EKSO BIONICS HOLDINGS, INC. The following discussion of our financial condition and results of operation should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2020 (this "Quarterly Report") and in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 (the "Annual Report"). This Quarterly Report contains forward-looking statements. These forward-looking statements include statements other than statements of historical facts contained or incorporated by reference in this Quarterly Report, including statements regarding (i) the plans and objectives of management for future operations, including those relating to the design, development and commercialization of exoskeleton products for humans, (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 theSecurities and Exchange Commission , (iv) our beliefs regarding the potential for commercial opportunities for exoskeleton technology in general and our exoskeleton products in particular, (v) our beliefs regarding potential clinical and other health benefits of our medical devices, and (vi) the assumptions underlying or relating to any statement described in points (i), (ii), (iii), (iv) or (v) above. The words "may," "might," "would," "should," "could," "project," "estimate," "pro-forma," "predict," "potential," "strategy," "anticipate," "attempt," "develop," "plan," "help," "believe," "continue," "intend," "expect," "future," and similar expressions (including the negative of any of the foregoing) are intended to identify forward-looking statements. The following factors, among others, including those described in the section titled "Risk Factors" included in our Annual Report, as updated and supplemented in this Quarterly Report under the heading "Part II - Item 1A. Risk Factors," could cause our future results to differ materially from those expressed in the forward-looking information: •our ability to obtain adequate financing to fund operations and to develop or enhance our technology; •scope, scale and duration of the impact of outbreaks of a pandemic disease, such as COVID-19 (coronavirus); •our ability to obtain or maintain regulatory approval to market our medical devices; •our ability to complete clinical trials on a timely basis and that completed clinical trials will be sufficient to support commercialization of our products; •the anticipated timing, cost and progress of the development and commercialization of new products or services, and improvements to our existing products, and related impacts on our profitability and cash position; •our ability to effectively market and sell our products and expand our business, both in unit sales and product diversification; •our ability to achieve broad customer adoption of our products and services; •existing or increased competition; •rapid changes in technological solutions available to our markets; •volatility with our business, including long and variable sales cycles, which could have a negative impact on our results of operations for any given quarter; •changes to our domestic or international sales and operations; •our ability to obtain or maintain patent protection for our intellectual property; •the scope, validity and enforceability of our and third-party intellectual property rights; •significant government regulation of medical devices and the healthcare industry; •our ability to receive regulatory clearance from certain government authorities, such as CFIUS (as defined below), including any conditions, limitations or restrictions placed on such approvals; •outbreaks of a pandemic disease, such as COVID-19 (coronavirus); •our customers' ability to get third-party reimbursement for our products and services associated with them; •our failure to implement our business plan or strategies; •our early termination of leases, difficulty filling vacancies or negotiating improved lease terms; •our ability to retain or attract key employees; •stock volatility or illiquidity; •our ability to maintain adequate internal controls over financial reporting; and •overall economic and market conditions.
Although we believe that the assumptions underlying the forward-looking statements and forward-looking information contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, such statements and information
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included in this Quarterly Report may not prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements and
forward-looking information included herein, the inclusion of such statements
and information should not be regarded as a representation by us or any other
person that the results or conditions described in such statements and
information or that our objectives and plans will be achieved. Such
forward-looking statements speak only as of the date of this Quarterly Report.
Except as required by law, we undertake no obligation to update any
forward-looking statements to reflect events or circumstances after the date of
such statements.
Overview
We design, develop and sell exoskeleton technology to augment human strength,
endurance and mobility. Our exoskeleton technology serves multiple markets and
can be used both by able-bodied persons as well as by persons with physical
disabilities. We have sold or rented devices that (i) enable individuals with
neurological conditions affecting gait (stroke and spinal cord injury) to
rehabilitate, and in some cases, to walk again, (ii) assist individuals with a
broad range of upper extremity impairments, and (iii) allow industrial workers
to perform difficult repetitive work for extended periods.
We believe that the commercial opportunity for exoskeleton technology adoption
is accelerating as a result of recent advancements in material technologies,
electronic and electrical engineering, control technologies, and sensor and
software development. Taken individually, many of these advancements have become
ubiquitous in peoples' everyday lives. We believe that we have learned how to
integrate these existing technologies and wrap the result around a human being
efficiently, elegantly and safely, supported by an industry leading intellectual
property portfolio. We further believe that we can do so across a broad spectrum
of applications, from persons with lower limb paralysis to able-bodied users.
EksoHealth
EksoHealth is our business unit that focuses on developing, marketing, and
selling exoskeletons for medical applications. Our leading product in EksoHealth
is EksoNR, which is a robotic exoskeleton used to provide physical therapy for
patients with lower extremity impairment. EksoNR, which in 2019 superseded our
EksoGT product in this segment, includes unique features designed specifically
to assist physical therapists and other clinicians to teach patients to walk
again after suffering a neurological impairment. Typical conditions that can be
treated with the assistance of EksoNR include acquired brain injuries (ABI),
such as stroke and traumatic brain injuries (TBI), as well as spinal cord
injuries and others. The benefits of using EksoNR for rehabilitation can include
earlier mobilization of patients, longer and more intense rehab sessions, and
better quality of sessions compared to alternative therapies. The product is
most typically used in a clinical setting, with the most common among those
being inpatient rehab facilities (IRF) and stroke centers.
EksoUE is a wearable upper body exoskeleton that is also used as a tool during
rehabilitation. EksoUE is designed to assists patients with a broad range of
upper extremity impairments and aims to provide them with a wider active range
of motion and increased endurance for rehabilitation sessions of higher
intensity.
EksoWorks
EksoWorks is our business unit that focuses on developing, marketing, and
selling exoskeletons and other assistive tools for industrial applications. The
target users for these devices are generally able-bodied, and as such the goal
of these products is to reduce fatigue for workers. The benefits of fatigue
reduction can include reduced rates of injuries, higher productivity, higher
worker morale, and lower turnover. Currently, we sell these products primarily
directly to companies that deploy them for use in their operations.
Within EksoWorks we have two main categories of products. Our wearable
exoskeleton products include EksoVest and the new EVO, both of which support the
weight of a worker's arms and tools, reducing the fatigue associated with
working at or above shoulder height for extended periods. These products are
currently targeted at end markets in Manufacturing, Aerospace, Construction, and
Food Processing.
EksoZeroG is a tool holder that can mount on aerial lift platform or
scaffolding. This effectively reduces the weight of heavy tools as felt by the
operator. EksoZeroG has been sold primarily through rental companies into the
construction market.
In addition to our current product lineup, we believe that there is additional
mid-to-long-term potential in the industrial markets, and accordingly, we will
continue our development efforts to expand our EksoWorks product offerings.
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Third Quarter 2020 Highlights
•Reported revenue of $2.9 million in the third quarter of 2020
•Record quarterly gross margins of approximately 63% in the third quarter of
2020, compared to 53% in the same period of 2019
•Launched EVOTM, an endurance-boosting assistive upper body exoskeleton designed
for industrial use
•Received proceeds of $3.3 million from the exercise of warrants
•Reduced use of cash for operating activities to lowest levels in Company
history
In March 2020 , the World Health Organization declared the COVID-19 outbreak to
be a global pandemic. In response to this pandemic, public health officials and
governments across the world have recommended and mandated actions to curb the
spread of the virus. The COVID-19 pandemic and the related responses to the
pandemic have caused a significant adverse impact on the global economy,
including disruptions to supply chains, sharp increases in unemployment and
overall economic uncertainty.
This pandemic has negatively impacted our business, including our employees,
suppliers, customers and other business partners. We have seen demand for our
exoskeleton products decrease in the current business environment, as many
inpatient rehabilitation facilities temporarily shift priorities and delay
capital expenditures. We have seen that the clinical need has not diminished as
more data is coming out about the increase prevalence of strokes during this
pandemic. As such, we continue to engage with our current and prospective
customers through video conferencing, virtual training events and online
education demos to offer our support and showcase the value of our Ekso devices.
Although market uncertainties related to the pandemic make it difficult for us
to project the full impact on our business and customers, we believe that we are
well-positioned to serve our customers when business conditions begin to
normalize.
We continue to instruct the majority of our employees to work from home, restrict non-critical business travel and have enhanced the use of personal protective equipment in our facilities.
To align our cost structure to the current business environment, we initially furloughed and subsequently laid-off a portion of our workforce in the second quarter of 2020.
Management continues to actively monitor the global situation and its effects on our financial position and operations.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the condensed consolidated financial statements. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the condensed consolidated financial statements. 35 -------------------------------------------------------------------------------- Table of Contents Results of Operations The following table presents our results of operations (in thousands, except percentages): Three months ended September 30, 2020 2019 Change % Change Revenue $ 2,897$ 3,319 $ (422) (13) % Cost of revenue 1,084 1,569 (485) (31) % Gross profit 1,813 1,750 63 4 % Operating expenses: Sales and marketing 1,740 2,818 (1,078) (38) % Research and development 599 1,149 (550) (48) % General and administrative 1,706 1,573 133 8 % Impairment of goodwill 189 - 189 n/m1 Total operating expenses 4,234 5,540 (1,306) (24) % Loss from operations (2,421) (3,790) 1,369 (36) % Other (expense) income, net: Interest expense (23) (88) 65 (74) % Gain on warrant liabilities 4,476 4,430 46 1 % Other income (expense), net 420 (346) 766 (221) % Total other (expense) income, net 4,873 3,996 877 22 % Net income $ 2,452$ 206 $ 2,246 1,090 % (1) Not meaningful Revenue Revenue decreased$0.4 million , or 13%, for the three months endedSeptember 30, 2020 , compared to the same period of 2019. This decrease was comprised of a$0.2 million decrease in EksoHealth revenue and a$0.2 million decrease in EksoWorks revenue, primarily due to a decrease in volume of medical device sales driven by the impact of the COVID-19 pandemic, as our customers shifted their priorities to manage their business during the pandemic.
Gross Profit
Gross profit increased$0.1 million , or 4%, for the three months endedSeptember 30, 2020 , compared to the same period of 2019, representing a gross margin of approximately 63% in the third quarter of 2020, compared to a gross margin for the same period in 2019 of 53%. The increase in gross margins was primarily due to higher average selling prices for EksoNR, an increased proportion of medical device sales in overall revenue composition, lower unit production costs, the introduction of EVO and higher service margins.
Operating Expenses
Sales and marketing expenses decreased$1.1 million , or 38%, for the three months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a reduction in force inMay 2020 , and lower general marketing and trade show activities. Research and development expenses decreased$0.6 million , or 48%, for the three months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a reduction in force inMay 2020 , and a decrease in patent and licensing costs. General and administrative expenses increased$0.1 million , or 8%, for the three months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to higher legal expenses associated with the termination of ourChina joint venture.
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The reduction in operating expenses reflects the continuation of the
company-wide initiatives we implemented last year, the restructuring completed
in May 2020 , as well as improving overall operational efficiencies. Our focus
remains on optimizing the cost structure of our organization.
Total Other (Expense) Income, Net
Interest expense decreased
Gain on warrant liabilities of$4.5 million for the three months endedSeptember 30, 2020 was associated with the revaluation of warrants issued in 2015, 2019 and 2020, compared to a$4.4 million gain associated with the revaluation of warrants issued in 2015 andMay 2019 for the three months endedSeptember 30, 2019 . The gain on the revaluation of warrant liabilities during the three months endedSeptember 30, 2020 is primarily due to the decrease in the market price of our common stock fromJune 30, 2020 toSeptember 30, 2020 . The comparable quarter's gain on the revaluation of warrant liabilities was also due to the decrease in our stock price during the comparable period. Other income (expense), net for the three months endedSeptember 30, 2020 was$0.4 million income, as compared to a$0.3 million expense for the same period of 2019. The primary reason for the increase in income is due to larger unrealized gain on foreign currency revaluations of our inter-company monetary assets and liabilities. 37
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The following table presents our results of operations (in thousands, except
percentages):
Nine months ended September 30,
2020 2019 Change % Change
Revenue $ 6,628 $ 10,197 $ (3,569) (35) %
Cost of revenue 2,919 5,288 (2,369) (45) %
Gross profit 3,709 4,909 (1,200) (24) %
Operating expenses:
Sales and marketing 5,972 8,666 (2,694) (31) %
Research and development 1,762 4,032 (2,270) (56) %
General and administrative 5,836 6,011 (175) (3) %
Impairment of goodwill 189 - 189 n/m (1)
Restructuring 244 - 244 n/m (1)
Total operating expenses 14,003 18,709 (4,706) (25) %
Loss from operations (10,294) (13,800) 3,506 (25) %
Other (expense) income, net:
Interest expense (113) (316) 203 (64) %
(Loss) gain on warrant liabilities (1,579) 6,045 (7,624) (126) %
Loss on modification of warrants - (257) 257 (100) %
Warrant issuance expense (329) (706) 377 (53) %
Other income (expense), net 466 (377) 843 (224) %
Total other (expense) income, net (1,555) 4,389 (5,944) (135) %
Net loss $ (11,849) $ (9,411) $ (2,438) 26 %
(1) Not meaningful
Revenue
Revenue decreased $3.6 million , or 35%, for the nine months ended September 30,
2020 , compared to the same period of 2019. This decrease was comprised of a
$2.7 million decrease in EksoHealth revenue and a $0.9 million decrease in
EksoWorks revenue, primarily due to a decrease in volume of medical device sales
driven by the impact of the COVID-19 pandemic, as our customers shifted their
priorities to prepare for and manage their business during the pandemic.
Gross Profit
Gross profit decreased$1.2 million , or 24%, for the nine months endedSeptember 30, 2020 , compared to the same period of 2019, primarily attributed to decreased volume of device sales. Gross margin was approximately 56% for the nine months endedSeptember 30, 2020 , compared to a gross margin of 48% for the same period in 2019. Gross margins increased primarily due to higher average selling prices for EksoNR, an increased proportion of medical device sales in overall revenue composition, lower unit production costs, the introduction of EVO and higher service margins. Operating Expenses Sales and marketing expenses decreased$2.7 million , or 31%, for the nine months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a furlough and a reduction in force in March andMay 2020 , respectively, lower general marketing and trade show activities, and the absence of clinical trials expense due to the completion of our main clinical trial in the first quarter of 2019. Research and development expenses decreased$2.3 million , or 56%, for the nine months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a furlough and a reduction in force in March andMay 2020 , respectively, and a decrease in patent and licensing costs. General and administrative expenses decreased$0.2 million , or 3%, for the nine months endedSeptember 30, 2020 , compared to the same period of 2019, primarily due to a decrease in employee compensation expenses from reduced headcount. 38 -------------------------------------------------------------------------------- Table of ContentsGoodwill impairment charge of$0.2 million was recorded in the nine months endedSeptember 30,2020 , reducing the goodwill balance to zero. No goodwill impairment charge was recorded in the same period of 2019.
Restructuring expense of
The reduction in operating expenses reflects the continuation of the company-wide initiatives we implemented last year, the restructuring completed inMay 2020 , as well as improving overall operational efficiencies. Our focus remains on optimizing the cost structure of our organization.
Total Other (Expense) Income, Net
Interest expense decreased
Loss on warrant liabilities of$1.6 million for the nine months endedSeptember 30, 2020 was associated with the revaluation of warrants issued in 2015, 2019 and 2020, compared to a$6.0 million gain associated with the revaluation of warrants issued in 2015 andMay 2019 for the nine months endedSeptember 30, 2019 . Gains and losses on the revaluation of warrant liabilities are primarily driven by changes in the Company's stock price. Typically, an increase in the price of our common stock over the reporting period would result in a loss on warrant liabilities, while a decrease would result in a gain; however, when warrants are exercised, the corresponding warrant liability is marked-to-market immediately prior to exercise. Due to the fluctuation of our stock price and significant warrant exercises, during the nine months endedSeptember 30, 2020 , we recorded a loss on the warrants liabilities even though there was an overall decrease in our stock price fromDecember 31, 2019 toSeptember 30, 2020 . The comparable period's gain on the revaluation of warrant liabilities was primarily due to the decrease in our stock price during the comparable period. Loss on modification of warrants of$0.3 million for the nine months endedSeptember 30, 2019 was due to the reduction of the exercise price of the 2015 Warrants$56.10 per share to$41.25 per share, in connection with an amendment 2015 Warrant Agreement, which retroactively removed a provision from such securities purchase agreement that prohibited the Company from effecting or entering into an agreement to effect any issuance by the Company of its common stock at a price determined based on the trading price of the Company's common stock or otherwise at a future determined price. There was no comparable amount for the nine months endedSeptember 30, 2020 . Warrant issuance expense of$0.3 million for the nine months endedSeptember 30, 2020 was recorded in connection with our private placement offerings of warrants to purchase common stock concurrently with a registered direct offering of our common stock inJune 2020 . We incurred$1.1 million in direct financing costs, which were allocated on a relative fair value basis between the common stock and warrant issuances, of which$0.3 million was allocated to warrants and expensed immediately. For the nine months endedSeptember 30, 2019 we recorded$0.7 million in warrant issuance expense in connection with our public offering of common stock and warrants to purchase common stock inMay 2019 .
Financial Condition, Liquidity and Capital Resources
Since our inception, we have devoted substantially all of our efforts toward the development of exoskeletons for the medical and industrial markets, toward the commercialization of medical exoskeletons for rehabilitation centers and toward raising capital. We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt.
Liquidity and Capital Resources
As ofSeptember 30, 2020 , we had an accumulated deficit of$195.1 million . Largely as a result of significant research and development activities related to the development of our advanced technology and commercialization of such technology into our medical device business, we have incurred significant operating losses and negative cash flows from operations since inception. In the nine months endedSeptember 30, 2020 , we used$7.0 million of cash in our operations and had cash on hand of$14.5 million as ofSeptember 30, 2020 . 39 -------------------------------------------------------------------------------- Table of Contents In 2020, management has taken several actions to alleviate the substantial doubt about the our ability to continue as a going concern that existed as of the date of issuance of theDecember 31, 2019 consolidated financial statements, including, but not limited to, the following: •streamlined our operations and reduced our workforce by approximately 35% to lower operating expenses and reduce cash burn; •conducted a registered direct offering of 1,747,704 shares of our common stock for net proceeds of$7.1 million ; •paid off the entire amount of$1.5 million of our indebtedness toWestern Alliance Bank with proceeds from a new loan of$2.0 million fromPacific Western Bank . The terms of the new loan agreement include monthly interest-only payments over the next three years. •invested in the development and reliability of our products; •restructured our commercial organization and strategy which is showing continued adoption; •received FDA clearance for ABI to market our product to a larger patient population increasing the value proposition to our customers.
We have also received proceeds of
As described in Note 11. Notes Payable, net in the notes to our condensed consolidated financial statements, borrowings under our new secured term loan agreement withPacific Western Bank have a requirement of minimum cash on hand equivalent to the current outstanding principal balance. As ofSeptember 30, 2020 ,$2.0 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as ofSeptember 30, 2020 is estimated to be$12.5 million . With this unrestricted cash balance and the impact of management's actions described above, we believe that we currently have sufficient cash to fund our operations beyond the look forward period of one year from the issuance of these condensed consolidated financial statements. Our actual capital requirements may vary significantly and will depend on many factors. We plan to continue our investments in our (i) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use. Consequently, we may require significant additional financing in the future, which we intend to raise through corporate collaborations, public or private equity offerings, debt financings, or warrant solicitations. Sales of additional equity securities by us could result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to further reduce our discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash (in thousands). We held no cash equivalents for any of the periods presented.
Nine months ended
2020 2019
Net cash used in operating activities$ (7,015) $ (14,277) Net cash used in investing activities -
(60)
Net cash provided by financing activities 10,704
14,770
Effect of exchange rate changes on cash (12)
(30)
Net increase in cash 3,677
403
Cash at the beginning of the period 10,872 7,655 Cash at the end of the period$ 14,549 $ 8,058
Net cash used in operations decreased$7.3 million , or 51%, for the nine months endedSeptember 30, 2020 , compared to the same period of 2019 primarily due to the reduction in operating expenses by improving overall operational efficiencies, including but not limited to, the reduction of employee headcount. In addition, increased collection efforts resulted in higher accounts receivable collections. 40
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Net Cash Provided by Financing Activities
Net cash provided by financing activities of$10.7 million for the nine months endedSeptember 30, 2020 was from the sale of our common stock for net proceeds of$7.1 million in connection with the equity financing inJune 2020 , proceeds of$1.1 million from our PPP loan, and proceeds of$3.3 million from the exercise ofJune 2020 Warrants andMay 2019 Warrants, partially offset by aggregate principal payments of$1.3 million against our term loan. Net cash provided by financing activities of$14.8 million for the nine months endedSeptember 30, 2019 was from the sale of common stock for net proceeds of$9.0 million in connection with the equity financing inMay 2019 , net proceeds of$2.3 million under our "at the market offering" program, net proceeds of$5.0 million from equity investors associated with the China JV, and proceeds of$0.2 million from the exercise of stock options, partially offset by aggregate principal payments of$1.8 million against our term loan.
Contractual Obligations and Commitments
The following table summarizes our outstanding contractual obligations as ofSeptember 30, 2020 , and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
Payments Due By Period:
Less than After
Total One Year 1-3 Years 3-5 Years 5 Years
Notes payable, principal and interest
$ 3,288 $ - $ - Facility operating leases 779 406 373 - - Purchase obligations 302 302 - - - Total$ 4,459 $ 798 $ 3,661 $ - $ - In addition to the table above, which reflects only fixed payment obligations, we have two license agreements to maintain exclusive rights to certain patents. Under these license agreements, we are required to pay 1% of net sales of products sold to entities other than theU.S. government. In the event of a sublicense, we owe 21% of license fees and must pass through 1% of the sub-licensee's net sales of products sold to entities other than theU.S. government. The license agreements also stipulate minimum annual royalties of$50,000 per year. In connection with our acquisition of Equipois inDecember 2015 , we assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants us an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, we pay the developer a single-digit royalty on net receipts, subject to a$50,000 annual minimum royalty requirement. We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling$0.3 million as ofSeptember 30, 2020 , which is expected to be paid within a year. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.
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