The Committee on Foreign Investment in the United States (“CFIUS”) has determined that the California based developer Ekso Bionics needs to terminate its role in the joint development of exoskeleton technology in China. As a reminder, Ekso Bionics entered a $100 Million Joint Venture to Make and Sell Exoskeletons to China, Hong Kong, Singapore and Malaysia in January of 2019. The announcement does not indicate if the decision was rendered based on prior defense projects involvement of Ekso Bionics (HULC, Warrior Web Project) or something newer.
While this event may be impactful to Ekso Bionics, there is a possibility it marks a permanent change to the exoskeleton industry. It is not clear if this will be a forgotten isolated incident or the start of a new trend? It is no secret that international relationships between China and the U.S. have cooled. Therefore it’s possible that this ruling will not be the last.
Historically, exoskeleton developers from around the globe have looked for investments beyond their regional borders. Simultaneously, researchers from all corners of the earth gather at conferences and online events in an attempt to unlock the potential of wearable devices. Perhaps nothing illustrates the vision of an interconnected global exo technology field better than the Get2Excel website art-board (below).
On the other end of the spectrum, there is the all too real possibility that the ruling by CFIUS marks the beginning of a new era in wearables development. An era in which all matters related to this technological field will have a more difficult time moving between continents.
Below is an excerpt of the press release, which can be found on the company’s website (link):
RICHMOND, Calif., May 20, 2020 (GLOBE NEWSWIRE) — Ekso Bionics Holdings, Inc. (Nasdaq: EKSO) (the “Company”), an industry leader in exoskeleton technology for medical and industrial use, today reported that the Company, Zhejiang Youchuang Venture Capital Investment Co., Ltd and another partner (collectively, the “JV Partners”) received notice from the Committee on Foreign Investment in the United States (“CFIUS”) in connection with its review of the Company’s and the JV Partners’ investment in Exoskeleton Intelligent Robotics Co. Limited (the “JV”). The notice states that CFIUS’s prior national security concerns regarding the JV could not be mitigated and, in connection with its determination, CFIUS presented the Company and the JV Partners with a National Security Agreement (“NSA”), which will, among other things, require the termination of the Company’s role with the JV. The Company intends to work cooperatively with the JV Partners and CFIUS to finalize the terms of the NSA.
The JV was established in early 2019 with the purpose of developing and serving the exoskeleton market in China and other Asian markets and to create a global exoskeleton manufacturing center in the Zhejiang Province of China. Following U.S. governmental inquiries regarding the JV, the Company and the JV formally submitted a joint voluntary notice to CFIUS in December 2019 to review the transaction. CFIUS subsequently inquired about Ekso Bionics’ legacy work for the U.S. government as well as technology transfers and other aspects of the JV and, in February 2020, imposed interim measures to mitigate identified concerns pending completion of its investigation. These measures temporarily suspended the Company’s contributions to the JV and other integration activities for the JV.
“Despite our best efforts to mitigate their concerns, we are disappointed that CFIUS will not allow us to move forward with the joint venture,” said Jack Peurach, Chief Executive Officer of Ekso Bionics. “Although we looked forward to working with our JV partners, we are confident in our abilities to partner with other global manufacturing sources to continue our product cost reduction initiatives. The termination of the JV should not have a material impact on our operations during the remainder of 2020.”
Mr. Peurach concluded, “We remain committed in working to reach an agreement with our partners and CFIUS to resolve this matter. We are grateful to the cooperation provided by our partners in China in submitting the joint filing and supporting us throughout this process. We regret that our case reflects the substantial changes in the economic and political environment since we first began the process to establish the JV that have made completing transactions involving Chinese operations more difficult.”