DIH Holding(US:DHAI)2024-07-15 20:56Part I Business DIH Holding US, Inc. provides advanced robotic and VR-enabled rehabilitation devices, focusing on market leadership and innovation - DIH is a global provider of advanced robotic and VR-enabled devices for physical rehabilitation, aiming to "Deliver Inspiration & Health" to individuals with disabilities and functional impairments18 - The company's corporate structure was established through the acquisition of Motek (2015) and Hocoma (2016), followed by a reverse recapitalization with Aurora Technology Acquisition Corp. (ATAK) on February 7, 20242032 - A key corporate reorganization to bring Motek Group and Hocoma AG under the public company was not completed prior to the business combination and remains pending, with DIH currently operating with Motek via an exclusive distribution agreement3490 - DIH's strategy focuses on leveraging its technology to expand market leadership, consolidating the fragmented rehabilitation market through acquisitions, and developing transformative "Total Solutions" for customers474849 - The company offers 17 robotic and VR-based systems across three main categories: upper extremity (Armeo series), lower extremity (Lokomat, Erigo, Andago, C-Mill), and full-body research platforms (CAREN, GRAIL)52 - DIH holds over 20 trademark families and numerous utility and design patents for its core technologies, with registrations in 18 countries858688 Risk Factors The company faces significant risks from incomplete reorganization, product dependency, geopolitical factors, capital needs, regulatory compliance, cybersecurity, and internal control weaknesses - The planned corporate reorganization to bring Motek and Hocoma AG under DIH Holding US, Inc. is incomplete, with DIH relying on an exclusive contract with Motek for key products, posing a risk Motek could sell to competitors9091 - The company is substantially dependent on its key product lines, with LokoMat accounting for over 45% of revenue and its top five product lines representing approximately 90% of revenue9395 - Geopolitical risks, including conflicts in Europe and the Middle East, and foreign exchange fluctuations (especially Euro vs. USD) could adversely affect business performance, as approximately 80% of revenue is from EMEA and the Americas9598101 - The company may need to raise additional capital to fund growth, and failure to secure financing on favorable terms could force a curtailment of operations and growth plans102 - DIH is subject to extensive medical device regulations (FDA, EU MDR), and failure to obtain or maintain regulatory approvals, or changes in regulations, could impede sales and lead to recalls or penalties140141147 - A material weakness in internal control over financial reporting has been identified, specifically a lack of sufficient accounting personnel and resources to meet public company requirements, which could affect timely and accurate financial reporting210211212 Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable214 Cybersecurity DIH implements a NIST-guided cybersecurity risk management program, overseen by the Audit Committee, with no material threats identified - The company has developed a cybersecurity risk management program based on the NIST Cybersecurity Framework to protect critical systems and information215216 - Cybersecurity governance is managed by the Chief Financial Officer, with oversight from the Audit Committee, which reports to the full Board of Directors222223 - As of the report date, the company has not identified any risks from cybersecurity threats or prior incidents that have materially affected or are reasonably likely to materially affect its business, strategy, or financial condition221225 Properties DIH does not own real estate, leasing its executive offices, main R&D campus in Switzerland, and five additional commercial offices globally - The company does not own any properties and leases all its facilities231 - Key leased properties include the executive office in Norwell, MA; an R&D and operational campus in Volketswil, Switzerland; and commercial offices in the US, Slovenia, Germany, Singapore, and Chile231234 Legal Proceedings There is no material litigation, arbitration, or governmental proceeding currently pending against the company or its management - There is no material litigation, arbitration, or governmental proceeding currently pending against the company or its management232 Mine Safety Disclosures This item is not applicable to the company - Not applicable233 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants are listed on Nasdaq, with no cash dividends planned, and a recent $3.3 million private placement of convertible debentures - Common Stock is listed on Nasdaq Global Market as "DHAI" and Public Warrants on Nasdaq Capital Market as "DHAIW"236 - The company has never paid cash dividends and does not intend to in the foreseeable future, planning to retain earnings for business operations237 - On June 7, 2024, the company sold $3.3 million in 8% Original Issue Discount Senior Secured Convertible Debentures in a private placement, along with warrants to purchase 330,000 shares of Common Stock239 Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2024, revenue increased to $64.5 million (19.3%), but net loss widened to $8.4 million primarily due to transaction costs, with liquidity supported by sales and future financing | (in thousands, except percentages) | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $64,473 | $54,059 | $10,414 | 19.3% | | Gross Profit | $29,771 | $30,585 | ($814) | (2.7)% | | Operating loss | ($2,614) | $709 | ($3,323) | (468.7)% | | Net loss | ($8,443) | ($1,014) | ($7,429) | 732.6% | - Revenue increased by $10.4 million (19.3%) in FY2024, primarily due to a $7.7 million increase in device sales volume in Europe, the Americas, and Asia271 - Net loss increased by $7.4 million, largely driven by $7.1 million in transaction costs to close the Business Combination, which included a $3.5 million non-cash advisory fee paid in stock247277 - Cost of sales increased by $11.2 million (47.8%), attributed to higher sales volume, direct cost inflation ($2.2 million), increased inventory reserves ($0.6 million), and higher overhead/service parts costs ($3.9 million)273 - The company had cash and cash equivalents of $3.2 million as of March 31, 2024, and management believes cash from operations and future financing will be sufficient to fund operations for at least the next 12 months281283 - The Business Combination was accounted for as a reverse recapitalization, with Legacy DIH as the accounting acquirer, and historical financial statements were recast to exclude Hocoma AG and Motek Group, which were not transferred to the company at closing251343 Quantitative and Qualitative Disclosures About Market Risk This information is not required as DIH qualifies as a "smaller reporting company" - As a "smaller reporting company," DIH is not required to provide this information308 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2024 and FY2023, reflecting the business combination as a reverse recapitalization and excluding certain entities - The financial statements were audited by BDO AG, which issued an unqualified opinion313 | (in thousands) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Assets | $35,735 | $31,779 | | Total Liabilities | $68,281 | $60,733 | | Total Deficit | ($32,546) | ($28,954) | | (in thousands) | Year Ended Mar 31, 2024 | Year Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,192 | $5,501 | | Net cash used in investing activities | ($202) | ($145) | | Net cash used in financing activities | ($4,945) | ($4,053) | - The Business Combination was accounted for as a reverse recapitalization, and financial statements were recast to exclude entities not controlled by the company as of March 31, 2024, due to the incomplete reorganization351 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure On March 12, 2024, the company dismissed Marcum LLP and engaged BDO AG as its new independent registered public accounting firm, reporting no disagreements - On March 12, 2024, the Audit Committee dismissed Marcum LLP and engaged BDO AG as the new independent registered public accounting firm506509 - There were no disagreements with Marcum on accounting principles, financial statement disclosure, or auditing scope or procedure508 Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2024, due to a material weakness in internal control over financial reporting from limited accounting personnel - Management concluded that disclosure controls and procedures were not effective as of March 31, 2024512 - The ineffectiveness is due to a material weakness in internal controls over financial reporting, specifically limited accounting personnel and resources to address public company requirements512 - The company is exempt from providing an auditor's attestation report on internal control over financial reporting due to its status as an "emerging growth company"518519 Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal year - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal year521 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable521 Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for Items 10-14 regarding directors, executive officers, corporate governance, compensation, and security ownership is incorporated by reference from the 2024 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive Proxy Statement for the 2024 Annual Meeting of Stockholders523525526527 - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees, available on its website524 Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including agreements, corporate documents, and certifications, with financial statement schedules omitted - This item lists all exhibits filed with the Form 10-K, including the Business Combination Agreement, corporate governance documents, and various certifications530533 - Financial statement schedules are omitted as they are inapplicable or the required information is included elsewhere in the report531 Form 10-K Summary This item is not applicable to the company - Not applicable530