UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41250

 

DIH HOLDING US, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware	98-1624542
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
77 Accord Park Drive; Suite D-1 Norwell, MA	02061
(Address of principal executive offices)	(Zip Code)

 

Registrant’s telephone number, including area code: 877-944-2200

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock		DHAI		The Nasdaq Stock Market LLC
Warrants		DHAIW		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
Emerging growth company		☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒

The number of shares of Registrant’s Common Stock outstanding as of July 31, 2024 was 40,544,935

 

 

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Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management and involve risks and uncertainties. Forward-looking statements include statements regarding our plans, strategies, objectives, expectations and intentions, which are subject to change at any time at our discretion. Forward-looking statements include our assessment from time to time of our competitive position, the industry environment, potential growth opportunities, the effects of regulation and events outside of our control, such as natural disasters, wars or health epidemics. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors which could cause the actual results to differ materially from the forward-looking statement. These uncertainties and other factors include, among other things:

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You should refer to Part I, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q together with the Risk Factors disclosed in our Annual Report on Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of the risks, uncertainties and assumptions described under “Risk Factors” and elsewhere, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by law.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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DIH HOLDING US, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED) (in thousands, except share and per share data)

 

		As of June 30, 2024				As of March 31, 2024
Assets
Current assets:
Cash and cash equivalents		$	2,749			$	3,225
Accounts receivable, net of allowances of $631 and $667, respectively			5,690				5,197
Inventories, net			9,014				7,830
Due from related party			5,728				5,688
Other current assets			6,194				5,116
Total current assets			29,375				27,056
Property, and equipment, net			664				530
Capitalized software, net			2,052				2,131
Other intangible assets, net			380				380
Operating lease, right-of-use assets, net			4,388				4,466
Other tax assets			417				267
Other assets			933				905
Total assets		$	38,209			$	35,735
Liabilities and Deficit
Current liabilities:
Accounts payable		$	5,368			$	4,305
Employee compensation			3,991				2,664
Due to related party			9,790				10,192
Current portion of deferred revenue			6,350				5,211
Manufacturing warranty obligation			549				513
Current portion of long-term operating lease			1,509				1,572
Current maturities of convertible debt			1,461				—
Advance payments from customers			9,272				10,562
Accrued expenses and other current liabilities			9,950				9,935
Total current liabilities			48,240				44,954
Convertible debt, net of current maturities			1,177				—
Notes payable - related party			10,722				11,457
Non-current deferred revenues			4,747				4,670
Long-term operating lease			2,925				2,917
Deferred tax liabilities			89				112
Other non-current liabilities			4,304				4,171
Total liabilities		$	72,204			$	68,281
Commitments and contingencies (Note 16)
Deficit:
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2024 and March 31, 2024			—				—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 34,544,935 shares issued and outstanding at June 30, 2024 and March 31, 2024			3				3
Additional paid-in-capital			3,685				2,613
Accumulated deficit			(35,826	)			(35,212	)
Accumulated other comprehensive income (loss)			(1,857	)			50
Total deficit		$	(33,995	)		$	(32,546	)
Total liabilities and deficit		$	38,209			$	35,735

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DIH HOLDING US, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) (in thousands, except per share data)

 

		For the Three Months Ended June 30,
		2024				2023
Revenue		$	16,187			$	13,045
Cost of sales			7,521				7,648
Gross profit			8,666				5,397
Operating expenses:
Selling, general, and administrative expense			8,676				5,837
Research and development			1,644				1,438
Total operating expenses			10,320				7,275
Operating loss			(1,654	)			(1,878	)
Other income (expense):
Interest income (expense)			(135	)			(120	)
Other income (expense), net			1,898				(689	)
Total other income (expense)			1,763				(809	)
Income (loss) before income taxes			109				(2,687	)
Income tax expense			723				226
Net loss		$	(614	)		$	(2,913	)
Net loss per share, basic and diluted		$	(0.02	)		$	(0.12	)
Weighted average common shares outstanding, basic and diluted			34,545				25,000

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DIH HOLDING US, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED) (in thousands)

 

		For the Three Months Ended June 30,
		2024			2023
Net loss		$	(614	)		$	(2,913	)
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments, net of tax of $0 and $0			(1,388	)			841
Pension liability adjustments, net of tax of $0 and $0			(291	)			(420	)
Other comprehensive (loss) income			(1,679	)			421
Comprehensive loss		$	(2,293	)		$	(2,492	)

 

See accompanying notes to the condensed consolidated financial statements.

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DIH HOLDING US, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(UNAUDITED) (in thousands, except share data)

 

	Common Stock
	Shares(1)			Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Equity (Deficit)
Balance, March 31, 2023		25,000,000		$	2		$	(1,898	)	$	(26,769	)	$	(289	)	$	(28,954	)
Net loss		—			—			—			(2,913	)		—			(2,913	)
Other comprehensive loss, net of tax		—			—			—			—			421			421
Balance, June 30, 2023		25,000,000		$	2		$	(1,898	)	$	(29,682	)	$	132		$	(31,446	)
	Shares			Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Equity (Deficit)
Balance, March 31, 2024		34,544,935		$	3		$	2,613		$	(35,212	)	$	50		$	(32,546	)
Net loss		—			—			—			(614	)		—			(614	)
Transaction relates to reverse recapitalization		—			—			710			—			—			710
Issuance of warrants		—			—			362			—			—			362
Other comprehensive income, net of tax		—			—			—			—			(1,907	)		(1,907	)
Balance, June 30, 2024		34,544,935		$	3		$	3,685		$	(35,826	)	$	(1,857	)	$	(33,995	)

 

(1). All outstanding share and per-share amounts have been restated to reflect the reverse recapitalization as established in the Business Combination Agreement as described in Note 1.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DIH HOLDING US, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) (in thousands)

 

		For the Three Months Ended June 30,
		2024				2023
Cash flows from operating activities:
Net loss		$	(614	)		$	(2,913	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			91				79
Provision for credit losses			(36	)			(432	)
Allowance for inventory obsolescence			(13	)			693
Pension contributions			(150	)			(150	)
Pension expense			77				66
Foreign exchange (gain) loss			(1,899	)			689
Noncash lease expense			422				375
Noncash interest expense			—				7
Deferred and other noncash income tax (income) expense			(166	)			4
Changes in operating assets and liabilities:
Accounts receivable			(489	)			705
Inventories			(1,468	)			(1,332	)
Due from related parties			(108	)			1,522
Due to related parties			(584	)			(649	)
Other assets			(872	)			(398	)
Operating lease liabilities			(425	)			(518	)
Accounts payable			1,508				36
Employee compensation			1,388				(160	)
Other liabilities			—				189
Deferred revenue			1,411				209
Manufacturing warranty obligation			50				71
Advance payments from customers			(1,136	)			2,229
Accrued expense and other current liabilities			1,003				(797	)
Net cash used in operating activities			(2,010	)			(475	)
Cash flows from investing activities:
Purchases of property and equipment			(235	)			(15	)
Net cash used in investing activities			(235	)			(15	)
Cash flows from financing activities:
Proceeds from issuance of convertible debt, net of issuance costs			2,509				—
Payments on related party notes payable			(735	)			(1,936	)
Net cash provided by (used in) financing activities			1,774				(1,936	)
Effect of currency translation on cash and cash equivalents			(5	)			13
Net increase in cash, and cash equivalents, and restricted cash			(476	)			(2,413	)
Cash, and cash equivalents - beginning of period			3,225				3,175
Cash, and cash equivalents - end of period		$	2,749			$	762
Supplemental disclosure of cash flow information:
Interest paid		$	135			$	113
Income tax paid		$	—			$	—
Supplemental disclosure of non-cash investing and financing activity:
Accounts payable settled upon reverse recapitalization		$	710			$	—

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DIH HOLDING US, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (in thousands, except share and per share data)

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The Company is not presently a party to any litigation the outcome of which, it believes, if determined adversely to the Company, would individually or taken together, have a material adverse effect on the Company’s business, operating results, cash flows or financial condition. The Company has determined that the existence of a material loss is neither probable nor reasonably possible.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read together with the condensed consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q. The discussion and analysis should also be read together with the audited consolidated financial statements, the respective notes thereto, and other financial information included elsewhere in the Annual Report for the year ended March 31, 2024 filed by us with the SEC on July 15, 2024. The following discussion may contain forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Form 10-Q, particularly in sections therein entitled “Cautionary Note Concerning Forward Looking Statements” and “Risk Factors.”

Our fiscal year ends on March 31. “Fiscal 2025” and “fiscal 2024” refer to the years ended March 31, 2025 and 2024, respectively.

Overview

DIH Holding US, Inc., a Delaware corporation and its consolidated subsidiaries are referred to in this Form 10-K as "we," “our,” “us,” the “Company,” or “DIH.” DIH is a global provider of advanced robotic devices used in physical rehabilitation, which incorporate visual stimulation in an interactive manner to enable clinical research and intensive functional rehabilitation and training in patients with walking impairments, reduced balance and/or impaired arm and hand functions. We strive to serve the rehabilitation market by providing a broad array of devices and services focused on the customer and patient recovery. DIH stands for our vision to “Deliver Inspiration & Health” to improve the daily lives of millions of people with disabilities and functional impairments.

In the three months ended June 30, 2024, DIH generated revenue of $16.2 million compared to $13.0 million in the three months ended June 30, 2023.

DIH’s net loss for three months ended June 30, 2024 was $0.6 million, compared to $2.9 million in the three months ended June 30, 2023. The $2.3 million improvement was primarily driven by the $3.2 million increase in gross profit and $2.6 million increase in other income (expense) primarily driven by foreign exchange rate fluctuation. The increase in the gross profit is primarily due to the increase in sales volume. The net loss improvement was partially offset by elevated professional service costs and IT costs in related to audit, legal and other professional services, incurred to enhance our infrastructure and operations as a public company following the recent business combination.

Recent Developments

Business Combination

On February 7, 2024, ATAK, Aurora Technology Merger Sub (“Merger Sub”) and DIH Nevada consummated a previously announced business combination pursuant to the Business Agreement dated as of February 26, 2023 following the receipt of the required approval by ATAK’s and DIH Nevada’s shareholders and the fulfillment or waiver of other customary closing conditions. ATAK agreed to waive the closing condition that the Reorganization be completed prior to Closing. As a result, at Closing of the Business Combination, the Company includes Hocoma Medical that holds assets transferred from Hocoma AG as well as other commercial entities controlled by the Company. Hocoma AG and Motekforce Link BV and its subsidiaries were excluded from the reorganization and are not included in the consolidated financials. The Company agreed to use its best efforts to complete the intended Reorganization to transfer Hocoma AG and Motek to the Company as soon as possible thereafter.

As a consequence of the Business Combination, the Company became the successor to an SEC-registered company, which required DIH to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. DIH expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.

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Issuance of Convertible Debt

On June 6, 2024, the Company entered into a Securities Purchase Agreement, issuing $3.3 million in principal amount of 8% Original Issue Discount Senior Secured Convertible Debentures ("Debentures"), resulting in net proceeds of approximately $2.5 million after estimated expenses and $300 thousand initially deposited into a bank account pending fulfillment of certain conditions. The Debentures, maturing on December 7, 2025, are convertible into 660,000 shares of Common Stock at a $5.00 per share conversion price, and are secured by substantially all of the Company’s domestic assets, with guarantees from domestic subsidiaries. In connection, the Company also issued warrants to purchase 330,000 shares of Common Stock at $5.00 per share. For further details, see Note 12 to the condensed consolidated financial statements.

Key Factors Affecting the DIH’s Operating Results

DIH believes that its future success and financial performance depend on a number of factors that present significant opportunities for its business, but also pose risks and challenges, including those discussed below and in the Section of described in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended March 31, 2024 entitled “Item 1a. Risk Factors.”

Supply Chain and Inflation

The global supply chain and logistics challenges continue to impact DIH and the industry. As a result of these challenges, DIH has experienced cost increases for freight and logistics, raw materials and purchased components, and has incurred increased manufacturing conversion costs. While, to date, the supply chain disruptions have not materially affected DIH’s business outlook or its operating results, including its revenue, liquidity, and capital resources and, consequently, DIH has not implemented any mitigation efforts as a result, DIH cannot predict the impact of any future or prolonged supply chain disruptions or any mitigation efforts it may need take going forward. For example, as a result of supply chain disruptions, DIH may be required to extend the overall shipment and installation timeline. In addition, DIH may consider additional or alternative third-party manufacturers and logistics providers, suppliers, vendors or distributors. Such mitigation efforts may result in cost increases and any attempts to offset such increases with price increases may result in reduced sales, customer dissatisfaction, or otherwise harm DIH’s business. Further, if DIH were to elect to transition or add manufacturers or logistics providers, suppliers, vendors or distributors, it may result in delays in shipments of products or risks related to consistent product quality or reliability. This in turn may limit DIH’s ability to fulfill customer sales orders and DIH may be unable to satisfy all of the demand for its products. DIH may also be required to purchase components further in advance of product delivery, which in return could result in less capital being allocated to other activities such as marketing and other business needs. DIH cannot quantify the impact on its business, financial condition and results of operations of any such disruptions at this time or predict the impact of that any mitigation efforts may have.

Input cost inflation historically has not been a material factor to our gross margin; however, beginning at the end of fiscal 2022 DIH began to experience increases in raw material and components costs due to inflation effects, which are expected to continue to remain at elevated levels for at least the near term.

Foreign Currency Fluctuations

DIH’s business operates in three different functional currencies (Euro, Swiss Franc, Singapore Dollar). DIH’s reporting currency is the U.S. Dollar. DIH’s results are affected by fluctuations in currency exchange rates that give rise to translational exchange rate risks. The extent of such fluctuations is determined in part by global economic conditions and macro-economic trends. Movements in exchange rates have a direct impact on DIH’s reported revenues. Generally, the impact on operating income or loss associated with exchange rate changes on reported revenues is partially offset from exchange rate impacts on operating expenses denominated in the same functional currencies. As foreign currency exchange rates change, translation of the statements of operations of DIH’s international businesses into U.S. dollars may affect year-over-year comparability of DIH’s operating results.

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EU MDR Implementation Costs

Changes in laws or regulations could make it more difficult and costly for DIH and its subsidiaries to manufacture, market, and distribute its products or obtain or maintain regulatory approval of new or modified products. DIH’s experience with the transition to the EU MDR, which it began in 2019, showed how complex, time-consuming and expensive a change in Medical Device Legislation can be. The EU MDR replaced the existing European Medical Devices Directive (MDD) and Active Implantable Medical Device Directive (AIMDD) regulatory frameworks, and manufacturers of medical devices were required to comply with EU MDR beginning in May 2021 for new product registrations and by May 2024 for medical devices which have a valid CE Certificate to the prior Directives (issued before May 2021). Updates to the legislative text of the EU MDR were adopted by the European Parliament and are currently being reviewed for adoption by the Council of the European Union, including an extension of the transitional period to 2027 for class IIb and III and 2028 for class I and IIa medical devices which have a valid CE Certificate to the prior Directives (issued before May 2021).

Macroeconomic Uncertainties on Future Operations

DIH’s operations are exposed to and impacted by various global macroeconomic factors. DIH faces continuing market and operating challenges across the globe due to, among other factors, impact of conflict in Ukraine, conditions related to the COVID-19 pandemic, supply chain disruption, higher interest rates and inflationary pressures. Continued evolution of these conditions could lead to economic slowdowns.

Basis of Presentation

Refer to Note 2 of the Notes to Annual Consolidated Financial Statements for a discussion of the underlying basis used to prepare the condensed consolidated financial statements.
 

Components of Results of Operations

Revenue

DIH generates revenue from the sale of medical rehabilitation devices and technology. DIH’s primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations. Shipping and handling costs charged to customers are included in net sales. DIH expects revenue to increase sequentially in future periods as it expects the demand for its products to expand in represented markets.

Cost of Sales

Cost of sales consists primarily of direct materials, supplies, in-bound freight and labor-related costs, including salaries and benefits for our manufacturing personnel, technical support team, our professional consulting personnel and our training teams. Cost of sales also includes allocated overhead costs, including facilities costs, depreciation of manufacturing-related equipment and facilities and other direct costs. DIH expects cost of sales to increase in absolute dollars in future periods as it expects orders for its products to continue to grow and expects cost of sales per unit to decrease as leverage improves behind expected growth.

Selling, General and Administrative Expense

Selling, general and administrative expenses consist primarily of personnel expenses for DIH’s corporate, executive, finance and other administrative functions, expenses for outside professional services, including legal, audit and advisory services, expenses for facilities, depreciation, amortization, insurance, and marketing costs. Personnel expenses consist of salaries and benefits.

DIH expects selling, general and administrative expenses to increase for the foreseeable future as it scales the headcount of its sales force to drive the growth of the business, and its support functions to meet the additional demands of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services.

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Research and Development

Research and development primarily consists of research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses.

DIH expects research and development costs to increase as it continues to invest in product design and technology to drive the growth of the business.

Interest Expense

Interest expense primarily consists of interest expense associated with related party notes payable and bank charges.

Other Income (Expense), Net

Other income (expense), net primarily consists of the non-service components of net periodic defined benefit plan income (costs) and certain non-recurring costs in connection with the Business Combination.

Income Tax Expense

The income tax provision (benefit) consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in the tax law.

Results of Operations

 

		Three months ended June 30,
(in thousands, except percentages)		2024				2023				$ Change				% Change
Revenue		$	16,187			$	13,045			$	3,142				24.1	%
Costs of sales			7,521				7,648				(127	)			(1.7	)%
Gross Profit			8,666				5,397				3,269				60.6	%
Operating expenses:
Selling, general and administrative expense			8,676				5,837				2,839				48.6	%
Research and development			1,644				1,438				206				14.3	%
Total operating expenses			10,320				7,275				3,045				41.9	%
Operating loss			(1,654	)			(1,878	)			224				(11.9	)%
Other income (expense):
Interest expense			(135	)			(120	)			(15	)			12.5	%
Other income (expense), net			1,898				(689	)			2,587				(375.5	)%
Total other income (expense)			1,763				(809	)			2,572				(317.9	)%
Profit (loss) before income taxes			109				(2,687	)			2,796				(104.1	)%
Income tax expense			723				226				497				219.9	%
Net loss		$	(614	)		$	(2,913	)		$	2,299				(78.9	)%

 

Revenue

The following table presents net revenue by major source for three months ended June 30, 2024 and 2023:

 

		Three months ended June 30,
(in thousands, except percentages)		2025				2023				$ Change				% Change
Devices		$	12,283			$	10,443			$	1,840				17.6	%
Services			3,542				2,375				1,167				49.1	%
Other			362				227				135				59.5	%
		$	16,187			$	13,045			$	3,142				24.1	%

 

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Revenue for the three months ended June 30, 2024 increased by $3.1 million, or 24.1%, to $16.2 million from $13.0 million for the three months ended June 30, 2023. The overall increase was primarily due to an increase in devices sold of $1.8 million, or 17.6% year over year. The increase in devices revenue was primarily driven by higher sales volume in EMEA. Services revenue represented an increase of $1.2 million, up 49.1% compared to the prior period. Other revenues was consistent compared to the prior period. Total revenue in the EMEA and in the Americas increased by $3.6 million and $1.6 million, respectively, to $10.2 million and $4.6 million for the three months ended June 30, 2024 compared to $6.6 million and $3.0 million for the three months ended June 30, 2023. The increase was partially offset by a decrease in sales in Asia.

The impact due to foreign currency translation resulted in a decrease of approximately $0.1 million for the three months ended June 30, 2024.

Cost of Sales

Cost of sales for the three months ended June 30, 2024 decreased by $0.1 million, or 1.7%, to $7.5 million from $7.6 million for the three months ended June 30, 2023. The cost of sales for device sales decreased by $0.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The cost of sales increased by $0.7 million correlated to the increase in device sales for the additional volume. An inventory reserve and provisions of approximately $1.0 million were recognized in the three months ended June 30, 2023, while the impact from inventory reserve and provisions was insignificant in the three months ended June 30, 2024. The decrease in cost of device sales was partially offset by an increase of $0.2 million in cost of services.

The impact due to foreign currency translation resulted in a decrease of approximately $0.1 million for the three months ended June 30, 2024.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended June 30, 2024 increased by $2.8 million, or 48.2%, to $8.7 million from $5.8 million for the three months ended June 30, 2023. The increase was driven by a $0.7 million increase in professional service costs related to audit, legal and other professional services along with an investment in finance capacity to support public company reporting obligations. Additionally, the increase included a $0.7 million increase in performance-based compensation and a $0.9 million increase in overhead expenses associated with operating as a public company and supporting current growth. In addition, the provision for credit losses decreased during the three months ended June 30, 2023 and the provision has remained consistent in subsequent periods through the three months ended June 30, 2024.

Research and Development

Research and development costs for the three months ended June 30, 2024 increased by $0.2 million, or 14.3%, to $1.6 million from $1.4 million for the three months ended June 30, 2023. The increase was primarily attributable to a $0.2 million increase in personnel expenses related to increased employee compensation.

Interest Expense

Interest expense for three months ended June 30, 2024 and 2023 were consistent to interest on Related Party Notes and bank charges.

Other Income (Expense), Net

Other income (expense), net for the three months ended June 30, 2024 was $1.9 million of income, compared to $0.7 million of expense for the three months ended June 30, 2023. The change was primarily driven by the fluctuation in the exchange rate, as the Swiss Franc weakened against to the U.S. dollar in the three months ended June 30, 2024.

Income Tax Expense

Income tax expense for the three months ended June 30, 2024 increased by $0.5 million compared to $0.2 million in the three months ended June 30, 2023. The change was primarily driven by changes in the net results of the underlying subsidiaries across jurisdictions. The tax expense for the three months ended June 30, 2024 and 2023 is driven by pre-tax book income in certain jurisdictions while the benefit from pre-tax losses in other jurisdiction may not be realizable.

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Liquidity and Capital Resources

As of June 30, 2024 and March 31 2024, DIH’s cash and cash equivalents amounted to $2.7 million and $3.2 million, respectively. DIH’s sources of liquidity have been predominantly from proceeds received from product sales and services provided as well as proceeds from convertible debt financing in June 2024. DIH’s sources of liquidity have enabled DIH to expand its installation base, capacity, and grow its sales personnel to expand capabilities and enter new markets.

DIH’s operating losses began in fiscal 2020 and continued through the three months ended June 30, 2024. DIH’s historical operating losses resulted in an accumulated deficit of $(35.8) million as of June 30, 2024. Operating losses were mainly driven by decreased sales during the COVID-19 pandemic due to social distancing measures that affected demand for rehabilitation services, increased expenditures in connection with its implementation of a new financial system (Oracle) and increased compliance costs associated with the EU MDR. Additionally, DIH had elevated costs related to its efforts of adopting to public company standards. During the three months ended June 30, 2024, DIH had negative cash flows from operating activities of $(2.0) million and an operating loss of $1.7 million. Management's plan to transition towards profitability is supported by DIH's ongoing efforts to streamline its organizational structure and enhance cost management through digitization investments such as the Oracle system implementation, alongside initiatives to grow revenue.

DIH’s gross revenue has increased by 24.1%, from $13.0 million to $16.2 million for the three months ended June 30, 2024 and 2023, respectively. DIH plans to continue to fund its growth through cash flows from operations and future debt and equity financings. Management expects that its cash and cash equivalents, together with cash provided by our operating activities and proceeds from future debt and equity financings, will be sufficient to fund its operating expenses and capital expenditures requirements for at least the next 12 months.

In connection with the transfer of Hocoma AG's business and assets to DIH, we incurred three related party notes payable to Hocoma AG as further discussed in Note 13 of the Notes to Annual Condensed Consolidated Financial Statements. The three Related Party Notes amounting to $10.47 million, $7.80 million and $1.57 million reflect transferring the assets, equity ownership in subsidiaries and IP rights it held to Legacy DIH. Each of the Related Party Notes Payable is due on June 30, 2026 with interest rate of 1.25%. The Company has made periodic payment on Related Party Notes payable with proceeds from its operations. The remaining balance on the Related Party Notes payable is $10.7 million and $11.5 million as of June 30, 2024 and March 31, 2024, respectively. We expect to continue our growth and generate sufficient proceeds to pay the balance of Related Party Notes payable over time.

In June 2024, we strengthened our liquidity position through the issuance of 8% Original Issue Discount Senior Secured Convertible Debentures, resulting in net proceeds of approximately $2.5 million after offering expenses, with $300,000 of the proceeds deposited into a bank account pending the fulfillment of certain conditions. For additional details, including the terms and conditions of these Debentures and associated warrants, please refer to Note 12 to the condensed consolidated financial statements

DIH’s other material contractual operating cash commitments at June 30, 2024 relate to leases and employee benefit plans. DIH’s employee benefit plans are discussed further in Note 14 of the Notes to Annual Consolidated Financial Statements. DIH’s long-term lease obligations and future payments are discussed further in Note 17 of the Notes to Annual Consolidated Financial Statements.

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Cash Flows

The following table summarizes DIH’s cash flow activities for the periods presented:

 

		Three months ended June 30,
(in thousands)		2025				2023
Net cash used in operating activities		$	(2,010	)		$	(475	)
Net cash used in investing activities			(235	)			(15	)
Net cash (used in) / provided by financing activities			1,774				(1,936	)
Effect of currency translation on cash and cash equivalents			(5	)			13
Net decrease in cash and cash equivalents		$	(476	)		$	(2,413	)

 

Net Cash used in Operating Activities

Net cash used in operating activities increased by $1.5 million to $2.0 million for the three months ended June 30, 2024 compared to $0.5 million for the three months ended June 30, 2023 primarily driven by:

This decrease in working capital was partially offset by an increase of $1.2 million in deferred revenue resulted from the difference in timing of payments received from our customers related to service contracts as well as $1.5 million increase in employee compensation accrued. We also experienced a total increase of $0.3 million in accounts receivable and accounts payable.

Net Cash used in Investing Activities

Net cash used in investing activities increased by $0.2 million for the three months ended June 30, 2024. The cash used in investing activities primarily includes purchase of property and equipment. DIH expects to fund future cash flows used in investing activities with cash flow generated by operations.

Net Cash (used in) / provided by Financing Activities

Net cash (used in)/provided by financing activities increased by $3.7 million to $1.7 million for the three months ended June 30, 2024 compared to $(1.9) million for the three months ended June 30, 2023. The increase was primarily due to the $2.5 million proceeds from the convertible debt financing net of transaction fee and $0.3 million that was deposited to a secured account and a $1.2 million decrease in payments on related party notes payable resulting from the asset transfer from Hocoma AG.

Critical Accounting Policies and Estimates

DIH’s financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Management believes that the following are some of the more critical judgment areas in the application of accounting policies that currently affect DIH’s financial condition and results of operations.

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Revenue Recognition

Sales are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration DIH expects to receive in exchange for satisfying the performance obligations. DIH’s sales are recognized primarily when it transfers control to the customer, which can be on the date of shipment of the product, the date of receipt of the product by the customer or upon completion of any required product installation service depending on the terms of the sales contracts and product shipping terms. The sales amount of warranties are deferred and recognized as revenue on a straight-line basis over the warranty period.

We provide a variety of products and services to our customers. Most of our contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer. For contracts that include multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the standalone selling price of each identified performance obligation.

Deferred revenue primarily represents service contracts and equipment maintenance, for which consideration is received in advance of when service for the device or equipment is provided, and a smaller component of product shipments where a residual installation service is to be completed. Revenue related to services contracts and equipment maintenance is recognized over the service period as time elapses. Revenues related to products containing an installation clause, are recognized once the item is confirmed installed.

Employee Benefit Plans

DIH has defined contribution plans or benefit pension plans covering substantially all of its employees. We recognize a liability for the underfunded status of the single employer defined benefit plans. Actuarial gains or losses and prior service costs or credits are recorded within other comprehensive income (loss). The determination of our obligation and related expense for our sponsored pensions is dependent, in part, on management’s selection of certain actuarial assumptions in calculating these amounts.

The actuarial assumptions used for the defined benefit plans are based on the economic conditions prevailing in the jurisdiction in which they are offered. Changes in the defined benefit obligation are most sensitive to changes in the discount rate. The discount rate is based on the yield of high-quality corporate bonds quoted in an active market in the currency of the respective plan. A decrease in the discount curve increases the defined benefit obligation. DIH regularly reviews the actuarial assumptions used in calculating the defined benefit obligation to determine their continuing relevance. We utilized weighted discount rates of 1.50% and 2.10% for our pension plan expenses for fiscal 2024 and fiscal 2023, respectively.

Sensitivity to changes in the discount rate used in the calculation of our pension plan liabilities is illustrated below (dollars in millions).

 

		Percentage Point Change		Projected Benefit Obligation (Decrease) Increase		Service Cost (Decrease) Increase
Discount rate		+/-1.00%		$(1.6) / 2.1		$(0.2) / 0.2

 

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Income Taxes

DIH accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (Topic 740). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. DIH reviews its deferred income tax asset valuation allowances on a quarterly basis or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to DIH’s valuation allowances may be necessary. DIH has generated operating losses in each of the years presented.

DIH is subject to income taxes in the U.S. and numerous foreign jurisdictions These tax laws and regulations are complex and significant judgment is required in determining DIH’s worldwide provision for income taxes and recording the related deferred tax assets and liabilities.

In the ordinary course of DIH’s business, there are transactions and calculations where the ultimate tax determination is uncertain. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of Topic 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to items for income tax reporting purposes and financial reporting purposes. DIH’s tax returns are subject to regular review and audit by US and non-US tax authorities. Although the outcome of tax audits is always uncertain, DIH believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year and would be the obligation of Parent. DIH accrues interest and penalties related to uncertain tax positions as a component of income tax expense.

Refer to Note 15 of the Notes to Annual Consolidated Financial Statements for further discussion regarding DIH’s income taxes.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is either not an emerging growth company or an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

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New Accounting Standards Not Yet Adopted

For the summary of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements included in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, DIH is not required to provide this information.

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and the Company’s Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d- 15(e) under the Exchange Act) as of end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to material weaknesses in our internal controls over financial reporting. Specifically, the Company concluded that it had limited accounting personnel and other resources with which to address its internal control over financial reporting in accordance with requirements applicable to public companies. In light of the material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

Inherent Limitations on Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Remediation Plan

We are implementing measures designed to improve our internal controls over financial reporting to remediate this material weakness including adding additional qualified accounting personnel, engaging consultants to assist with the financial statement close process and evaluate accounting treatment of significant unusual transactions, and segregating duties among accounting personnel to enable adequate review controls. These additional resources and procedures are intended to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures.

The material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively. We are continuing to work on the implementation of our remediation plan, following which we will continue to test such controls over time.

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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the last the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

 

There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding in the 12 months preceding the date of this Quarterly Report on Form 10-Q.

 

Item 1A. Risk Factors.

In addition to other information contained elsewhere in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K, which could materially affect our business, financial condition or future results.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

 

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.

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Item 6 Exhibits

 

Exhibit Number		Description
2.1		Business Combination Agreement, dated as of February 26, 2023, by and among Aurora Technology Acquisition Corp., Aurora Technology Merger Sub Corp., and DIH Holding US, Inc. (incorporated by reference to Exhibit 2.1 of the registrant’s Current Report on Form 8-K filed with the SEC on February 27, 2023).
3.1		Amended and Restated Certificate of Incorporation of DIH Holding US, Inc.
3.2		By-Laws of DIH Holding US, Inc.
4.1		Description of Securities
4.2		Warrant Agreement
4.3		Debenture dated June 7, 2024
4.4		Warrant Agreement dated February 7, 2022
10.1		Amended and Restated Registration Rights Agreement , dated as of February 7, 2024, by and among, (i) Aurora Technology Acquisition Corp., a Delaware corporation (formerly a Cayman Islands exempted company), (ii) ATAC Sponsor LLC, a Delaware limited liability company, (iii) Maxim Group LLC, (iv) the Sponsor equityholders as set forth on Exhibit A thereto, (v) certain equityholders designated on Exhibit B thereto and (vi) any other parties listed on the signature pages thereto and any other person or entity who thereafter becomes a party to the Agreement
10.2		Securities Purchase Agreement dated June 6, 2024
10.3		Security Agreement dated June 6, 2024
10.4		Subsidiary Guarantee Agreement dated June 6, 2024
10.5		Form of Deposit Account Control Agreement
10.6		Registration Rights Agreement dated June 6, 2024
10.7		Form of Voting Agreement
10.8		Form of Lock Up Agreement
10.9		Subscription Agreement dated February 8, 2024
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97		Claw-Back Policy
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		DIH HOLDING US, INC.
Date: August 19, 2024		By:	/s/ Jason Chen
			Name: Jason Chen
			Title: Chief Executive Officer

 

		DIH HOLDING US, INC.
Date: August 19, 2024		By:	/s/ Lynden Bass
			Name: Lynden Bass
			Title: Chief Financial Officer and Director
			(Principal Financial and Accounting Officer)

 

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