity-based plans. As part of these responsibilities, the Board may request that management of the Company provide it with recommendations on non-employee director compensation and/or common director compensation practices, although the Board retains its ultimate authority to take compensatory actions.

 

The Company currently pays its non-employee directors an annual retainer of $10,000. In addition, the Company will pay each member of a standing Board committee, once they are established, an annual retainer of $5,000 per committee, except that the chairperson of the Audit Committee shall be paid an annual retainer of $30,000 and the chairperson of the Compensation Committee shall be paid an annual retainer of $10,000. In addition, the Company pays the Chairman of the Board an additional cash retainer of $5,000 per month.

  

The Company also grants to each new director (not including those directors who were previously serving on the board of directors of Ekso Bionics) an option to purchase 100,000 shares of the Company’s common stock.

 

In connection with the Merger, Steven Sherman was elected Chairman of the Board and granted an option to purchase 300,000 shares of the Company’s common stock. Also in connection with the Merger, Marilyn Hamilton, Dan Boren and Jack Peurach, were each granted an option to purchase 50,000 shares of the Company’s common stock. Each of the option awards were made under our 2014 Plan, have an exercise price of $1.00 per share and will become exercisable over a 4-year period, with 1/4 of the shares becoming exercisable on the first anniversary of the date of grant and with 1/48 of the shares becoming exercisable at the end of each month thereafter.

 

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The following table sets forth compensation actually paid to or earned or accrued by Ekso Bionics’ directors during 2013:

 

Name  Fees earned
or paid in
cash
($)
   Stock awards
($)
   Option 
awards
($)(1)
   All other 
compensation
($)
   Total
($)
 
Steven Sherman                    
                          
Daniel Boren (2)          $48,698       $48,698 
                          
Marilyn Hamilton (3)                    
                          
Jack Peurach (4)                    

 

(1)The amounts in the “Option Awards” column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the provisions of ASC 718. The assumptions that we used to calculate these amounts are discussed in Note 14 to our financial statements included in this prospectus. In connection with the Merger, the exercise prices for all outstanding options were adjusted to reflect the conversion ratio used in the Merger.

 

(2)Reflects the grant of an option to purchase 100,000 shares of Ekso Bionics’ common stock on April 25, 2013 in connection with Mr. Boren’s appointment as a director. As of December 31, 2013, Mr. Boren held options to purchase 152,380 shares of Common Stock at an exercise price of $0.5381 per share.

 

(3)As of December 31, 2013, Ms. Hamilton held options to purchase 152,380 shares of Common Stock at an exercise price of $0.4594 per share.

 

(4)As of December 31, 2013, Mr. Peurach held options to purchase 152,380 shares of Common Stock at an exercise price of $0.4594 per share.

  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of our Common Stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days after April 30, 2014 (the “Determination Date”) are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our Common Stock indicated as beneficially owned by them.

  

The following table sets forth information with respect to the beneficial ownership of our Common Stock as of the Determination Date by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only classes of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Merger, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.

  

The address for each director and executive officer named in the table is c/o Ekso Bionics Holdings, Inc., 1414 Harbour Way South, Suite 1201, Richmond, California 94804, USA.

  

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Name and address of beneficial owner  Amount and nature of
beneficial ownership
   Percent of class  (1) 
           
Directors          
Steven Sherman (2)   2,885,482    3.7%
Nathan Harding (3)   5,779,953    7.4%
Daniel Boren (4)   84,445    * 
Marilyn Hamilton (5)   492,063    * 
Jack Peurach (6)   178,920    * 
           
Executive Officers          
Nathan Harding (3)   5,779,953    7.4%
Max Scheder-Bieschin (7)   536,562    * 
Russ Angold (8)   3,473,947    4.4%
Frank Moreman (9)   220,341     
           
All directors, nominees and executive officers as a group (8 persons) (10)   13,651,713    17.4%
           
5% Shareholders          
Opaleye L.P. (11)
29 Colonial Way
Weston, MA 02493
   19,000,000    24.2%
CNI Commercial LLC (12)
2020 Lonnie Abbott Blvd.
Ada, OK 74820
   10,129,599    12.9%
Bionic Partners, LLC (13)
546 Fifth Avenue
New York, NY 10036
   6,771,737    8.6%
Homayoon Kazerooni (14)
2806 Ashby Ave
Berkeley, CA 94705
   4,945,091    6.3%
Mark Tompkins (15)
Via Guidino 23
6900 Lugano-Paradiso
Switzerland
   4,908,429    6.3%

 

 

 

* Less than 1%

 

(1)Applicable percentage ownership is based on 78,445,924 shares of Common Stock outstanding as of the Determination Date.

 

(2)Includes warrants to purchase 1,500,000 shares of Common Stock currently exercisable and 1,385,482 shares of common stock. Excludes 20,289 Indemnity Shares over which Mr. Sherman does not currently exercise voting or dispositive power.

 

(3)Includes options to purchase 144,444 of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 3,504,740 shares of common stock. Also includes 2,130,769 Indemnity Shares which Mr. Harding may be deemed to beneficially own as a result of his right to vote such shares as Indemnification Representative under the Indemnification Shares Escrow Agreement dated January 15, 2014, entered into in connection with the Merger and the PPO. Mr. Harding disclaims beneficial ownership of all but 175,237 of such Indemnity Shares.

 

(4)Includes options to purchase 44,445 of Common Stock currently exercisable or exercisable within 60 days after the Determination Date, warrants to purchase 20,000 shares of Common Stock currently exercisable and 20,000 shares of common stock.

 

(5)Includes options to purchase 92,063 of Common Stock currently exercisable or exercisable within 60 days after the Determination Date, warrants to purchase 200,000 shares of Common Stock currently exercisable and 200,000 shares of common stock.

 

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(6)Includes options to purchase 92,063 shares of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 86,857 shares of Common Stock. Excludes 4,571 Indemnity Shares over which Mr. Peurach does not currently exercise voting or dispositive power.

 

(7)Includes options to purchase 477,934 shares of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 58,628 shares of Common Stock. Excludes 3,086 Indemnity Shares over which Mr. Scheder-Bieschin does not currently exercise voting or dispositive power.

 

(8)Includes options to purchase 144,444 shares of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 3,329,503 shares of Common Stock. Excludes 175,237 Indemnity Shares over which Mr. Angold does not currently exercise voting or dispositive power.

 

(9)Includes options to purchase 139,999 shares of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 80,342 shares of Common Stock. Excludes 4,229 Indemnity Shares over which Mr. Moreman does not currently exercise voting or dispositive power.

 

(10)Includes warrants to purchase 1,720,000 shares of Common Stock currently exercisable, options to purchase 1,135,391 shares of Common Stock currently exercisable or exercisable within 60 days after the Determination Date and 8,872,964 shares of Common Stock. Also includes 2,130,769 Indemnity Shares which Mr. Harding may be deemed to beneficially own as a result of his right to vote such shares as Indemnification Representative under the Indemnification Shares Escrow Agreement dated January 15, 2014, entered into in connection with the Merger and the PPO.

 

(11)Includes warrants to purchase 8,500,000 shares of Common Stock currently exercisable and 8,500,000 shares of Common Stock, each held by Opaleye L.P. Also includes warrants to purchase 1,000,000 shares of Common Stock and 1,000,000 shares of Common Stock held by Silverman Insurance Partnership. James Silverman may be deemed to have voting and/or disposition control with respect to the shares held by Opaleye L.P. and Silverman Insurance Partnership. The business address of Opaleye L.P. is 9B Russell Street, Cambridge MA 02140.

 

(12)Includes warrants to purchase 279,645 shares of Common Stock currently exercisable and 9,849,954 shares of Common Stock. Excludes 518,419 Indemnity Shares over which CNI Commercial LLC does not currently exercise voting or dispositive power. CNI Commercial LLC is a wholly-owned subsidiary of Chickasaw Nation Industries, Inc. (“CNI”). CNI and its President and Chief Executive Officer, David Nimmo, may be deemed to have voting and/or dispositive power with respect to the shares held by CNI Commercial LLC. The business address of CNI Commercial LLC is 2020 Lonnie Abbott Blvd., Ada, OK 74820.

  

(13)Includes warrants to purchase 2,554,089 shares of Common Stock currently exercisable and 4,217,648 shares of Common Stock. Excludes 93,297 Indemnity Shares over which Bionic Partners, LLC does not currently exercise voting or dispositive power. The managing partner of Bionic Partners, LLC is Hugh Regan. The mailing address for Bionic Partners, LLC is 546 5th Avenue, 5th Floor, New York, NY 10036.

 

(14)Includes options to purchase 457,140 shares of Common Stock currently exercisable or exercisable within 60 days after April 30, 2014 and 4,487,951 shares of Common Stock. Excludes 236,189 Indemnity Shares over which Mr. Kazerooni does not currently exercise voting or dispositive power. The mailing address of Professor Kazerooni is c/o University of California at Berkeley, 6147 Etcheverry Hall, Mailstop 1740, Berkeley, CA 94720.

 

(15)Includes warrants to purchase 1,500,000 shares of Common Stock currently exercisable and 3,408,429 shares of Common Stock. The mailing address of Mr. Tompkins is Via Guidino, App.1, 6900 Lugano – Paradiso, Switzerland.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000.00 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate family member of any of those persons.

 

The descriptions set forth above under the captions “Executive Compensation—Employment Agreements” and —Director Compensation” and below under “Description of Securities—Options” are incorporated herein by reference.

 

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Merger Agreement

 

On January 15, 2014 (the “Closing Date”), the Company, Acquisition Sub and Ekso Bionics entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), which closed on the same date.  Pursuant to the terms of the Merger Agreement, Acquisition Sub merged with and into Ekso Bionics, which was the surviving corporation and thus became our wholly-owned subsidiary.

 

Pursuant to the Merger, we acquired the business of Ekso Bionics to design, develop and commercialize human exoskeletons to augment human strength, endurance and mobility. 

  

At the closing of the Merger:

 

·each of the 10,450,500 shares of Ekso Bionics’ common stock issued and outstanding immediately prior to the closing of the Merger was converted into 1.5238 shares of our Common Stock;

 

·each of the 4,624,840 shares of Ekso Bionics’ Series A preferred stock issued and outstanding immediately prior to the closing of the Merger was converted into 1.6290 shares of our Common Stock; and

 

·each of the 9,800,087 shares of Ekso Bionics’ Series A-2 and Series B preferred stock issued and outstanding immediately prior to the closing of the Merger was converted into 1.9548 shares of our Common Stock.

As a result, an aggregate of 42,615,556 shares of our Common Stock were issued to the holders of Ekso Bionics’ stock.

 

In addition, pursuant to the Merger Agreement:

 

·warrants to purchase 407,772 shares of Ekso Bionics’ common stock issued and outstanding immediately prior to the closing of the Merger were converted into warrants to purchase shares of our Common Stock at a conversion ratio of 1.5238 for one; and

 

·options to purchase 4,978,645 shares of Ekso Bionics’ common stock issued and outstanding immediately prior to the closing of the Merger were converted into options to purchase shares of our Common Stock at a conversion ratio of 1.5238 for one.

 

As a result, warrants to purchase an aggregate of 621,363 shares of our Common Stock and options to purchase an aggregate of 7,586,459 shares of our Common Stock were issued in connection with the Merger. See “Description of Securities—Warrants” and “—Options” below for more information.

   

The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties will be subject to certain indemnification provisions. Each of the stockholders of Ekso Bionics as of the date of the Merger initially received in the Merger 95% of the shares to which each such stockholder is entitled, with the remaining 5% of such shares being held in escrow for one year to satisfy post-closing claims for indemnification by the Company (“Indemnity Shares”).  Any of the Indemnity Shares remaining in escrow at the end of such one-year period shall be distributed to the pre-Merger stockholders of Ekso Bionics on a pro rata basis.  The Merger Agreement also contains a provision providing for a post-Merger share adjustment as a means for which claims for indemnity may be made by the pre-Merger stockholders of Ekso Bionics.  Pursuant to this provision up to 1,000,000 additional shares (“R&W Shares”) of Common Stock may be issued to the pre-Merger stockholders of Ekso, pro rata, during the one-year period following the Merger for breaches of representations and warranties by the Company.  The value of the Indemnity Shares and the R&W Shares issued pursuant to the foregoing adjustment mechanisms is fixed at $1.00 per share. The foregoing mechanisms are the exclusive remedies of the Company on one hand and the pre-Merger stockholders of Ekso Bionics for satisfying indemnification claims under the Merger Agreement.

 

The Merger will be treated as a recapitalization of the Company for financial accounting purposes. Ekso Bionics will be considered the acquirer for accounting purposes, and our historical financial statements before the Merger will be replaced with the historical financial statements of Ekso Bionics before the Merger in all future filings with the SEC.

 

The Merger is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

The issuance of shares of our Common Stock to holders of Ekso Bionics’ capital stock in connection with the Merger was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement, and some of these securities are subject to further contractual restrictions on transfer as described below.

 

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We also agreed not to register under the Securities Act the resale of the shares of our Common Stock received in the Merger by our officers, directors and key employees and holders of 10% or more of our Common Stock for a period of two years following the closing of the Merger, provided that the foregoing will not prohibit us from registering for resale shares of Common Stock held by such persons with the written approval of the lead underwriter of any future underwritten public offering of our securities for gross proceeds of at least $25 million.

 

The form of the Merger Agreement is filed as an exhibit to the registration statement of which this prospectus is a part. All descriptions of the Merger Agreement herein are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.

 

Split-Off

 

Upon the closing of the Merger, under the terms of a split-off agreement and a general release agreement, the Company transferred all of its pre-Merger operating assets and liabilities to its wholly-owned special-purpose subsidiary, PN Med Split Off Corp, a Delaware corporation (“Split-Off Subsidiary”), formed on January 7, 2014. Thereafter, pursuant to the split-off agreement, the Company transferred all of the outstanding shares of capital stock of Split-Off Subsidiary to Pedro Perez Niklitschek and Miguel Molina Urra, the pre-Merger majority stockholders of the Company, and the former officers and sole director of the Company (the “Split-Off”), in consideration of and in exchange for (i) the surrender and cancellation of an aggregate of 17,483,100 shares of our Common Stock held by Messrs. Perez Niklitschek and Molina Urra (which were cancelled and will resume the status of authorized but unissued shares of our Common Stock) and (ii) certain representations, covenants and indemnities. All descriptions of the split-off agreement and the general release agreement herein are qualified in their entirety by reference to the text thereof filed as exhibits hereto, which are incorporated herein by reference.

 

The Bridge Financing

 

In November 2013, Ekso Bionics offered and sold in a private placement to accredited investors $5,000,000 principal amount of its senior subordinated secured convertible notes (the “Bridge Notes”). The Bridge Notes bore interest at 10% per annum and were payable on July 15, 2014, subject to earlier conversion as described below.

 

Interest on the Bridge Notes would have been payable at maturity; however, upon conversion of the Bridge Notes as described below, accrued interest was forgiven. The Bridge Notes were secured by a second priority security interest on all of the assets of Ekso Bionics and its subsidiary, subject to certain limited exceptions. This security interest terminated upon conversion of the Bridge Notes.

 

Upon the closing of the Merger and the PPO, the outstanding principal amount of the Bridge Notes was automatically converted into Units of our securities (as described below under “The Private Placement Offering”) at a conversion price of $1.00 per Unit, and investors in the Bridge Notes received a warrant to purchase a number of shares of Common Stock equal to 50% of the number of shares of Common Stock contained in the Units into which the Bridge Notes were converted, at an exercise price of $1.00 per share for a term of three years (the “Bridge Warrants”). The Bridge Warrants have weighted average anti-dilution protection, subject to customary exceptions. See “Description of Securities – Warrants” below.

 

In connection with the sale of the Bridge Notes, Ekso Bionics paid to Gottbetter Capital Markets, LLC (the “Placement Agent”), a registered broker-dealer, cash commissions of 10% of funds raised and issued to it warrants to purchase a number of shares of our Common Stock equal to 10% of the number of shares of Common Stock into which Bridge Notes would convert at the closing of the Merger and PPO, with an exercise price per share of $1.00 and a term of five years (“Bridge Agent Warrants”). The Bridge Agent Warrants have weighted average anti-dilution protection, subject to customary exceptions. See “Description of Securities—Warrants” below.

 

The Placement Agent and its sub-agents were paid an aggregate commission of $500,000 and were issued Bridge Agent Warrants to purchase an aggregate of 500,000 shares of our Common Stock. We also reimbursed the Placement Agent $25,000 for its legal and other expenses incurred in connection with the Bridge Financing.

 

We agreed to indemnify the Placement Agent and its sub-agents to the fullest extent permitted by law, against certain liabilities that may be incurred in connection with the Bridge Notes, including certain civil liabilities under the Securities Act, and, where such indemnification is not available, to contribute to the payments the placement agents and its sub-agents may be required to make in respect of such liabilities.

 

All descriptions of the Bridge Warrants and the Bridge Agent Warrants herein are qualified in their entirety by reference to the text thereof filed as exhibits hereto, which are incorporated herein by reference.

   

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The Private Placement Offering

 

Concurrently with the closing of the Merger and in contemplation of the Merger, we held a closing of our PPO in which we sold 20,580,000 Units (including Units issued upon conversion of the Bridge Notes as described above) of our securities, at a purchase price of $1.00 per Unit, each Unit consisting of one share of our Common Stock and a PPO Warrant. In addition, as a result of the foregoing, we issued to the holders of the Bridge Notes prior to the merger Bridge Warrants to purchase 2,500,000 shares of our Common Stock. Between January 29, 2014 and February 6, 2014, we issued an additional 9,720,000 Units in subsequent closings of the PPO.

 

Investors in the Units have weighted average anti-dilution protection with respect to the shares of Common Stock included in the Units if within 24 months after the final closing of the PPO the Company shall issue additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions, including but not limited to issuances of awards under the Company’s 2014 Plan (as defined below)) for consideration per share less than $1.00. The PPO Warrants have weighted average anti-dilution protection, subject to customary exceptions. The aggregate gross proceeds of the PPO were $30,300,000 (including the aggregate principal amount of Bridge Notes converted and before deducting placement agent fees and expenses of the offering estimated at approximately $4,200,000).

 

The PPO was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided by Regulation D promulgated by the SEC thereunder. The PPO was sold to “accredited investors,” as defined in Regulation D, and was conducted on a “best efforts” basis.

 

The closing of the PPO and the closing of the Merger were conditioned upon each other.

 

Mr. Boren and Ms. Hamilton, each a director of the Company, purchased 20,000 and 200,000 Units, respectively, in the PPO.

 

In connection with the PPO, we agreed to pay the Placement Agent a cash commission of 10% (or 2% in the case of certain named investors) of the gross proceeds raised from investors in the PPO. In addition, the Placement Agent received warrants to purchase a number of shares of Common Stock equal to 10% (or 2% in the case of certain named investors) of the number of shares of Common Stock included in the Units sold in the PPO, with a term of five years and an exercise price of $1.00 per share (the “PPO Agent Warrants”). The PPO Agent Warrants have weighted average anti-dilution protection, subject to customary exceptions. In addition, we agreed to pay the Placement Agent an additional cash commission of 5% of funds received by the Company from the exercise of Bridge Warrants and PPO Warrants resulting from any future solicitation of the exercise of such warrants by the Company. Any sub-agent of the Placement Agent that introduced investors to the PPO was entitled to share in the cash fees and warrants attributable to those investors as described above.

 

As a result of the foregoing, the Placement Agent and its sub-agents were paid an aggregate commission of $2,530,000 (not including the commission paid in connection with the sale of the Bridge Notes) and were issued PPO Agent Warrants to purchase an aggregate of 2,530,000 shares of our Common Stock. We were also required to reimburse the Placement Agent $17,500 of legal expenses incurred in connection with the PPO.

 

We agreed to indemnify the Placement Agent and its sub-agents to the fullest extent permitted by law, against certain liabilities that may be incurred in connection with the PPO, including certain civil liabilities under the Securities Act, and, where such indemnification is not available, to contribute to the payments the placement agents and its sub-agents may be required to make in respect of such liabilities.

 

All descriptions of the PPO Warrants and the PPO Agent Warrants herein are qualified in their entirety by reference to the text thereof filed as exhibits hereto, which are incorporated herein by reference.

   

Registration Rights

 

In connection with the PPO, we entered into a Registration Rights Agreement, pursuant to which we have agreed that promptly, but no later than 90 calendar days from the final closing of the PPO, the Company will file a registration statement with the SEC (the “Registration Statement”) covering (a) the shares of Common Stock issued in the PPO (including those issued upon conversion of the Bridge Notes), (b) the shares of Common Stock issuable upon exercise of the Bridge Warrants, (c) the shares of Common Stock issuable upon exercise of the PPO Warrants, (d) the shares of Common Stock underlying Bridge Agent Warrants and PPO Agent Warrants and (e) 225,000 shares of Common Stock underlying warrants issued to a lender (the “Registrable Shares”). The Company must use its commercially reasonable efforts to ensure that such Registration Statement is declared effective within 180 calendar days after filing with the SEC. If the Company is late in filing the Registration Statement or if the Registration Statement is not declared effective within 180 days after filing with the SEC, liquidated damages payable by the Company to the holders of Registrable Shares (but excluding shares of Common Stock underlying Bridge Agent Warrants and PPO Agent Warrants) that have not been so registered will commence to accrue and cumulate at a rate equal to 1.00% of the Offering Price per share for each full month that (i) the Company is late in filing the Registration Statement or (ii) the Registration Statement is late in being declared effective by the SEC; provided, however, that in no event shall the aggregate of any such liquidated damages exceed 8% of the PPO offering price per share. No liquidated damages will accrue with respect to any Registrable Shares removed from the Registration Statement in response to a comment from the staff of the SEC limiting the number of shares of Common Stock which may be included in the Registration Statement (a “Cutback Comment”) or after the shares may be resold under Rule 144 under the Securities Act or another exemption from registration under the Securities Act.

 

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The Company must keep the Registration Statement “evergreen” for one year from the date it is declared effective by the SEC or until Rule 144 is available to the holders of Registrable Shares who are not and have not been affiliates of the Company with respect to all of their registrable shares, whichever is earlier.

 

The holders of Registrable Shares (including any shares of Common Stock removed from the Registration Statement as a result of a Cutback Comment) (but not holders of the shares issued to the stockholders of Ekso Bionics in consideration for the Merger) shall have “piggyback” registration rights for such Registrable Shares with respect to any registration statement filed by the Company following the effectiveness of the Registration Statement that would permit the inclusion of such shares.

 

We will pay all expenses in connection with any registration obligation provided in the Registration Rights Agreement, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees and disbursements of our counsel and of our independent accountants.  Each investor will be responsible for its own sales commissions, if any, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.

 

All descriptions of the Registration Rights Agreement herein are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.

 

2014 Equity Incentive Plan

 

Before the Merger, our Board of Directors adopted, and our stockholders approved, our 2014 Equity Incentive Plan (the “2014 Plan”), which provides for the issuance of incentive awards of up to 14,410,000 shares of our Common Stock to officers, key employees, consultants and directors. In connection with the Merger, options to purchase an aggregate of 7,586,459 shares of our Common Stock were issued under the 2014 Plan as described above. See “Market Price of and Dividends on Common Equity and Related Stockholder Matters - Securities Authorized for Issuance under Equity Compensation Plans” below for more information about the 2014 Plan and the outstanding stock options.

 

On the closing of the Merger, our Board granted to our officers and directors options to purchase an aggregate of 2,300,000 shares of our Common Stock under the 2014 Plan. See “Description of Securities—Options” below for additional information about these awards.

 

Departure and Appointment of Directors and Officers

 

Our Board of Directors currently consists of five members. On the Closing Date, Pedro Perez Niklitschek, our sole director before the Merger, resigned his position as a director, and Steven Sherman (Chairman), Nathan Harding, Daniel Boren, Marilyn Hamilton and Jack Peurach were appointed to the Board of Directors.

 

Prior to consummation of the Merger, the Company entered into an agreement with CNI, whereby the Company agreed to nominate Daniel Boren, or another individual designated by CNI and reasonably acceptable to the remaining directors of the Company, for election as a director of the Company until the earlier of such time as CNI no longer holds at least 10% of the Company’s outstanding voting securities, or the shares of Common Stock held by CNI are no longer subject to a contractual lock-up agreement with the Company restricting the resale of such shares of Common Stock.

 

Also on the Closing Date, Mr. Perez Niklitschek, our Chief Executive Officer, President and Treasurer before the Merger, and Miguel Molina Urra, our Secretary before the Merger, resigned from these positions, and Nathan Harding was appointed as our Chief Executive Officer and President, Max Scheder-Bieschin was appointed as our Chief Financial Officer and Treasurer, Russ Angold was appointed as our Chief Technology Officer, and Frank Moreman was appointed as our Chief Operating Officer by the Board.

 

See “Management – Directors and Executive Officers” below for information about our new directors and executive officers.

 

Lock-up Agreements and Other Restrictions

 

In connection with the Merger, each of our executive officers and directors named above and each person holding 10% or more of our Common Stock after giving effect to the Merger, the Split-Off and the PPO (the “Restricted Holders”), holding at that date in the aggregate 19,021,337 shares of our Common Stock, entered into agreements (the “Lock-Up and No Shorting Agreements”), whereby they are restricted for a period of 24 months after the Merger from certain sales or dispositions of shares of our Common Stock held by them immediately after the Merger, except in certain limited circumstances.

 

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Further, for a period of 24 months after the Merger, each Restricted Holder has agreed in the Lock-Up and No Shorting Agreements to be subject to restrictions on engaging in certain transactions, including effecting or agreeing to effect short sales, whether or not against the box, establishing any “put equivalent position” with respect to our Common Stock, borrowing or pre-borrowing any shares of our Common Stock, or granting other rights (including put or call options) with respect to our Common Stock or with respect to any security that includes, relates to or derives any significant part of its value from our Common Stock, or otherwise seeks to hedge his position in our Common Stock.

 

We agreed with each Restricted Holder that, except in certain limited circumstances, we would not register for resale any of the shares of our Common Stock received by stockholders of Ekso Bionics in exchange for their shares of Ekso Bionics’ common stock pursuant to the Merger (the “Merger Shares”) unless we offer the Restricted Holders the opportunity to include the shares they received in the Merger in such registration statement on a pari passu basis with the other Merger Shares.

 

Pro Forma Ownership

   

After giving effect to (i) the Merger and (ii) the cancellation of 17,483,100 shares in the Split-Off, and (iii) the final closing of the PPO, there were 78,445,924 issued and outstanding shares of our Common Stock, as follows: