NEW YORK (The Deal) -- Tamara Mena has been in a wheelchair since 2005. But since 2012, she has had the opportunity, at least for short periods of time, to walk again.
Mena, 25, is one of eight ambassadors for Ekso Bionics (EKSO) a company that has produced the Ekso, a robotic suit which makes it possible for some wheelchair users to walk again. The company went public Jan. 15 in a reverse merger transaction and raised $20.6 million in private placement financing.
Forsaken by venture capital funds, the Richmond, Calif.-based company instead raised $30 million before it went public from angel investors including the Chickasaw Indian nation, to produce the Ekso.
The 50-pound suit is worn on the back and legs. It consists of a computer, a pair of lithium batteries, and an aluminum and carbon fiber frame with a series of harnesses worn on the legs. Small motors at the hips and knees power the user's legs. Crutches allow the user to balance and control the suit.
Mena, who is a motivational speaker and model, says she hopes to one day have her own personal Ekso Bionic suit. For now, however, she is happy to commute from Modesto, Calif., about 90 miles southeast of Ekso's San Francisco Bay Area headquarters, to train with the suit. She has used it about 20 times.
"The suit has given me a chance to do something that I never thought I would ever do again," Mena said. "I can walk and look people in the eye. I can hug people. To have an opportunity like this is a blessing. I'm excited about the future."
In fact, the hug factor caused the Ekso to be redesigned, according to CEO Nathan Harding.
"Originally, we had the power button on the back of the pack, but after we had worked the Ekso with a few people and their families began being involved, we realized that the first thing that Mom was going to do is go in for a hug, and that could shut it all down," he said, laughing.
Having solved that problem and taken Ekso public, the 46-year-old Harding now has his sights set on when the company might shift from the red into the black.
"We think we can be profitable in 18 to 24 months," he said during an interview at Ekso's headquarters at Ford Point, a former Ford car factory that now also houses numerous green businesses and a museum that commemorates the building's previous history as a military vehicle factory during World War II.
Ekso has a little history as well. The original research that launched the Ekso Bionic suit took place at the Berkeley Robotics and Human Engineering Laboratory at the University of California at Berkeley in 2005, with mechanical engineering professor Homayoon Kazerooni and Ekso co-founders Harding and Russ Angold partnering with the lab, as ExoWorks. Angold is now Ekso's chief technology officer.
In 2007, ExoWorks became Berkeley Bionics and began working off a $10 million grant from the Defense Advanced Research Projects Agency. DARPA is an offshoot of the Defense Department, known for its ground-breaking research projects. The grant resulted in the Human Universal Load Carrier (HULC), an exoskeleton suit that helps soldiers to carry heavy loads. In 2009, that technology was licensed to Lockheed Martin (LMT) for further military development. The latest version of the HULC can allow soldiers to carry up to 200 pounds over long distances and rough terrain.
A year later, Berkeley Bionics debuted eLEGS, a predecessor to the Ekso Bionics suit. In 2010, the company changed its name to Ekso Bionics. In 2012, it shipped the first Ekso Bionic suit to Craig Hospital in Englewood, Colo.
Today, there are 22 rehabilitation centers in the U.S. using Ekso suits, eight facilities in Europe and one in South Africa.
The company is focused on the rehabilitation market.
"There are 3,500 rehab centers in the U.S. that deal with spinal and brain injuries that could use the Ekso," Harding said.
The suit is sold at a list price of $110,000 plus another $40,000 for a software upgrade and a $10,000-a-year maintenance agreement. The software upgrade enables a new feature called variable assist, which allows clinicians to target patients' strengths and weaknesses to make rehabilitation more productive.
Ekso has tried to continually upgrade its technology. The company recently rolled out the Ekso GT, a higher performing suit and the fourth evolution in two years.
"We are creating a new industry," CFO Max Scheder-Bieschin said.
The suit is used to train people with neurological conditions such as stroke, traumatic brain injury and hemiparesis (a weakness on one side of the body) to walk again. A patient wears the suit works with a spotter and physical therapy personnel. According to the company, the Ekso can be used by patients with C7 spinal injury (paralysis of the legs and partial body paralysis) and incomplete spinal cord injury, and can also be used by non- or pre-ambulatory patients following a stroke.
Currently there are 40 suits in use, with 34 in rehab centers and six in use by individuals. The company has a back-log of 18 suits on order with a 10-week time line for delivery, Scheder-Bieschin said. Each suit delivered also requires a week of training by Ekso personnel with rehab staff.
While the company is mainly focused on rehabilitation, its partnership with Lockheed could provide a secondary market.
"The military market represents an upside for our investors," said Harding. "We continue to work with Lockheed and eventually they will be responsible for the military market, which is what they do well. We will see a 4% to 6% royalty from that."
Ekso had sought venture capital financing for its product's development but its story didn't translate well, Scheder-Bieschin said.
"To begin with, we are hardware, not software, so they were uncomfortable with that," he said. "We were also looked at as a medical device, which scared a lot of people. And the nature of venture capital was hard in that even if one of the partners likes what you are doing, he still needs to convince everybody else to invest."
More receptive investors included Opaleye and Montrose Capital Partners. The two firms were the lead investors in the private placement that Ekso issued with its reverse merger. Opaleye, based in Cambridge, Mass., mainly invests in biotech and medical devices. InspireMD and Retrophin are also in its portfolio. Montrose is a private equity fund.
One of the largest shareholders in Ekso is Chickasaw Nation Industries, a Norman-Okla.-based holding company that represents the interests of the Chickasaw Indian tribe. It controls 15.6% of the company. According to Scheder-Bieschin, the tribe has invested $10 million into Ekso.
Opaleye founder Jim Silverman says he expects Ekso to become a product that rehabilitation providers will need.
"My view is over time any rehabilitation facility helping paraplegics is going to have to get Ekso devices to remain competitive," he said. "Patients will demand it or move to facilities that do have Eksos.
"Other low hanging fruit may be for any disease with lower-extremity weakness such as post-stroke, MS, ALS, et cetera, and of course, at-home use for those able to afford it.
"You want to invest in the leaders of an industry and for robotic exoskeletons, Ekso is it."
Cofounders Harding and Angold each hold 5.3% of the company.
After the $20.6 million in private placement financing that Ekso raised with its reverse merger, the company is now debt-free, according to Scheder-Bieschin.
"We used $2.5 million to pay off debt to investors," he said. "We have very few receivables and our cash is in good shape."
Ekso sold 20.5 million units for $1 each in the private placement. Each unit consisted of one share and a five-year warrant to purchase another shares for $2.
Ekso shares, which trade on the OTC Bulletin Board, closed at $2.94 on Thursday, up 44 cents, or 17.6%, that day.
The financing included the conversion of $5 million in bridge debt.
Gottbetter Capital Markets was the placement agent with EDI Financial acting as a sub-agent.
Before the reverse merger and financing, Ekso had only $227,098 in cash as of Sept. 30, according to a filing with the SEC. That was after net losses that totaled $9.09 million in the first nine months of 2013 on $2.51 million in revenue.
Dressed in a tweed sport coat with his tie a bit askew, Harding's cowboy boots clicked as he walked to one end of the two-story industrial space and sidestepped a foosball table, pointing to earlier iterations of the HERC, featuring a camouflage color rather than the industrial black of today's Ekso.
Harding says that another sizeable market for a version of the Ekso is the industrial market. He describes a use for the suit in shipyards where workers need to take finishes off ships and hold heavy equipment over their heads for extended periods of time.
Then there is the home market, the use that has captured the heart of Tamara Mena.
She has been in her wheelchair for eight years, since an accident in her native Mexico where a taxi she was riding in struck a horse, which landed on top of the cab, fracturing Mena's spine and killing her boyfriend. Mena, who is now 25, says she daydreams of the personal-use version of the Ekso that will someday be available.
"Using the Ekso has given me the ability to do something I never saw happening," Mena said. "This has given me a challenge and I have really enjoyed the journey. Emotionally, it gave me the chance to remember how some things felt, looking people in the eyes, hugging. Those are pretty important things."
Also, the Ekso has provided more tangible benefits.
"Since I have been using it, my blood pressure has dropped," Mena said.
Health benefits are common for Ekso users, Harding said.
"As you can imagine, we gather a lot of data and one of the things we have found is that the health of all of those who have a high dosage, have trained heavily on the Ekso, they have improved."
The company may have to be able to argue for the health benefits of its product if it is going to make major in-roads into the home market, as that would require support from health insurers.
"One of the things we always hear from people is that when it comes time to talk with insurance companies about reimbursement, they are not going to want to pay for Eksos," Harding said. "We think they are going to be our best friends. I think if we can show that Ekso users improve their health, they are going to think that if this can help keep people healthier, the insurance companies are going to say, 'I don't want to pay for another urinary tract infection.' It will make sense."
Mena says that right now, she doesn't foresee the Ekso becoming a daily mode of transportation.
"I don't think it would replace the wheelchair, but we are probably several years and several versions away," she said. "I would just look at it as an option and a way for me to get some exercise."
Harding is careful when he talks about the personal version of Ekso. The company can already ship to Europe for personal use, but in the U.S. the Ekso is still under study for home use.
The company hopes that by the time it is ready to ship Eksos for home use, the costs will have dropped. Harding said there is no reason why an Ekso should cost more than a high-end motorcycle. With that in mind, he said the company wants to redesign some of the parts for mass production, and that some costs can be captured by going away from adjustable parts now being used, and instead making more customized parts.
Some of the money raised in the private placement will be used to augment the sales and marketing staff, according to the company. Currently the sales staff has seven members, five in the U.S. and two in Europe. Ekso has two people in marketing, one each in the U.S. and Europe, and three customer-relations employees. Additionally, the company has six clinical professionals and physical therapists. Each sale requires a clinician as well as an assist from customer service, according to Harding.
Ekso said in an SEC filing that its sales cycle ranges from three to 12 months. The company is working on shortening the cycle by increasing clinical awareness and acceptance of its product.
Ekso has 49 employees and plans to add 10 to 15 more over the next three months in its sales, clinical and manufacturing divisions.
As a public company, Ekso will have more access to a capital and will be better able to retain its engineering talent, Harding said. It may also give the company more credibility with prospective customers.
One customer who needs no convincing is Mena.
"I'm excited about the future, there are brilliant people working on this," she said. "The thing is, I was not hung up on walking, I didn't dream of walking, and when they talked to me about it, I wondered if I wanted to try it."
She is quiet for a moment, then she adds, "Why wouldn't I give myself the chance to walk again?"