Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



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

For the fiscal year ended December 31, 2019



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

Commission File No. 001-37854

Ekso Bionics Holdings, Inc.

(Exact name of registrant as specified in its charter)



Nevada (State or Other Jurisdiction of Incorporation or Organization)	99-0367049 (I.R.S. Employer Identification No.)

1414 Harbour Way South, Suite 1201

Richmond, California 94804

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (510) 984-1761

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



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	EKSO	Nasdaq Stock Market LLC
		(Nasdaq Capital Market)

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

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 ý 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 ý No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ý Non-accelerated filer ¨ Smaller reporting company ý 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 ý

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $68,357,943 based on the last sale price for such stock on June 30, 2019, the last business day of the registrant's most recently completed second fiscal quarter.

As of February 21, 2020 the registrant had 87,050,070 outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2019.

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Ekso Bionics Holdings, Inc.

ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2019

Table of Contents



	Part I
Item 1	Business	4
Item 1A	Risk Factors	15
Item 1B	Unresolved Staff Comments	34
Item 2	Properties	34
Item 3	Legal Proceedings	34
Item 4	Mine Safety Disclosures	35
	Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	36
Item 6	Selected Financial Data	36
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8	Financial Statements and Supplementary Data	47
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	83
Item 9A	Controls and Procedures	83
Item 9B	Other Information	83
	Part III
Item 10	Directors, Executive Officers and Corporate Governance	84
Item 11	Executive Compensation	84
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	84
Item 13	Certain Relationships and Related Transactions and Director Independence	84
Item 14	Principal Accountant Fees and Services	84
	Part IV
Item 15	Exhibits, Financial Statements and Financial Statement Schedules	96
	Signatures	102

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or this Annual Report, contains forward-looking statements, including, without limitation, in the sections captioned “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Annual Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Annual Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives 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 the Securities and Exchange Commission ("SEC"), (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 forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time and resources associated with the development of our products and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of medical devices and the healthcare industry, the results of clinical studies or trials, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Annual Report appears in the section captioned “Risk Factors” and elsewhere in this Annual Report.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Annual Report to reflect any new information or future events or circumstances or otherwise.

Readers should read this Annual Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Annual Report, and other documents which we may file from time to time with the SEC.

Notes regarding references to Ekso Bionics

In this Annual Report, the “Company”, “we”, “its” and “our” refers to Ekso Bionics Holdings, Inc. and its wholly-owned subsidiaries, and “Ekso Bionics” refers to Ekso Bionics, Inc. as it existed prior to the January 15, 2014 merger of our wholly-owned subsidiary, Ekso Acquisition Corp., with and into Ekso Bionics, Inc. or the Merger. Ekso Bionics was the surviving corporation in the Merger and became our wholly-owned subsidiary, and all of the outstanding Ekso Bionics stock was converted into shares of our common stock. Ekso^®, Ekso Bionics^®, EksoVest^®, EksoWorks^®, EksoGT^™, EksoNR^™, EksoZeroG^™, EksoUE^™, EksoPulse^™, and EksoOutcomes^™ are registered and unregistered trademarks of the Company. All other trademarks that may appear in this Annual Report are the property of their respective owners.

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PART I

Item 1. BUSINESS

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 leased devices that (i) enable individuals with neurological conditions affecting gait (stroke and spinal cord injury, or SCI) 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.

In July 2019, we announced the expansion of our medical exoskeleton portfolio with an upper extremity rehabilitation device called EksoUE. EksoUE’s wearable upper body exoskeleton 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 rehabilitation sessions of higher intensity.

In August 2019, we introduced our next generation lower extremity rehabilitation exoskeleton, EksoNR, which succeeds our EksoGT. Our EksoNR is used as a rehabilitation tool to allow physicians and therapists to rehabilitate patients who have suffered a stroke or spinal cord injury. With its unique features designed specifically for hospitals and its proprietary SmartAssist software, EksoNR allows for the early mobilization of patients, enabling increased endurance during rehabilitation sessions through higher step counts and for longer periods. The intent is to allow the patient's central nervous system to take advantage of a patient's neuroplasticity to maximize the patient’s recovery.

For able-bodied industrial workers, the EksoVest is an upper body exoskeleton that elevates and supports a worker's arms to assist them with tasks ranging from chest height to overhead. It is lightweight and low profile, making it comfortable to wear while enabling freedom of motion. The goal is for workplaces with the EksoVest to experience fewer on-site injuries while tasks are completed faster and with higher quality results, for workers to stay healthier and experience increased stamina, and for companies to gain greater productivity in factories and on construction sites. In 2019, we focused on increasing sales of the EksoVest and the support arm, EksoZeroG Arm, by pursuing alternative channels, such as rental agreements with construction equipment and heavy tool providers and working with automotive and related manufacturers to roll out our products globally within their assembly operations. We also 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.

While we believe that advancements in technology will continue driving commercial interest in and further development of exoskeleton systems, we also recognize that we are in the early stages of development of exoskeleton capabilities. In order to advance the commercialization of our exoskeleton technology, we intend to focus our efforts in 2020 on the following key initiatives:


•	Drive robotic exoskeleton rehabilitation to become the standard of care for both in-patient and out-patient rehabilitation for patients with some form of extremity weakness or paralysis in the United States.


•	Continue to introduce new indications and features in rehabilitation for our EksoNR, which could expand access to care to more patients, and for our EksoPulse Analytics, which aids in providing more personalized care in rehabilitation sessions.


•	Build on the initial launch of our EksoUE by introducing it into multiple channels in the Americas, the Asia Pacific region, or APAC, and Europe, the Middle East and Africa, or EMEA.


•	Leverage our market position in exoskeleton rehabilitation by introducing new products and therapies beyond the scope of our existing devices.


•	Expand on our position in industrial markets with our EksoZeroG Arm for aerial work platforms and scaffolding and EksoVest for overhead work applications by forming strategic partnerships to define and develop new uses for these and potential derivative products.


•	Build on our initial success in Singapore and Hong Kong by expanding our reach to additional select countries in APAC, such as Malaysia and Australia.


•	Improve the cost structure through our joint venture (our China JV) with Zhejiang Youchuang Venture Capital Investment Co., Ltd. and Shaoxing City Keqiao District Paradise Silicon Intelligent Robot Industrial Investment Partnership (Limited

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Partnership), who we refer to as our Joint Venture Partners of our China JV, to drive unit costs lower for both our medical and industrial products and to develop and serve the exoskeleton market in China and other Asian markets.

EksoHealth - Rehabilitation

Today, the focus of our healthcare business is on rehabilitation robotics. We are leveraging our patented exoskeleton technology to develop and market products intended to enable patients with some form of lower limb impairment to rehabilitate earlier and with better outcomes than the current standard of care.

EksoNR

Our latest product, the EksoNR, is a wearable bionic suit that allows our hospital and rehabilitation customers to provide in-patients and out-patients with SCI and hemiplegia due to stroke the ability to stand and walk over ground with a full weight-bearing, reciprocal gait using a cane, crutches or a walker under the supervision of a physical therapist. Walking is achieved by a user shifting their weight, balancing like in normal walking and initiating steps when safe to progress forward. If needed, some patients utilize sensors in the device which in turn initiate steps. Battery-powered motors drive the legs, detecting the deficient neuromuscular function and providing that level of assistance necessary for a user to complete their step. Users can expect to walk with aid from the device the first time they put on the EksoNR exoskeleton (after passing an assessment). Physical therapists can transfer patients to or from their wheelchair and don or remove the EksoNR in less than ten minutes.

The EksoNR incorporates SmartAssist, our proprietary, adaptive software that allows a patient to perform to their capability but will dynamically provide 0-100% power to either side of the body as needed for successful walking. SmartAssist can promote a greater number of high-quality steps in a short time period and support the early re-learning of correct step patterns and weight shifts, potentially mitigating compensatory behaviors. SmartAssist also has allowed our customers to significantly expand the spectrum of patients that can potentially benefit from robotic rehabilitation.

In addition, SmartAssist can aid in promoting early mobility by training patients (PreGait) to walk in an exoskeleton, which should expand access to care to more patients. SmartAssist also includes next generation Variable Assist technology that provides more freedom for healthcare providers to allow patients to power themselves (FreeGait) in the most appropriate ways possible.

Another important feature of our EksoNR is its EksoPulse Analytics, a real-time data capture program. EksoPulse gathers and transmits statistics and device information during EksoNR walking sessions. This information can be used to track patient progression and to monitor device utilization. The EksoNR records data such as steps, speed, step size, and other settings along with all error logs and operating parameters. Data is sent securely to our servers where it is available for customers to view, filter, and export through a secure web portal. This feature enables more thorough patient care while reducing manual data entry. It also enables us to provide a higher level of service through early identification and thorough reporting of device errors, saving customers the time and expense of unnecessary on-site visits.

The EksoNR is used by customers in both in-patient and out-patient settings. Our customers believe that for patients with some motor ability preserved (for example, after a stroke or an incomplete SCI), the EksoNR exoskeleton offers unique benefits to help therapists teach proper step patterns and weight shifts, allowing patients potentially to mobilize earlier and ultimately to walk again. By allowing individuals to stand and walk in a full weight-bearing setting, early clinical evidence is also beginning to show that EksoNR may offer potential healthcare benefits (including for patients with complete SCI) such as reducing post-injury medical costs through reduction in secondary complications such as pressure sores, urinary tract infections, bowel problems, pneumonia and other respiratory issues, bone loss/osteoporosis, cardiovascular disease and psychological disorders.

EksoGT

EksoGT, previously our leading product, has been superseded by EksoNR. We may still sell small quantities of EksoGT into certain foreign countries while awaiting regulatory clearance for our EksoNR. For existing customers with one or more previously purchased EksoGT, we offer an upgrade package.

As of February 1, 2020, we had shipped over 440 EksoGT and EksoNR units combined to 350 rehabilitation facilities or customers worldwide. The number of units utilized at a facility varies from one to six, and is driven by the number of beds and rehabilitation sessions a hospital can offer and that hospital’s adoption of robotics within its rehabilitation protocols.

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EksoUE

In 2019, we entered the market for upper extremity rehabilitation devices with EksoUE. EksoUE is a wearable assistive device that helps to reduce the effect of gravity on the wearer’s shoulders and arms. While worn, EksoUE allows longer, more intense rehabilitation sessions by reducing fatigue, while also allowing the patient to achieve a larger active range of motion. Similar to EksoNR, EksoUE is a tool for use by trained clinicians, primarily physical and occupational therapists, during rehabilitation sessions. Based on the same technology that is used in our industrial products, EksoUE uses a passive (non-motorized) design which avoids the need to charge or manage batteries and other electrical systems.

EksoUE shipments in 2019 have been to key rehabilitation centers for clinical feedback. In 2020, we plan to launch EksoUE in the broader rehabilitation market globally.

Market Overview

The primary market for our medical products is rehabilitation clinics with significant stroke and SCI populations. Due to their chronic nature, we believe that these conditions have an enormous clinical and economic impact on both people with the conditions and the healthcare system. According to the Centers for Disease Control, there are approximately 800,000 strokes suffered per year in the U.S. and approximately 15 million worldwide, making stroke rehabilitation our largest target market. Likewise, according to the National Spinal Cord Injury Statistical Center, there are approximately 18,000 incidences of SCI per year in the U.S., and according to the World Health Organization, between 250,000 to 500,000 incidences worldwide.

While the market opportunity for robotic exoskeleton rehabilitation may be large, we also recognize that the path for medical devices to become the standard of care is long and challenging. We believe that our ability to accelerate adoption will also be based, in part, on our ability to build on our and our partners’ early efforts: (i) to expand clinical evidence and (ii) to drive toward standard of care. We are already seeing customers appreciate that one way for stroke patients at in-patient facilities to receive the recommended amount of rehabilitation per guidelines is by using an EksoNR, the only device currently in the market that has the versatility to provide an over-ground gait training intervention that is task-specific, high intensity and allows for a margin of error, across the continuum of care.

Clinical Evidence

Many of our early clinical customers have undertaken research to evaluate the use in rehabilitation of exoskeletons in general and our EksoNR and EksoGT in particular. Although these studies primarily have focused on feasibility and safety and have relied on small sample sizes, initial study findings have been favorable. Also, we have now completed our company sponsored WISE (Walking Improvement for SCI with Exoskeletons) study. These sites, in turn, have enrolled and completed 30 patients. The primary endpoint of the WISE study sought to demonstrate that a 12-week robotic gait-training regimen can lead to a clinically meaningful improvement in independent walking speed. Secondary endpoints from the trial are examining economic factors such as number of physical therapists and staff required during training, the physical burden on physical therapists assisting and supervising during training, and the influence of factors that may modify the gait recovery. The data is currently being analyzed for journal submission.

The European Union also requires a two-track approach to market penetration and subsequent coverage, requiring separate claims for purchasing the device and for requests for reimbursement. We are well represented in clinics run by German and Austrian accident insurers, with four out of nine rehabilitation sites in Germany and four out of four rehabilitation sites in Austria. We also have a growing number of patients in Europe, who get reimbursement on a case-by-case decision covered by public and private health insurers for in-patient and out-patient treatment. We operate out-patient rehabilitation sessions paid by an accident insurer, where a patient trains using our EksoGT or EksoNR device twice a week. We are using these examples to integrate exoskeletal therapy in existing care pathways. In the United Kingdom, the National Institute for Health and Care Excellence, or NICE, has selected us as the first exoskeleton company to produce a Medtech Innovation Briefing, or MIB, which are designed to support National Health Services, or NHS, and social care commissioners and staff who are considering using new medical devices and other medical or diagnostic technologies. The MIB highlighted the innovative aspect of our proprietary SmartAssist software, which differentiates our EksoNR and EksoGT from other available exoskeletons.

Economic Value Proposition

We believe that our EksoNR allows our customers to benefit economically without modifying the reimbursement model or reimbursement codes. First, many of our customers have reported that utilizing the EksoNR promotes continuous patient improvement beginning sooner than with traditional rehabilitation. This may lead to a commensurate increase in insurance reimbursement. Second, many of our customers have reported that they have been able to attract more patients to their facilities

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with our EksoNR as part of their rehabilitation program, and this has also reportedly driven positive economics for our customers. Lastly, improvements in patient outcomes has been reported to impact other metrics including discharge to community, staffing efficiency in the rehabilitation unit, and reduction in readmission rates.

Current Sales and Marketing Efforts

Our key marketing goal today is to achieve broad-based commercial adoption of our EksoNR in the rehabilitation setting. We are focusing our go-to-market protocols and collateral on our three target audiences: medical administrators, medical directors/therapists, and patients. Working closely with thought leaders, we will continue to build upon our early user-group exchanges, develop clinical education programs, and grow our medical advisory council.

There continues to be high market interest in expanding neurosciences service lines. As such, in 2020, our sales priorities are to effectively educate both clinical and executive stakeholders on the economic and clinical value of starting an EksoNR Robotics Stroke and SCI Rehabilitation Program. In tandem, we continue to leverage our EksoNR customer base to educate and mentor strategic target centers that specialize in Stroke and SCI rehabilitation in key market service areas across the US and Canada. Geographically, the priorities have been North America (Canada, the U.S., and Mexico), EMEA, and Singapore and Hong Kong in APAC. Currently, we utilize a direct sales force for the U.S., Canada, Singapore, Hong Kong, Germany and Switzerland. We also have an expanding distributor network in EMEA and Asia.

The sales and marketing team is principally based in the U.S., Germany, and Singapore, and is structured as follows:


•	One commercial leader each for the Americas, EMEA, and APAC;


•	Americas, EMEA, and APAC sales professionals that pursue new prospects and organizes demonstrations;


•	Clinical professionals and physical therapists that provide peer-to-peer demonstrations and trainings;


•	Marketing professionals and consultants to build awareness and generate demand;


•	Ambassadors, who are stroke and SCI survivors, that provide demonstrations and personal experiences.

The sales cycle for the EksoNR averages approximately eight to 12 months for a first device and two to four months for subsequent devices. Our typical sale is our EksoNR complete package, which includes the device and all relevant components, two sets of batteries for continuous run-time, training through two levels of certification, and SmartAssist software. Customers also typically purchase Ekso Care, which is our one- to four-year after-sales service package.

Clinical Services and Customer Success

We have developed leading clinical capability in robotic rehabilitation, and we provide extensive training and support to our customers to ensure they are successful. All rentals or sales include customer training. This is comprised of both on-line and in-person training of our customers’ physical therapists. We have made this a high priority as we recognize getting customers comfortable using our product is a prerequisite to them successfully implementing a robotic rehabilitation program. In addition to the training that is included with each sale or rental, we also offer additional training services for customers who are interested in more advanced uses of the product or who desire more supervised experiences.

After Sales Service

We provide direct service for the EksoNR at our facility in Richmond, California, in Germany for our EMEA customers, and through a third party service provider in Hong Kong for APAC customers. When maintenance or service is required, a customer schedules service by contacting us and we then arrange for the appropriate service, depending on the level of Ekso Care the customer has purchased. In some cases, we may decide it is appropriate to have an Ekso field technician fly to the customer site to service the device. The EksoNR is designed with EksoPulse, which allows us to diagnose many customer service issues remotely.

In addition to the Ekso Care service programs we provide a Fee-for-Service option. In this program, EksoNR repair is fulfilled per quote on demand of the customer and as per our repair price list.

Manufacturing and Supply Chain

We produce the EksoNR at our facilities in Richmond, California for worldwide sales. We currently run one line for one shift per day and believe we have the capacity to eventually run additional lines and shifts should we deem it appropriate. The EksoNR uses over 700 purchased parts, which we source globally from over 70 suppliers. Whenever possible, we seek to secure dual source suppliers for our components.

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Our commitment to the philosophy of continuous improvement has continued to increase product performance and reliability over the past year. As a result, we expect our cost of field service will continue to decline over the next 12 months.

EksoWorks - Able-Bodied Industrial Applications

We continue to pursue market and product development opportunities for the industrial market. Our initial efforts have included EksoZeroG Arm, a mobile arm mount that makes heavy tools feel weightless and enables workers to be more productive and safe, and EksoVest, an upper body exoskeleton that elevates and supports a worker's arms to assist them with tasks ranging from chest height to overhead. Market feedback continues to indicate a growing imperative among construction and manufacturing companies to drive adoption of improved safety and health practices. Furthermore, based on initial field-testing and market research, we believe that industrial exoskeletons have the potential to help prevent workforce injuries, improve productivity and over time reduce workers’ compensation and related costs. In the U.S. alone, our target manufacturing and construction verticals employ a total of 18.4 million workers (according to U.S. Bureau of Labor Statistics), many of whom can potentially benefit from our assistive technology.

In addition, human augmentation technology is being viewed by senior managers of companies that have participated in field-testing as an opportunity to extend the careers of experienced and skilled workers while also changing the work environment to attract future workers to these careers.

While we believe that the evidence clearly demonstrates that there is significant demand for human augmentation in industrial applications, adoption rates remain a challenge due to the nascent nature of the technology. That said, we believe that there is significant mid-to-long-term potential in the industrial markets, and accordingly, we will continue our product development efforts to expand our EksoWorks product offerings. Given the fragmented nature of the industrial market we believe that the best approach in this market is work with established strategic partners that can help us target applications tailored for specific use cases. We believe that leveraging our extensive exoskeleton expertise and intellectual property portfolio with the established channel and application expertise of one or more strategic partners unlocks the highest value for us and our stockholders. We continue to engage with multiple potential industrial partners, and plan to continue this approach going forward.

China Joint Venture

We entered into a joint venture, or the China JV, to develop and serve the exoskeleton market in China and certain other Asian markets and to create a global exoskeleton manufacturing center. The Equity Joint Venture Contract, dated January 30, 2019, between us, Zhejiang Youchuang Venture Capital Investment Co., Ltd., or ZYVC, and Shaoxing City Keqiao District Paradise Silicon Intelligent Robot Industrial Investment Partnership (Limited Partnership), or Industrial Investment Fund, as amended by the Amendment to the Joint Venture Contract, dated April 30, 2019, or the JV Agreement, provides for the establishment of the China JV as a limited liability company pursuant to the Law on Sino-foreign Equity Joint Ventures and the Regulations for the Implementation of the Law on Sino-foreign Equity Joint Ventures. ZYVC, Industrial Investment Fund and we will hold 41.54%, 38.46% and 20.00% of the China JV, respectively. ZYVC and Industrial Investment Fund, or the Joint Venture Partners, will make their contributions in the form of an aggregate of RMB 624 million cash to the China JV (10% of which, or RMB 62.4 million, is to be made within 90 days of the formation of the China JV, RMB 124.8 million of which will be made upon notice by the China JV and the remainder of which will be made within the 10 years of the formation of the China JV), while we have licensed certain patented technologies and non-patented manufacturing technologies in China, Hong Kong, Singapore, Malaysia and other countries to be mutually agreed upon by us and the China JV (but excluding Japan, India and Australia), or the JV Territory, with equivalent value of RMB 145 million and related to the EksoGT, EksoVest and EksoZeroG Arm and their improvements (including the EksoNR), or the JV Products, to the China JV as our contribution pursuant to a Technology License Agreement dated October 22, 2019 between us and the China JV, or the Technology License Agreement. As of December 31, 2019, the transfer of the licensed patented technologies was not completed.

Pursuant to the JV Agreement and the Technology License Agreement, the China JV will build a manufacturing facility and will manufacture the JV Products in the JV Territory under our trademark and brands. Pursuant to the Technology License Agreement, during the term of the China JV and following a royalty-free period, we will receive a royalty fee based on a mid-single digits percentage of the net sales revenue of the products manufactured and sold by the China JV.

In 2019 the China JV acquired facilities and began outfitting its production facility. In the fourth quarter of 2019, we completed the technology transfer for EksoVest (but not the transfer of patented technologies) and the China JV assembled its first EkosVest devices9. As discussed further under “Item 1A. Risk Factors—Risks Related to Our Business and the Industry in Which We Operate—U.S. regulatory review may result in delays, restrictions or other adverse impacts on the operations of our China JV” of this Annual Report on Form 10-K, after receiving questions from the Committee on Foreign Investment in the United States (“CFIUS”), in December 2019, the Company and the China JV submitted a joint voluntary notice to CFIUS to review the transaction.

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CFIUS has determined that the establishment of the China JV is subject to CFIUS’s jurisdiction, and pending completion of its investigation, CFIUS imposed interim measures that temporarily suspend the Company’s contributions to the China JV and other integration activities. The Company continues to engage with CFIUS to address its concerns, and expects CFIUS review and investigation, as well as its assessment of whether its concerns can be mitigated, to end by April 13, 2020. Subject to satisfactory completion of CFIUS review and any mitigation that may be required by CFIUS, as well as any impact of the COVID-19 virus, we anticipate that further qualifications will be completed in the first half of 2020 along with the ramp up of production capability and localized component supply chain.

Intellectual Property

We have established an extensive intellectual property portfolio that includes various U.S. patents and patent applications. The table below provides a summary of U.S. patents by issuing status and ownership status.



	Issuing Status
License Status	Issued Patents	Pending Applications
Licensed to the Company	15	—
Exclusively licensed to the Company	6	—
Co-owned with Regents of the University of California, exclusively licensed to the Company	4	—
Co-owned with the Regents of the University of California	3	—
Sole ownership by the Company	25	12
Total: 65	53	12

Pending applications mean a complete application has been filed with the applicable patent authority and additional action is pending.

Many of these applications have also been filed internationally as appropriate for their respective subject matter. As of December 31, 2019, 199 applications have issued or have been allowed as patents worldwide. Our patent portfolio contains 237 cases that have issued or are in prosecution in 23 countries.

Our patent portfolio includes product and method type claims, since the devices that we produce and the processes performed by those devices are patentable. Our patents encompass technologies relevant to our devices, including medical exoskeletons, commercial exoskeletons, actuators, and strength-enhancing exoskeletons. The earliest priority date of the portfolio reaches back to 2003, and new applications continue to be filed.

Licensors include the Regents of the University of California, or UC Berkeley, and Garrett Brown (as a result of our acquisition of technology of Equipois, LLC, or Equipois).

The license with UC Berkeley consists of two agreements and one amendment covering ten patent cases exclusively licensed to us, nine of which have issued and one of which remains in prosecution or the UC Berkeley License Agreements. Inventions covered by a further three patent applications are co-owned by us and UC Berkeley, with no license agreement between us and UC Berkeley. As a result, UC Berkeley may license its rights in these patents to a third party. With respect to two of these co-owned patent applications, UC Berkeley has licensed their rights in the U.S. to an unrelated third party. The third patent application will need to be fully prosecuted before it can be determined which claims are exclusive to us (through a previous license) and which claims UC Berkeley may license to other entities.

Pursuant to the UC Berkeley License Agreements, Ekso Bionics initially paid UC Berkeley consideration consisting of $5,000 in cash and 310,400 common shares of Ekso Bionics, and committed to pay a 1% royalty on sales, including sales generated by sublicenses. In addition, the UC Berkeley License Agreements call for minimum annual payments of $50,000. We do not pay royalties to UC Berkeley on products sold or to be resold to the U.S. government.

In some cases, as a result of government funding we receive, the patents have a government use license, granting the U.S. government a non-exclusive, non-transferable, irrevocable, paid-up license for use of the inventions for or on behalf of the U.S. government, as is typical in the case of government sponsored research.

In connection with our acquisition of assets of Equipois, we assumed the rights and obligations of Equipois under a license agreement with Garrett Brown, the developer of certain intellectual property related to mechanical balance and support arm

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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 will be required to pay Mr. Brown a single-digit royalty on net receipts, subject to a $50,000 annual minimum royalty requirement.

Intellectual Property Out-Licensing

We believe that the breadth of the coverage across various bionic systems and technologies, together with our freedom to grant sub-licenses under the UC Berkeley License Agreements gives us the potential to generate licensing revenue in fields outside our present areas of commercialization. Since 2009, we have generated approximately $1.8 million in such licensing revenue from our two licensees: Lockheed Martin Corporation or Lockheed and OttoBock Healthcare Product GmbH or OttoBock.

We receive revenue pursuant to a Government Field Cross License Agreement dated as of July 1, 2013 between Ekso Bionics, Inc. and Lockheed and a Cross License Agreement dated as of July 1, 2013 between Ekso Bionics, Inc. and Lockheed. Pursuant to these agreements, we have licensed to Lockheed certain rights with respect to our anthropomorphic exoskeleton technology for which Lockheed is obligated to pay us a royalty on sales of products incorporating such technology. Royalty fees from Lockheed were either de minimus or nil for the years ended December 31, 2019 and 2018, respectively.

With respect to OttoBock, we received exclusivity payments pursuant to the License and Services Agreement dated October 27, 2014. The License and Services Agreement grants OttoBock exclusive rights in order to develop a semi-active prosthetic knee prototype for use in medical prosthetics and provides that OttoBock will pay us a royalty based on sales by OttoBock of products incorporating the licensed technology. Royalty fees from OttoBock were $nil and $150,000 for the years ended December 31, 2019 and 2018, respectively. In November of 2019, OttoBock informed us that they will not be pursuing commercialization of products based on our intellectual property. As a result, we do not expect additional royalty revenue from OttoBock in the future.

In March 2018, we entered into a set of agreements with Daydo Co, Ltd., or Daydo, related to distribution and cross-licensing of EksoVest. Under these agreements, Daydo has exclusive distribution rights for EksoVest within Japan and rights to modify EksoVest as needed to address the Japanese market in exchange for royalty payments to us. We also have rights to use any improvements made by Daydo. Daydo released its localized version of EksoVest (called Task AR) in January of 2019. Revenue from related royalty payments were de minimis in 2019.

Competition

The medical technology and industrial robotics industries are characterized by intense competition and rapid technological change. We believe that a number of other companies are developing competitive technology and devices for both the able-bodied and medical fields of use and many of these competitors have significantly more financial and other resources than we possess.

In the medical field, we face competition from companies that are focused on technology for rehabilitation of patients suffering from stroke and related neurological disabilities as well as from companies that are focused on SCI. In stroke, Cyberdyne, Parker Hannafin’s Indego, and ReWalk all now offer ambulatory exoskeletons for rehabilitation use in various markets where we operate. While not functionally equivalent, Hocoma, AlterG, Aretech and Reha Technology are selling treadmill-based gait therapies. In SCI, ReWalk Robotics and Parker Hannafin also sell ambulatory exoskeletons. Other companies who have announced plans to commercialize robotic exoskeletons include: Bionik Laboratories and SuitX.

Technologies developed by competitors in the areas of stroke rehabilitation and SCI represent therapeutic interventions with utility at varying points of the continuum of care. Clinically, the EksoNR is unique in its broad ability to mobilize pre- or even non-ambulatory patients using a full weight bearing, over ground, task-based platform. From a practice management perspective, the EksoNR is less expensive than many other systems, has a smaller footprint, the ability to move around the hospital, and uses standard power requirements that make it easy to integrate into existing infrastructure. Other over-ground exoskeletons were initially designed for an individual to achieve ambulation reliant on the device. By contrast, the EksoNR’s design accommodates patients with complete paraplegia and additionally includes features that are optimized to assist therapists in helping patients with some motor ability learn to walk again in a clinical setting, treating several patients and indications in a single day.

Notwithstanding the foregoing, the most pressing challenges we face are not necessarily competitive technologies, but rather achieving rapid market awareness and adoption of this emerging technology while acclimating prospects to a fundamentally new paradigm in neuro-rehabilitation and mobility. In addition, it may be difficult for the rehabilitation department of a hospital or clinic to secure the funds for acquisition of an Ekso device in an environment where capital expenditures of this magnitude are not commonly incurred by those rehabilitation departments.

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In the able-bodied field, Lockheed Martin, Raytheon, BAE Systems, Panasonic, Honda, Daewoo, Noonee, Revision Military, SuitX, Skel-ex, Levitate and Cyberdyne - among others - are each developing or commercializing some form of exoskeleton for military and/or industrial applications.

The field of robotic exoskeleton technology remains in its infancy. As this field develops, we believe that we will face increased competition on the basis of product features, clinical outcomes, price, services and other factors. Our competitive position will depend on multiple, complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. In some instances, competitors may also offer, or may attempt to develop, alternative therapies for disease states that may be delivered without a medical device.

Governmental Regulation and Product Approval

U.S. Regulation

The U.S. government regulates the medical device industry through various agencies, including but not limited to the Food and Drug Administration, or the FDA, which administers the Federal Food, Drug and Cosmetic Act or FDCA. The design, testing, manufacturing, storage, labeling, distribution, advertising, and marketing of medical devices are subject to extensive regulation by federal, state, and local governmental authorities in the United States, including the FDA, and by similar agencies in other countries. Any medical device product that we develop must receive all requisite regulatory approvals or clearances, as the case may be, before it may be marketed in a particular country.

Device Development, Marketing Clearance and Approval. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the extent of control deemed necessary to ensure the device’s safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements for device labeling, premarket notification, and adherence to the FDA’s current good manufacturing practice requirements, as reflected in its Quality System Regulation, or QSR. Class II devices are intermediate risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness solely through general or special controls, and include life- sustaining, life-supporting, or implantable devices, and devices not “substantially equivalent” to a device that is already legally marketed. Most Class I devices, and some Class II devices are exempted by regulation from the 510(k) clearance requirement and can be marketed without prior authorization from the FDA. Class I and Class II devices that have not been so exempted are eligible for marketing through the 510(k) clearance pathway. By contrast, devices placed in Class III generally require premarket approval, or PMA, prior to commercial marketing.

To obtain 510(k) clearance for a medical device, an applicant must submit a premarket notification application to the FDA demonstrating that the device is “substantially equivalent” to a predicate device, which is typically a Class II device that is legally marketed in the United States. A device is substantially equivalent to a predicate device if it has the same intended use and (i) the same technological characteristics, or (ii) has different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. A showing of substantial equivalence sometimes, but not always, requires clinical data. Generally, the 510(k) clearance process can exceed 90 days and may extend to a year or more. After a device has received 510(k) clearance for a specific intended use, any modification that could significantly affect its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, will require a new 510(k) clearance or if the device as modified is not substantially equivalent to a legally marketed predicate device PMA. While the determination as to whether new authorization is needed is initially left to the manufacturer, the FDA may review this determination and evaluate the regulatory status of the modified product at any time and may request the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

The second, more comprehensive, approval process applies to a new device that is not substantially equivalent to a predicate device or that is to be used in supporting or sustaining life or preventing impairment. These devices are normally Class III devices requiring PMA. The FDA will approve the PMA application if it finds there is reasonable assurance that the device is safe and effective for its intended use. The PMA process takes substantially longer than the 510(k) process, approximately one to two years or more.

In some instances, the FDA may find that a device is new and not substantially equivalent to a predicate device but is also not a high-risk device as is generally the case with Class III PMA devices. In these instances, the FDA may allow a device to be

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reclassified from Class III to Class I or II. The de novo reclassification option is an alternate pathway to classify novel devices of low to moderate risk that had automatically been placed in Class III after receiving a “not substantially equivalent” (NSE) determination in response to a 510(k) notification. The FDCA also allows a sponsor to submit a de novo reclassification request to the FDA for novel low to moderate risk devices without first being required to submit a 510(k) application. These types of applications are referred to as “Evaluation of Automatic Class III Designation” or “de novo.” In instances where a device is deemed not substantially equivalent to a Class II predicate device, the candidate device may be filed as a de novo application which may lead to delays in regulatory decisions by the FDA. FDA review of a de novo application may lead the FDA to identify the device as either a Class I or II device and subject to or exempt from 510(k) premarket notification.

Clinical trials are generally required to support a PMA or de novo reclassification application and are sometimes required for 510(k) clearance. Clinical trials generally require an investigational device exemption application, or IDE, approved in advance by the FDA for a specified number of patients and study sites, unless the product is deemed a non-significant risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of an institutional review board or an IRB, for the relevant clinical trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. Conducting a clinical trial, also requires obtaining the patients' informed consent in form and substance compliant with both FDA requirements and state and federal privacy and human subject protection regulations. The FDA or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA approval to market the product in the U.S. To date, the EksoGT has been the subject of several clinical studies, some sponsored by us, as well as non-Ekso-sponsored independent studies conducted by rehabilitation institutions. In addition, we are currently conducting several studies to investigate additional indications for use for the EksoGT, as well as to evaluate clinical and non-clinical outcomes of using the device.

Our current indication for use, or IFU, clearance for stroke and SCI. On April 4, 2016, we received clearance from the FDA to market our EksoGT robotic exoskeleton for use in the treatment of individuals with hemiplegia due to stroke, individuals with SCI at levels T4 to L5, and individuals with SCI at levels of T3 to C7 (ASIA D), in accordance with the device’s labeling. On July 19, 2016, we received clearance from the FDA to expand/clarify the indications and labeling to expressly include individuals with hemiplegia due to stroke who have upper extremity function of at least 4 out of 5 strength in at least one arm.

After a device is placed on the market, numerous regulatory requirements apply. These include:



•	product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
•	QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
•	labeling regulations and FDA prohibitions against the promotion of products for un-cleared, unapproved or off-label use or indication;
•	510(k) clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;
•	medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;
•	post-approval restrictions or conditions, including post-approval study commitments;
•	post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;
•	the FDA's recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;
•	regulations pertaining to voluntary recalls; and
•	notices provision regarding corrections or removals.

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to

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advertising claims. If the FDA determines that promotional or training material related to an approved device constitute the promotion of an un-cleared or unapproved use, the FDA could request that the promotional or training materials related to such device be modified or it could subject the manufacturer to regulatory or enforcement actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.

The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations.

Since January 2019, there have been no reports of an adverse event relating to our EksoGT or EksoNR devices reported to FDA under the Manufacturer and User Facility Device Experience Database.

Foreign Regulation

In addition to regulations in the U.S., we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

The policies of the FDA and foreign regulatory authorities may change, and additional government regulations may be enacted which could prevent or delay regulatory approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or abroad.

Employees

As of December 31, 2019, we had 68 employees, including 67 full time employees and one part-time employee. Seven employees reside in Europe and three in Singapore. None of our employees are covered by a collective bargaining agreement and we consider our relationship with our employees to be good.

Corporate Information

We were incorporated as PN Med Group Inc. in Nevada on January 30, 2012. Prior to the Merger and Split-Off (each as defined below), our business was to distribute medical supplies and equipment in Chile.

On January 15, 2014, we consummated the Merger, in which our wholly-owned subsidiary, Ekso Acquisition Corp., a corporation formed in the State of Delaware on January 3, 2014, merged with and into Ekso Bionics, Inc., a corporation incorporated in the State of Delaware on January 19, 2005. Ekso Bionics was the surviving corporation in the Merger and became our wholly-owned subsidiary. All of the outstanding Ekso Bionics' capital stock was converted into shares of our common stock in the Merger.

In connection with the Merger and pursuant to a split-off agreement and general release, we transferred our pre-Merger assets and liabilities to our pre-Merger majority stockholders, in exchange for the surrender by them and cancellation of 2,497,586 shares of our common stock, or the Split-Off, after adjusting to give effect to the 1-for-7 reverse stock split, which occurred on May 4, 2016.

As a result of the Merger and Split-Off, we discontinued our pre-Merger business and acquired the business of Ekso Bionics, and have continued the existing business operations of Ekso Bionics as a publicly-traded company under the name Ekso Bionics Holdings, Inc.

Our principal executive office is located at 1414 Harbour Way South, Suite 1201, Richmond, California, and our telephone number is (510) 984-1761.

We make available free of charge on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Our internet address is www.eksobionics.com. This website address is intended to be an inactive, textual reference only; none of the material on this website is part of this Annual Report. Copies of our annual reports

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on Form 10-K will be furnished without charge to any person who submits a written request directed to the attention of our Secretary, at our offices located at 1414 Harbour Way South, Suite 1201, Richmond, California, 94804. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Item 1A. RISK FACTORS

An investment in our securities is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict. Before investing in our securities, you should carefully consider the following risks, together with the financial and other information contained in this prospectus. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our common stock would likely decline and investors may lose all or a part of their investment.

This Annual Report contains certain statements relating to future events or our future financial performance. Readers are cautioned that such forward-looking statements are only predictions and involve risks and uncertainties, and that actual events or results may differ materially. In evaluating such statements, readers should specifically consider the various factors identified in this Annual Report, including the matters set forth below, which could cause actual results to differ materially from those indicated by such forward-looking statements.

The risks described below do not purport to be all the risks to which we could be exposed. This section is a summary of certain risks and is not set out in any particular order of priority. They are the risks that we presently believe are material to our operations. Additional risks of which we are not presently aware or which we presently deem immaterial may also impair our business, financial condition or results of operations.

Risks Related to Our Business and the Industry in Which We Operate

We have a limited operating history upon which investors can evaluate our future prospects.

Although we were incorporated in 2005, we did not sell our first Ekso medical device until 2012 and did not sell our first industrial unit until 2016. Therefore, we have limited operating history upon which an evaluation of our business plan or performance and prospects can be made. Our business and prospects must be considered in light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business and creating a new industry. The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded service offerings; or that we fail to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that we can successfully address these challenges. If we are unsuccessful, we and our business, financial condition and operating results could be materially and adversely affected.

The industries in which we operate are highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.

The medical technology and industrial robotics industries are characterized by intense competition and rapid technological change, and we will face competition on the basis of product features, clinical outcomes, price, services and other factors. Competitors may include large medical device and other companies, some of which have significantly greater financial and marketing resources than we do, and firms that are more specialized than we are with respect to particular markets. Our competition may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing and other resources than we do or may be more successful in attracting potential customers, employees and strategic partners.

Our competitive position will depend on multiple, complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. Competitors may offer, or may attempt to develop, more efficacious, safer, cheaper, or more convenient alternatives to our products, including alternatives that could make the need for robotic exoskeletons obsolete. The development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. The entry into the market of manufacturers located in low-cost manufacturing locations may also create pricing pressure, particularly in developing markets. Our future success depends, among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological advances, and upon our ability to successfully implement our marketing strategies and execute our research and development plan.

Our products or exoskeletons generally may not be accepted in the market.

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We cannot be certain that our current products or any other products we may develop or market will achieve or maintain market acceptance. Market acceptance of our products depends on many factors, including our ability to convince key opinion leaders to provide recommendations regarding our products, convince distributors and customers that our technology is an attractive alternative to other technologies, convince health insurers and other third-party payers to cover and provide adequate payments for any products that are used for medical or therapeutic purposes, demonstrate that our products are reliable and supported by us in the field, supply and service sufficient quantities of products directly or through marketing alliances, and price products competitively in light of the current macroeconomic environment, which, particularly in the case of the medical device industry, is becoming increasingly price sensitive.

In addition, the market for medical and industrial exoskeletons is new and unproven. We cannot be certain that the market for robotic exoskeletons will continue to develop, or that robotic exoskeletons for medical or industrial use will achieve market acceptance. If the exoskeleton market fails to develop, or develops more slowly than we anticipate, we and our business, financial condition and operating results could be materially and adversely affected.

Protecting our patent and other proprietary rights can be costly, and we may not be able to attain, defend or maintain such rights, which could harm our business.

Our long-term success largely depends on our ability to market technologically competitive products. Failure to protect or to obtain, maintain or extend adequate patent and other intellectual property rights could materially adversely impact our competitive advantage and impair our business. Our issued patents may not be sufficient to protect our intellectual property and our patent applications may not result in issued patents. Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner or may challenge the validity of our patents. Our attempts to prevent third parties from circumventing our intellectual property and other rights ultimately may be unsuccessful. We may also fail to take the required actions or pay the necessary fees to maintain any of our patents that issue.

Furthermore, we have not filed applications for all of our patents internationally and may not be able to prevent third parties from using our proprietary technologies or may lose access to technologies critical to our products in other countries. These include, in some cases, countries in which we are currently selling products and countries in which we intend to sell products in the future.

We have agreed to transfer and license intellectual property and other rights for the manufacture and sale of our products in China and certain other Asian territories to a joint venture that we do not control and that may not act in our best interests, and we may not receive all anticipated benefits from the arrangement.

In consideration for a 20% stake in the China JV and royalty rights based on net sales of the JV Products by the China JV following a royalty-free period, we have licensed certain patented technologies and non-patented manufacturing technologies in the JV Territory to the China JV. We have also granted to the China JV a license to use our trademarks free of charge in the JV Territory. As a result of these transfers and licenses, and the other agreements we have agreed to with the China JV and the Joint Venture Partners, we will be reliant on the China JV for the manufacturing and sale of the foregoing products in the JV Territory. We will also be reliant on our Joint Venture Partners to fund the China JV in the future, and their failure to do so could have a material adverse effect on the ability of the China JV to effectively manufacture and sell products. Even to the extent the China JV is successful in manufacturing and selling products, aside from a royalty fee based on a mid-single digits percentage of the net sales revenue of the products manufactured and sold by the China JV, we will only benefit from any profit in the China JV to the extent of our minority equity ownership therein.

As a result of our 20% ownership stake and the terms of the China JV agreements, we will not have control of the operations of the China JV, which will be governed by a five-member board of directors to which we may only designate one director in our sole discretion, with the majority of such directors being designated by our Joint Venture Partners. Accordingly, if our relationship with our Joint Venture Partners deteriorates, or if our strategic objectives diverge from that of our Joint Venture Partners, our success in the joint venture and our business and operations may be materially adversely affected. Further, we may be unable to prevent misconduct or other violations of applicable laws by the China JV, and we have no control over the conduct or actions of our Joint Venture Partners. Moreover, the China JV may not follow the same requirements regarding compliance, internal controls (including internal control over financial reporting) that we follow. To the extent another party makes decisions that negatively impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive or other actions or we may be subject to penalties, fines or other related actions for these activities

Finally, because the China JV will only manufacture and sell products in the JV Territory, we may still need to expend resources on the manufacturing and sale of our product in other markets in Asia.

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As of December 31, 2019, the Company had not transferred the patented technologies pursuant to the Technology License Agreement.

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products.

The industries in which we operate, including, in particular, the medical device industry, are characterized by extensive intellectual property litigation and, from time to time, we might be the subject of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert the time and effort of our management and operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringement against us could result in our payment of significant monetary damages and/or royalty payments or negatively impact our ability to sell current or future products in the affected category and could have a material adverse effect on our business, cash flows, financial condition or results of operations.

Because competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly, or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure.

Some of the patents and patent applications in the intellectual property portfolio are not within our complete control, which could reduce the value of such patents.

Some of our U.S. patents (which have associated international patents and applications) are co-owned by UC Berkeley. UC Berkeley has exclusively licensed its rights under many of these patents to us, but we do not have an exclusive license to UC Berkeley’s rights under three of these patents.

UC Berkeley has licensed their U.S. rights in two of these three co-owned patents to an unrelated third-party.

The third patent is a continuation-in-part of a patent that UC Berkeley has licensed to us. Under the terms of the relevant license agreement between us and UC Berkeley, we have exclusive rights to any claims that are fully supported by the specification in the parent application. However, any claims that are not based on the specification in the parent application are co-owned by UC Berkeley and us, and UC Berkeley’s rights in respect of such claims are not exclusively licensed to us. There is no assurance that we will be able to obtain a license to UC Berkeley’s rights in any such claims on commercially reasonable terms or at all, and UC Berkeley may choose to license its rights to third parties instead of us.

In addition, in connection with our acquisition of certain assets from Equipois, we assumed the rights and obligations of Equipois with respect to certain patents and patent applications under an in-license of intellectual property from a third-party and subject to an out-license of that intellectual property to an unrelated third-party for use in a particular field. We do not have complete control over the prosecution of these patent applications. As well, the license of intellectual property rights under these patents to third parties could reduce the value of our patent portfolio and limit any income or license fees that we might receive if we were to attempt to transfer or license our rights under any of our co-owned or licensed patents.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third-parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.

We are a party to two exclusive license agreements and one amendment with UC Berkeley, covering ten patents exclusively licensed to us. In addition, in connection with our acquisition of certain assets from Equipois, we assumed the rights and obligations of Equipois with respect to certain patents and patent applications under an in-license of intellectual property from a third-party and subject to an out-license of that intellectual property to an unrelated third-party for use in a particular field. We may also need to obtain additional licenses from others to advance our research and development activities or allow the commercialization of

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our devices or any other devices we may identify and pursue. Our license agreements with UC Berkeley and the rights and obligations that we assumed in connection with the Equipois acquisition impose various development, diligence, commercialization, and other obligations on us, and we any future license agreements may impose similar or other obligations on us. For example, under our license agreements with UC Berkeley we are required to submit a commercialization plan with performance milestones and progress report to UC Berkeley, and must satisfy specified minimum annual royalty payment obligations. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If our license agreements with UC Berkeley is terminated, or if our agreements granting us intellectual property rights in connection with the Equipois acquisition or any future agreements granting us material intellectual property rights are terminated or impeded in a material way, competitors or other third parties would have the freedom to seek regulatory approval of, and to market, products that may be identical or functionally similar to our devices and we may be required to cease our development and commercialization of such devices. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

Moreover, disputes may arise between us and our counterparties regarding intellectual property subject to a licensing agreement, including:



	·	the scope of rights granted under the license agreement and other interpretation-related issues;
	·	the extent to which our devices, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
	·	the sublicensing of patent and other rights under our collaborative research and development relationships;
	·	our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
	·	the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and
	·	the priority of invention of patented or patentable technology.

In addition, certain provisions in our license agreement with UC Berkeley may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected devices, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.

Patent terms may be inadequate to protect our competitive position on our devices for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our devices are obtained, once the patent life has expired, we may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of new devices, patents protecting such devices might expire before or shortly after such devices are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

If we fail to obtain or maintain necessary regulatory clearances or approvals for our medical device products, or if clearances or approvals for future products or modifications to existing products are delayed or not issued, our commercial operations would be harmed.

Our EksoGT, EksoNR and EksoUE products are medical devices and are regulated by the FDA, the European Union and other governmental authorities both inside and outside of the United States. These agencies enforce laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of our medical products. Our failure to comply with these complex laws and regulations could have a material adverse effect on our business, results of operations, financial condition and cash flows

In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDCA or approval of a premarket approval or PMA application from the FDA, unless an exemption applies. Both the PMA and the 510(k) clearance process can be expensive,

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lengthy and uncertain. The FDA’s 510(k) clearance process may take anywhere from several months to over a year. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or even longer, from the time the application is filed with the FDA. In addition, PMA generally requires the performance of one or more clinical trials.

The FDA also has substantial discretion in the medical device review process. Despite the time, effort and cost, we cannot assure you that any particular device will be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory approvals could harm our business. Failure can occur at any stage, and we could encounter problems that cause us to repeat or perform additional development, standardized testing, pre-clinical studies and clinical trials. Any delay or failure to obtain necessary regulatory approvals could harm our business.

The FDA or other non-U.S. regulatory authorities can delay, limit or deny clearance or approval of a medical device candidate for many reasons, including:



	·	a medical device candidate may not be deemed to be substantially equivalent to a device lawfully marketed either as a grandfathered device or one that was cleared through the 510(k) premarket notification process;
	·	a medical device candidate may not be deemed to be in conformance with applicable standards and regulations;
	·	FDA or other regulatory officials may not find the data from pre-clinical studies and clinical trials or other product testing date to be sufficient;
	·	other non-U.S. regulatory authorities may not approve our processes or facilities or those of any of our third-party manufacturers, thereby restricting export; or
	·	the FDA or other non-U.S. regulatory authorities may change clearance or approval policies or adopt new regulations.

Even after regulatory clearance or approval has been granted, a cleared or approved product and its manufacturer are subject to extensive regulatory requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising and promotion for the product. If we fail to comply with the regulatory requirements of the FDA or other non-U.S. regulatory authorities, or if previously unknown problems with our products or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions, including:



	·	restrictions on the products, manufacturers or manufacturing process;
	·	adverse inspectional observations (Form 483), warning letters, non-warning letters incorporating inspectional observations;
	·	civil or criminal penalties or fines;
	·	injunctions;
	·	product seizures, detentions or import bans;
	·	voluntary or mandatory product recalls and publicity requirements;
	·	suspension or withdrawal of regulatory clearances or approvals;
	·	total or partial suspension of production;
	·	imposition of restrictions on operations, including costly new manufacturing requirements;
	·	refusal to clear or approve pending applications or premarket notifications; and
	·	import and export restrictions.

If imposed on us, any of these sanctions could have a material adverse effect on our reputation, business, results of operations and financial condition.

Modifications to our EksoNR and our future products may require new 510(k) clearances or premarket approvals, or may require us to cease marketing or recall the modified products until clearances are obtained

On April 4, 2016, we received clearance from the FDA to market our EksoGT robotic exoskeleton for use in the treatment of individuals with hemiplegia due to stroke, individuals with SCI at levels T4 to L5, and individuals with SCI at levels of T3 to C7 (ASIA D), in accordance with the device’s labeling. On July 19, 2016, we received clearance from the FDA to expand/clarify the indications and labeling to expressly include individuals with hemiplegia due to stroke who have upper extremity function of at least four-fifths in only one arm. Our prior cleared indications for use statement required that individuals with hemiplegia due to stroke have upper extremity function of at least four-fifths in both arms.

An element of our strategy is to continue to upgrade our robotic exoskeleton platform to incorporate new software and hardware

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enhancements. Any modification to a 510(k)-cleared device, including our EksoGT, that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a PMA. The FDA requires every manufacturer to make this determination in the first instance based on the final guidance document issued by the FDA in October 2017 addressing when to submit a new 510(k) application due to modifications to 510(k)-cleared devices and a separate guidance document on when to submit a new 510(k) application due to software changes to 510(k)-cleared devices. Although largely aligned with the FDA’s longstanding guidance document issued in 1997, the 2017 guidance includes targeted changes intended to provide additional clarity on when a new 510(k) application is needed. The FDA may review our determinations regarding whether new clearances or approvals are necessary, and may not agree with our decisions. If the FDA disagrees with our determinations for any future changes, or prior changes to previously marketed products, as the case may be, we may be required to cease marketing or to recall the modified products until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

We may introduce new products with enhanced features and extended capabilities from time to time. The products may be subject to various regulatory processes, and we may need to obtain and maintain regulatory approvals in order to sell our new products. If a potential purchaser of our products believes that we plan to introduce a new product in the near future or if a potential purchaser is located in a country where a new product that we have introduced has not yet received regulatory approval, planned purchases may be deferred or delayed. As a result, new product introductions may adversely impact our financial results.

The manufacture of our products is subject to extensive post-market regulation by the FDA. Our failure to meet strict regulatory requirements could require us to pay fines, incur other costs or even close our facilities.

We are required to comply with the FDA’s Quality System Regulation, or QSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of our marketed products. These regulatory requirements may significantly increase our production costs and may even prevent us from making our products in amounts sufficient to meet market demand. If we change our approved manufacturing process, the FDA may need to review the process before it may be used. The FDA enforces the QSR through periodic announced and unannounced inspections of manufacturing facilities. Failure to comply with regulatory requirements such as QSR may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.

Federal, state and non-U.S. regulations regarding the manufacture and sale of medical devices are subject to future changes. The complexity, timeframes and costs associated with obtaining marketing clearances are unknown. Although we cannot predict the impact, if any, these changes might have on our business, the impact could be material.

We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses.

Any cleared or approved product may be promoted only for its indicated uses and our promotional materials must comply with FDA and other applicable laws and regulations. We believe that the specific use for which our products are marketed fall within the scope of the indications for use that have been cleared by the FDA. However, if the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.

Failure to comply with anti-kickback and fraud regulations could result in substantial penalties and changes in our business operations.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payers for our products, we are subject to healthcare fraud and abuse regulation and enforcement by federal, state and foreign governments, which could significantly impact our business. These laws may constrain the business and financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any product for which we have obtained regulatory approval, or for which we obtain regulatory approval in the future. The principal U.S. federal laws implicated include, but are not limited to, those that prohibit, among other things,

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(i) filing, or causing to be filed, false or improper claims for federal payment, known as the false claims laws, (ii) payment, solicitation or receipt of unlawful inducements, directly or indirectly, for the referral of business reimbursable under federally-funded health care programs, known as the anti-kickback laws, and (iii) health care service providers from seeking reimbursement for providing certain services to a patient who was referred by a physician who has certain types of direct or indirect financial relationships with the service provider, known as the Stark law. Many states have similar laws that apply to reimbursement by state Medicaid and other government funded programs as well as in some cases to all payers. In addition, we may be subject to federal and state data privacy laws that govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Efforts to ensure that our business arrangements will comply with applicable healthcare laws and regulations will involve substantial costs. We are subject to the risk that a person or government could allege we have engaged in fraud or other misconduct, even if none occurred. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, additional integrity oversight and reporting obligations, contractual damages, reputational harm and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Changes in law or regulation could make it more difficult and costly for us to manufacture, market and distribute our products or obtain or maintain regulatory approval of new or modified products.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated devices. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of future products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. Elections could result in significant changes in, and uncertainty with respect to, legislation, regulation and government policy that could significantly impact our business and the health care industry. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.

Any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market, and distribute existing products. Significant delays in receiving clearance or approval, or the failure to receive clearance or approval, for any new products would have an adverse effect on our ability to expand our business.

Healthcare changes in the U.S. and other countries, including recently enacted legislation reforming the U.S. healthcare system, could have a negative impact on our future operating results.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. For example, in 2010, the Patient Protection and Affordable Care Act, or ACA, was enacted into law. The legislation seeks to reform the United States healthcare system. It is far-reaching and is intended to expand access to health insurance coverage, improve quality and reduce costs over time. We expect the law will have a significant impact upon various aspects of our business operations. The ACA reduces Medicare and Medicaid payments to hospitals, clinical laboratories and pharmaceutical companies, and could otherwise reduce the volume of medical procedures. These factors, in turn, could result in reduced demand for our products and increased downward pricing pressure. It is also possible that the ACA will result in lower reimbursements. While the ACA is intended to expand health insurance coverage to uninsured persons in the United States, the impact of any overall increase in access to healthcare on sales of our products remains uncertain. The current U.S. Presidential administration and the majority party in both Houses of U.S. Congress have indicated their desire to repeal all or certain provisions of the ACA. It is unclear whether, when and how that repeal could be effectuated and what the effect on the healthcare sector might be. A number of lawsuits have been filed challenging various aspects of the ACA and related regulations. In addition, the efficacy of the ACA is the subject of much debate among members of Congress and the public. On December 14, 2018, the U.S. District Court for the Northern District of Texas held the individual mandate provisions, and therefore the entirety of ACA, unconstitutional. The impact of the ruling is stayed as it is appealed to the Fifth Circuit Court of Appeals. Our business may be materially and adversely impacted in the event that the ACA in part, or in its entirety, is ruled unconstitutional. Furthermore, the uncertainty regarding the constitutionality of the ACA, or specific provisions therein, may negatively affect our business.

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In December 2017, the Tax Cuts and Jobs Act was enacted and signed into law, one part of which repeals the “individual mandate” introduced by the ACA starting in 2019. The repeal of the “individual mandate” may have an adverse effect on ACA insurance markets and lead to further legislative changes. In addition, the new law imposes a 2.3% excise tax on medical devices that will apply to U.S. sales of our medical device products. In January 2018, President Trump signed into law a spending package that included a two-year moratorium on the medical device excise tax, which lapsed on December 31, 2019. This tax has had, and may continue to have, a negative impact on our gross margin. There have been other changes to the ACA since the enactment of the Tax Cuts and Jobs Act, and Congress could still consider additional legislation to repeal or replace all or certain elements of the ACA. In addition, other reform legislation has been passed subsequent to the enactment of the ACA, including measures that reduced reimbursement for certain providers and entities under federal health care programs. The outlook for the healthcare sector is unclear, and we are unable to predict the future course of federal or state healthcare legislation and regulations. Changes in the law or regulatory framework that reduce our revenues or increase our costs could also harm our business, financial condition and results of operations and cash flows.

Future elections in the United States could result in significant changes in, and uncertainty with respect to, legislation, regulation, implementation of Medicare and/or Medicaid, and government policy that could significantly impact our business and the healthcare industry. In the event that legal challenges are successful, or the ACA, is repealed or materially amended, particularly any elements of the ACA that are beneficial to our business or that cause changes in the health insurance industry, including reimbursement and coverage by private payers or, Medicare or Medicaid payers, our business, operating results and financial condition could be harmed. While it is not possible to predict whether and when any such changes may occur, certain proposals, including a repeal or material amendment of the ACA, could harm our business, operating results and financial condition. In addition, even if the ACA is not amended or repealed, the President and the executive branch of the federal government have a significant impact on the implementation of the provisions of the ACA, and the current or future administrations could make changes impacting the implementation and enforcement of the ACA, which could harm our business, operating results and financial condition. If we are slow or unable to adapt to any such changes, our business, operating results and financial condition could be adversely affected.

If our medical products, or malfunction of our medical products, cause or contribute to a death or a serious injury, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA’s medical device reporting or MDR regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. For example, we have been informed of a limited number of events with respect to our EksoNR or EksoGT devices that have been determined to be reportable pursuant to the MDR regulations. In each case, the required MDR report was filed with the FDA.

In addition, all manufacturers bringing medical devices to market in the European Economic Area are legally bound to report any incident that led or might have led to the death or serious deterioration in the state of health of a patient, user or other person, and which the manufacturer’s device is suspected to have caused, to the competent authority in whose jurisdiction the incident occurred. In such case, the manufacturer must file an initial report with the relevant competent authority, which would be followed by further evaluation or investigation of the incident and a final report indicating whether further action is required. The events described above that were reported to the FDA were also reported to the relevant EU regulatory authorities.

We are also required to follow detailed recordkeeping requirements for all Company-initiated medical device corrections and removals, and to report such corrective and removal actions to the FDA if they are carried out in response to a risk to health and have not otherwise been reported under the MDR regulations. Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Recalls of our products, or agency actions relating to our failure to comply with our reporting or recordkeeping obligations, could harm our reputation and financial results.

Discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. In addition, manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. To date, we have initiated only one field action in which we voluntarily accelerated our maintenance schedule based on field usage.

When a medical human exoskeleton is used by a paralyzed individual to walk, the individual relies completely on the exoskeleton

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to hold them upright. There are many exoskeleton components that, if they were to fail catastrophically, could cause a fall resulting in severe injury or death of the patient. Certain of our competitors have reported injuries caused by the malfunction of human exoskeleton devices (in at least one case to the FDA). Injuries caused by the malfunction or misuse of human exoskeleton devices, even where such malfunction or misuse occurs with respect to one of our competitor’s products, could cause regulatory agencies to implement more conservative regulations on the medical human exoskeleton industry, which could significantly increase our operating costs.

Similarly, when an industrial exoskeleton is used by a healthy individual - for example to operate heavy machinery overhead - malfunction of the device at an inopportune moment could result in severe injury or death of the person using the device. Such occurrences could result in regulatory action on the part of OSHA or its foreign counterparts.

Any future recalls of any of our products could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner, and have an adverse effect on our reputation, results of operations and financial condition. In some circumstances, such adverse events could also cause delays in new product approvals. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

In addition, personal injuries relating to the use of our products could also result in product liability claims being brought against us. Any product liability claim brought against us, with or without merit, could result in substantial damages, be costly and time-consuming to defend and could increase our insurance rates or prevent us from securing insurance coverage in the future.

We could be exposed to significant liability claims if we are unable to obtain insurance at adequate levels or otherwise protect ourselves against potential product liability claims.

The testing, manufacture, marketing and sale of medical devices and industrial products entail the inherent risk of liability claims or product recalls. Although we maintain product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. A successful product liability claim or product recall could inhibit or prevent the successful commercialization of our products, cause a significant financial burden on us, or both, which in either case could have a material adverse effect on our business and financial condition.

Warranty claims or any other service and repairs provided by us at our expense could have a material adverse effect on our business.

Sales of our EksoNR and EksoGT generally include a one-year warranty for parts and services in the U.S. and a two-year warranty in Europe, the Middle East and Africa. We also generally provide customers with an option to purchase an extended warranty for up to an additional three years. The costs associated with such warranties, including any warranty-related legal proceedings, could have a material adverse effect on our results of operations, cash flows and liquidity. As we enhance our product and in an effort to build our brand and drive adoption, we have elected to incur increased service expenses related to an accelerated maintenance program, field corrections and the implementation of technological improvements developed subsequent to many of our units being placed into service, sometimes outside of its warranty and contractual obligations. Continuation of these activities could have a material adverse effect on our results of operations, cash flows and liquidity.

If use of our products by healthcare providers and related facilities becomes dependent on their ability to obtain reimbursement for use of our products from third-party payers, failure to both obtain and maintain adequate levels of third-party reimbursement for such services would have a material adverse effect on our business.

Healthcare providers and related facilities are generally reimbursed for their services through payment systems managed by various third-party payers, including governmental agencies worldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available budget, or a combination of these factors, and coverage and payment levels are determined at each payer’s discretion. Reimbursement to healthcare providers and related facilities for rehabilitation services are not dependent on the use of our products. However, to the extent that the adoption of our product by our customers becomes dependent in the future on their ability to obtain adequate reimbursement for treatments provided using our product from third-party payers, the coverage policies and reimbursement levels of these third-party payers may impact the decisions of healthcare providers and facilities regarding which medical products they purchase and the prices they are willing to pay for those products and reimbursement rates could also affect the acceptance rates of new technologies.

We have no direct control over payer decision-making with respect to coverage and payment levels for our medical device products. Additionally, we expect many payers to continue to explore cost-containment strategies (e.g., comparative and cost-effectiveness analyses, so-called “pay-for-performance” programs implemented by various public and private payers, and expansion of payment

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bundling schemes such as Accountable Care Organizations, and other such methods that shift medical cost risk to providers). Should the use of our products be a factor in reimbursements in the future, these considerations may potentially impact coverage and/or payment levels for our products.

In addition to the ACA, which is intended to reduce the cost of healthcare over time, initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare costs, including price regulation and competitive pricing, are ongoing in markets where we do business. Pricing pressure has also increased in these markets due to continued consolidation among health care providers, trends toward managed care, the shift towards governments becoming the primary payers of health care expenses and laws and regulations relating to reimbursement and pricing generally. Should the use of our products be a factor in reimbursements in the future, reductions in reimbursement levels or coverage or other cost-containment measures could adversely affect customer demand or the price customers may be willing to pay for our products and could result in decreased revenue.

Clinical studies regarding our products may not provide sufficient data to either cause third-party payers to approve reimbursement or to make human exoskeletons a standard of care.

Our business plan relies on broad adoption of human exoskeletons to provide neuro-rehabilitation in the form of gait training to individuals who have suffered a neurological injury or disorder. Although use of human exoskeletons in neuro-rehabilitation is new, use of robotic devices to provide gait training has been going on for over a decade and the clinical studies relating to such devices have had both positive and negative outcomes. In the past, some in the rehabilitation community have questioned the use of robotic devices based on the data from some of these studies. Although we believe that human exoskeletons will outperform such robotic equipment, this has not been proven or broadly accepted by the rehabilitation community. Furthermore, it may prove impossible to prove an advantage in a timely manner, or at all, which could prevent broad adoption of our products.

Part of our business plan relies on broad adoption of our robotic exoskeleton to provide “early mobilization” of individuals who have been immobilized by an injury, disease, or other condition. Although the health benefits of other methods of “early mobilization” have been demonstrated in clinical studies in fields such as stroke, those studies did not test early mobilization with human exoskeletons directly. To date, our device has been the subject of several clinical trials, some of which have been partially sponsored by us, but most of which are non-Ekso-sponsored independent studies conducted by rehabilitation institutions. Data from these studies was provided to the FDA as part of our 510(k) application submissions. In addition, there are several ongoing independent studies to investigate additional indications for use for our device, as well as to evaluate clinical and non-clinical outcomes of using the Ekso device, and we are currently in the planning stage for several Company-led studies. Further, a Company-sponsored clinical trial, entitled WISE (Walking Improvement for SCI with Exoskeletons), is being conducted to evaluate improvement in independent gait speeds of SCI patients undergoing rehabilitation with the EksoNR and EksoGT and to compare it to both conventional therapy and a control group.

If current and future clinical trials do not provide sufficient data to support our belief that early mobilization through the use of exoskeletons improves health outcomes, or such studies actually contradict that belief, market acceptance of the human exoskeletons could fail to increase or could decrease and our business could be harmed.

Any studies that we initiate, whether to drive market adoption and support commercialization, or to support additional product submissions or new claims, will be expensive and time consuming, which could harm our financial results.

Initiating and completing clinical trials necessary to drive market adoption and support commercialization, or to support additional product submissions or new claims, is time consuming and expensive. Conducting successful clinical studies requires the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in future clearances or approvals of our products or result in the failure of the clinical trial. Such increased costs and delays or failures could adversely affect our business, results of operations and prospects.

In addition, all clinical trial activities that we undertake are subject to extensive regulation and review by numerous governmental authorities both in the United States and abroad. Clinical trials intended to support a 510(k) applications or PMA must be conducted in compliance with the FDA’s Good Clinical Practice regulations and similar requirements in foreign jurisdictions. Sufficient and appropriate clinical protocols to demonstrate safety and efficacy may be required and we may not adequately develop such protocols to support future clearances and approvals. Compliance with these regulations is costly, and any failure to do so could delay or prevent us from using data obtained from such activities to support our claims that a product is safe and effective.

The results of clinical trials may not support new product submissions or claims or may result in the discovery of adverse side effects.

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Despite considerable time and expense invested in clinical trials, the FDA may not consider any data that we obtain adequate to demonstrate safety and efficacy for future submissions. Even if our clinical trials are completed as planned, we cannot be certain that their results will support our intended claims or demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials. Any delay or termination of our clinical trials or studies could delay the filing of associated product submissions and, ultimately, our ability to commercialize products requiring submission of clinical data or relying on clinical data for market acceptance.

It is also possible that patients enrolled in a clinical trial will experience adverse side effects that are not currently part of the product candidate’s safety profile, which could cause us to delay or abandon development of such product

Security breaches could expose us to liability and damage our reputation and business.

We process, store, and transmit sensitive data, including those provided by employees, customers and vendors. It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. Our infrastructure may be vulnerable to physical break-ins, computer viruses, attacks by hackers or nefarious actors or similar disruptive problems. Any physical or electronic break-in or other security breach or compromise of the information handled by us or our service providers may jeopardize the security or integrity of information in our computer systems and networks or those of our employees, customers or vendors and cause significant interruptions and/or errors in our products and services.

The systems and processes that we have developed that are designed to protect information processed, stored or transmitted on our systems and prevent data loss and other security breaches cannot provide absolute security. In addition, we may not successfully implement remediation plans to address all potential exposures. It is possible that we may have to expend additional financial and other resources to address such problems. Failure to prevent or mitigate data loss or other security breaches could expose us or our employees, customers or vendors to a risk of loss or misuse of such information, cause employees, customers or vendors to lose confidence in our data protection measures, damage our reputation, adversely affect our operating results or result in litigation or potential liability for us. While we maintain insurance coverage, we do not maintain cyber insurance and our insurance coverage may be insufficient to cover all losses associated with a cyber-attack or security breach.

Our business may suffer if we are not able to attract and retain key employees.

Our success depends on our ability to identify, hire, train and retain highly qualified managerial, technical and sales and marketing personnel. In addition, as we introduce new products or services, we will need to hire additional personnel. Currently, competition for personnel with the required knowledge, skill and experiences is intense, particularly in the San Francisco Bay area, where we are headquartered, and we may not be able to attract, assimilate or retain such personnel. The inability to attract and retain the necessary managerial, technical and sales and marketing personnel could have a material adverse effect on our business, results of operations and financial condition.

Changes in our management and sales teams may adversely affect our operations.

Over the last two years, we have experienced turnover in our senior management and sales teams, including most recently, Christian Babini, who resigned as VP of Sales, Americas in January 2019. During 2018, Russell DeLonzor also resigned as Chief Operating Officer in December 2018. Maximilian Scheder-Bieschin, our former Chief Financial Officer, retired as Chief Financial Officer as of August 1, 2018 and transitioned to being a consultant until December 31, 2018, and effective August 13, 2018, John F. Glenn was appointed as our new Chief Financial Officer. As well, Gregory Davault, previously our Chief Marketing Officer, resigned effective as of May 15, 2018.

While we expect to engage in an orderly transition process as we integrate newly appointed officers and managers, we face a variety of risks and uncertainties relating to management transition and execution of our sales strategy, including diversion of management attention from business concerns, failure to retain other key personnel, loss of institutional knowledge, loss of sales prospects and inability to replenish our sales team in a manner needed to execute our sales strategy. These risks and uncertainties could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations, stock price and research and development of our products.

We will experience long and variable sales cycles, which could have a negative impact on our results of operations for any given quarter and may result in volatility in our stock price.

The EksoNR has a lengthy sale and purchase order cycle because it is a major capital item and generally requires the approval of

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senior management at purchasing institutions, which may contribute to substantial fluctuations in our quarterly operating results. Other factors that may cause our operating results to fluctuate include:



	·	general economic uncertainties and political concerns;
	·	the introduction of new products or product lines;
	·	product modifications;
	·	the level of market acceptance of new products;
	·	the availability of coverage and adequate reimbursement by third-party payers of services provided using our products;
	·	the timing and amount of research and development and other expenditures;
	·	timing of the receipt of orders from, and product shipments to, distributors and customers;
	·	changes in the distribution arrangements for our products;
	·	manufacturing or supply delays;
	·	the time needed to educate and train additional sales and manufacturing personnel; and
	·	costs associated with defending our intellectual property.

In addition to these factors, expenditures are based, in part, on expected future sales. If sales levels in a particular quarter do not meet expectations, we may be unable to adjust operating expenses quickly enough to compensate for the shortfall of sales, and our results of operations may be adversely affected.

The China JV exposes us to certain risks with respect to international trade, enforcement of intellectual property rights and political risks.

As a result of our involvement in the China JV, we are subject to a number of risks associated with conducting operations in China and other international markets, including:



	·	unexpected changes in regulatory requirements that may limit our ability to manufacture, export the products of these companies or sell into particular jurisdictions or impose multiple conflicting tax laws and regulations;
	·	the imposition of tariffs, trade barriers and duties;
	·	difficulties in managing geographically disparate operations;
	·	difficulties in enforcing agreements through non-U.S. legal systems, including the JV Agreement, which is governed under Chinese law;
	·	political and economic instability, civil unrest or war;
	·	terrorist activities that impact international commerce;
	·	outbreaks of a pandemic disease, such as COVID-19 (coronavirus);
	·	difficulties in protecting our intellectual property rights, particularly in China and other countries where the laws and practices do not protect proprietary rights to as great an extent as do the laws and practices of the United States;
	·	changing laws and policies affecting economic liberalization, foreign investment, currency convertibility or exchange rates, taxation or employment; and
	·	nationalization of foreign‑owned assets, including intellectual property.

International sales of our products account for a portion of our revenues, which will expose us to certain operating risks, and we intend to rely on international joint venture, particularly the China JV, for manufacturing and sales of our products in China and certain other Asian countries. If we are unable to successfully manage our international activities, our net sales, results of operations and financial condition could be adversely impacted.

Our business currently depends in part on our activities in the EMEA, APAC, and other foreign markets. We also recently entered into the China JV and intend to rely on the China JV to manufacture and sell our products in the JV Territory. Our international activities are subject to a number of risks inherent in selling and operating abroad. These include:

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	·	failure of local laws to provide the same degree of protection against infringement of our intellectual property rights;
	·	protectionist laws and business practices that favor local competitors, which could slow our growth in international markets;
	·	the expense of establishing facilities and operations in new foreign markets;
	·	building an organization capable of supporting geographically dispersed operations;
	·	challenges caused by distance, language and cultural differences;
	·	challenges caused by differences in legal regulations, markets, and customer preferences, which may limit our ability to adapt our products or succeed in other regions;
	·	multiple, conflicting, and changing laws and regulations, including complications due to unexpected changes in regulatory requirements, foreign laws, tax schemes, international import and export legislation, trading and investment policies, exchange controls and tariff and other trade barriers;
	·	foreign tax consequences;
	·	fluctuations in currency exchange rates and foreign currency translation adjustments;
	·	foreign exchange controls that might prevent us from repatriating income earned outside the United States;
	·	imposition of public sector controls;
	·	differing payer reimbursement regimes, governmental payers or patient self-pay systems and price controls;
	·	political, economic and social instability; and
	·	restrictions on the export or import of technology.

Some of the countries in which we operate and seek to expand are in emerging markets where legal systems may be less developed or familiar to us. Other jurisdictions in which we conduct business may establish legal and regulatory regimes that differ materially from United States laws and regulations. Compliance with diverse legal requirements is costly and time-consuming and requires significant resources. Violations of one or more of these regulations in the conduct of our business could result in significant fines or monetary damages, criminal sanctions against us or our officers, prohibitions on doing business, unfavorable publicity and other reputational damage, restrictions on our ability to process information and allegations by our clients that we have not performed our contractual obligations.

In connection with our entry into the China JV for the manufacturing, sales and marketing of our products into China, we may be exposed to the additional risks of doing business in China. Our success in the Chinese markets may be adversely affected by China’s continuously evolving laws and regulations, including those relating to taxation, import and export tariffs, currency controls, anti-corruption, export control and environmental laws and regulations, indigenous innovation, and intellectual property rights and enforcement of those rights. Enforcement of existing laws or agreements may be inconsistent. In addition, changes in the political environment, governmental policies or United States-China relations could result in revisions to laws or regulations or their interpretation and enforcement, exposure of our proprietary intellectual property, increased taxation, restrictions on imports, import duties or currency revaluations, which could have an adverse effect on our business plans and operating results.

In addition to the foregoing, our business and operations could be materially and adversely affected by the effects of a health epidemic or widespread outbreak of a contagious disease, including the recent outbreak of the respiratory illness caused by a coronavirus strain (COVID-19) first identified in Wuhan, Hubei Province, China, or any other outbreak of contagious diseases, and other adverse public health developments. These effects could include disruptions or restrictions on our employees’ ability to travel, as well as temporary closures of our facilities or the facilities of our customers, suppliers, or other vendors in our supply chain, including those associated with our China JV. The significance of the impact of the COVID-19 outbreak to us remains unclear at this time; however, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Interruptions in production, in particular at any of the manufacturing facilities used to create our products, could increase our costs and reduce our sales.

U.S. regulatory review may result in delays, restrictions or other adverse impacts on the operations of our China JV.

In connection with the China JV, the Joint Venture Partners and their affiliates agreed to purchase an aggregate of 3,067,485 shares of our common stock at a price per share equal to $1.63, for aggregate proceeds to us of $5.0 million (the "JV Share Purchase").

In February 2019, the Department of Defense, or the DOD, inquired about certain aspects of the China JV, including about our products’ classification under U.S. export control regimes and whether the China JV parties intended to notify the Committee on Foreign Investment in the United States, or CFIUS, of the China JV. In July 2019, the Treasury Department - as the chair of CFIUS - made similar inquiries about the China JV and the JV Share Purchase.

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CFIUS has broad discretion to assert jurisdiction to review foreign investments in U.S. businesses, and to restrict the ownership thereof and the transfer of technology therefrom to foreign investors, including where CFIUS believes that such foreign investment may present potential national security risks to the United States. CFIUS may take actions if CFIUS determines that the China JV and related investment are covered by its regulations and identifies any national security concerns with the transactions. CFIUS’s actions could include the imposition of measures designed to mitigate and resolve any such national security concerns. Such mitigation measures may include, but not necessarily be limited to, a requirement that we obtain prior approval from the U.S. government to transfer certain technology related to our products, which would present a risk to the operations of the China JV. If CFIUS were to determine that it cannot mitigate any identified national security concerns, CFIUS could recommend that the President of the United States compel the China JV partners to abandon or unwind the China JV or the JV Share Purchase.

In December 2019, the Company and the China JV submitted a joint voluntary notice to CFIUS to review the transaction. CFIUS has determined that the establishment of the China JV is subject to CFIUS’s jurisdiction, and pending completion of its investigation, CFIUS imposed interim measures that temporarily suspend the Company’s contributions to the China JV and other integration activities. The Company continues to engage with CFIUS to address its concerns, and expects CFIUS review and investigation, as well as its assessment of whether its concerns can be mitigated, to end by April 13, 2020.

In addition to CFIUS, and notwithstanding our views regarding the classifications of our products under U.S. export control regimes, the Department of Commerce has authority in certain circumstances under the Export Control Reform Act and the Export Administration Regulations to inform parties that a license is required to export items or technology to certain destinations, for reasons that include risk that the technology may be transferred for proscribed end uses. In the event the U.S. government exercises such authority over our products, it may delay and ultimately restrict our ability to transfer manufacturing technology to China JV.

Any of the foregoing actions by the U.S. government could materially and adversely affect our China JV, and therefore, our business, financial condition and operating results.

If we are unable to meet and overcome these challenges, then our international operations may not be successful, which could adversely affect our net sales, results of operations and financial condition and limit our growth.

The disruption or loss of relationships with vendors, suppliers and distributors for the components used in the manufacturing of our products or for sale and marketing of our products in certain territories could materially adversely affect our business.

Our ability to manufacture and market our products successfully is dependent on relationships with third-party vendors, suppliers and distributors. Although most of the raw materials that we use to manufacture our products are readily available from a number of suppliers, we generally procure raw materials and components through purchase orders, with no guaranteed supply arrangements. Our inability to obtain sufficient quantities of various components, if and as required in the future, may subject us to:



	·	delays in delivery or shortages in components that could interrupt and delay manufacturing and result in cancellations of orders for our products;
	·	increased component prices and supply delays as we establish alternative suppliers;
	·	inability to develop alternative sources for product components;
	·	required modifications of our products, which may cause delays in product shipments, increased manufacturing costs, and increased product prices; and
	·	increased inventory costs as we hold more inventory than we otherwise might in order to avoid problems from shortages or discontinuance, which may result in write-offs if we are unable to use all such products in the future.

In addition, failure of any one supplier’s components could result in a product recall, which could materially adversely affect our business, operations and cash flows.

We are beginning the process of establishing a JV to streamline the supply chain for released products in China. If we are unable to build the local supply chains, it could have a material adverse effect on our business, results of operations and financial condition.

In non-German-speaking European countries, other EMEA countries and Central and South American countries, we rely on independent distributors to distribute and assist us with the marketing and sale of our products. These distributors are our principal customers, and revenue growth will depend in large part on our success in establishing and maintaining this sales and distribution channel. However, there can be no assurance that our distributors will be successful in selling our products to end users, or will focus adequate resources on selling them, and they may not continue to purchase or market our products for a number of reasons.

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We may be unable to manage our growth and entry into new business areas.

If demand for our exoskeleton products exceeds our capacity to provide services timely and efficiently, then we may need to expand our operations accordingly and swiftly. Our management believes that establishing industry leadership will require us to:



	·	test, introduce and develop new products and services including enhancements to our existing products;
	·	develop and expand the breadth of products and services offered;
	·	develop and expand our market presence through relationships with third parties; and
	·	generate satisfactory revenues from such expanded products or services to fund the foregoing requirements while obtaining and maintaining satisfactory profit margins.

To be able to expand our operations in a cost-effective or timely manner and increase the overall market acceptance of our products and services in this manner, we will need additional capital and technical and managerial human resources. These additional resources may not be available to us. Our failure to timely and efficiently expand our operations and successfully achieve the four requirements listed above could have a material adverse effect on our business, results of operations and financial condition.

The acquisition of other companies, businesses, or technologies could result in operating difficulties, dilution, and other harmful consequences.

We may selectively pursue strategic acquisitions, any of which could be material to our business, operating results, and financial condition. Future acquisitions could divert management’s time and focus from operating our business. In addition, integrating an acquired company, business or technology is risky and may result in unforeseen operating difficulties and expenditures associated with integrating employees from the acquired company into our organization and integrating each company’s accounting, management information, human resources and other administrative systems to permit effective management. The anticipated benefits of future acquisitions may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all.

We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure

Our operating results are subject to volatility due to fluctuations in foreign currency exchange rates. Our primary exposure to fluctuations in foreign currency exchange rates relates to revenue and operating expenses denominated in currencies other than the U.S. dollar. The weakening of foreign currencies relative to the U.S. dollar adversely affects our foreign currency-denominated revenue. In the past, we have not hedged our exposures to foreign currencies or entered into any other derivative instruments and we have no current plans to do so. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for additional discussion on the impact of foreign exchange risk.

Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.

Natural disasters, terrorist activities, military conflict and other business disruptions could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters are located in California, a seismically active region. A natural disaster in any of our major markets in North America or Europe could have a material adverse impact on our operations, operating results and financial condition. Further, any unanticipated business disruption caused by Internet security threats, damage to global communication networks or otherwise could have a material adverse impact on our operating results.

Risks Related to our Financial Condition

We have a history of losses and we may not achieve or sustain profitability in the future. These factors raise substantial doubt about our ability to continue as a going concern.

We have incurred losses in each fiscal year since our incorporation in 2005. Our net losses were $12.1 million and $27.0 million for the years ended December 31, 2019 and 2018, respectively (with gains from a decrease on common stock purchase warrant liabilities due to a drop in our stock price accounting for a $6.4 million decrease on net losses in 2019). As of December 31, 2019 and 2018, we had an accumulated deficit of $183.3 million and $171.1 million, respectively. Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern, and as a result our independent registered public accounting firm included an explanatory paragraph regarding the same in its report to this Annual Report on Form 10-K. Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of our common stock and we may have

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a more difficult time obtaining financing in the future.

Our future profitability is dependent upon our ability to successfully execute our business plan. We can provide no assurance regarding when, if ever, we will become profitable. Even if we do become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. Accordingly, we may continue to generate losses for the foreseeable future and, in the extreme case, discontinue operations.

We will require significant additional financing to fund our operations and service our debt. If we are unable to obtain additional financing on acceptable terms, we may have to curtail our growth or cease our development plans and operations.

The operation of our business and our growth efforts will require significant cash outlays and advance capital equipment expenditures and commitments. We will also need to repay or refinance approximately $2.8 million in outstanding indebtedness.

We have been largely dependent on capital raised through the sale of equity securities in various public and private offerings, and going forward will be largely dependent on capital raised in any future offerings to implement our business plan, support our operations and service our debt obligations.

Based upon our current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue offset by incremental increases in expenses related to increased sales and marketing and research and development, and a potential increase in rental activity from our medical device business, we believe that we have sufficient resources to operate in compliance with our debt covenants until the end of the third quarter of 2020. We will require significant additional financing. We intend to pursue opportunities to obtain additional financing in the future through public or private equity and/or debt financings, corporate collaborations, or warrant solicitations.

We anticipate for the foreseeable future that cash on hand and cash generated from operations will not be sufficient to meet our cash requirements, and that we will need to raise additional capital through investments to fund our operations and growth. We cannot assure you that we will be able to raise additional working or growth capital as needed on terms acceptable to us, if at all. In addition, we may be subject to limitations on our ability to raise financing in private offerings as a result of volume limitations under Nasdaq rules with respect to sales of securities by Nasdaq-listed companies, as well as limitations on our ability to utilize our shelf registration on Form S-3 to raise financing in public or other registered offerings due to rules applicable to public companies with a public float below $75 million. If we are required to file a new registration statement on another form, we may incur additional costs and/or be subject to delays due to review by the SEC Staff. If we are unable to raise capital as needed, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely.

Additionally, our only loan agreement contains financial covenants, including a requirement of minimum cash on hand equivalent to three months of cash burn. Breach of covenants included in our loan agreement could result in the lenders demanding payment of the unpaid principal and interest balances. If we fail to pay any principal or interest under our indebtedness when due, or are otherwise in violation of financial covenants under our loan agreement, it may result in the acceleration of our indebtedness, which would have a material adverse effect upon our business and would likely require us to seek to renegotiate the loan agreement with our lender or obtain a waiver from the lender, as we may not have sufficient funds to repay that indebtedness or to comply with our financial covenants. In the event that any such renegotiations are not successful or such waivers cannot be obtained on terms commercially acceptable to us, we may have to liquidate our assets at below-fair value prices, seek bankruptcy protection or implement other arrangements, any of which would or may be material adverse to our business, financial condition, assets and operations.

We may not be able to reduce the cost to manufacture or service our products as planned.

Our business plan assumes that exoskeletons can be manufactured more inexpensively than they are currently being manufactured. However, we have not yet found a way to significantly reduce the manufacturing cost of our products and doing so may prove more difficult than expected or even impossible. For example, if expectations for greater functionality of the products drive costs up as other factors drive costs down, the result may be that the overall cost of manufacturing the product stays the same or even increases. Likewise, we currently provide service and support of our products for our customers at a high standard (both in and out of warranty), and plan on continuing to do so. Our business plan also assumes that as we continue to improve our product, we achieve improved levels of product reliability and decreased service cost and frequency, which also may prove more difficult than expected.

We may not be able to leverage our cost structure or achieve better margins.

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Due to the early stage of our commercial efforts, and particularly the early stage of customer adoption of our products, our current sales and marketing, research and development, and general and administrative expenses are each a higher percentage of sales than they will need to be for us to reach profitability. While we do expect these expenses to grow as our business grows, we also expect these expenses to decline as a percentage of revenues over time. If we are unable to leverage these costs and grow revenues at a greater pace than these operating expenses as we expect, we will not be able to achieve viable operating margins and profitability.

Our reported financial results may be adversely affected by changes in our accounting policies or in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. The accounting principles and accompanying accounting pronouncements, implementation guidelines and interpretations for many aspects of our business, including revenue recognition, are highly complex and involve subjective judgments. Some of these policies require the use of estimates and assumptions that may affect the value of our assets and liabilities, and financial results. We may be required or determine that it is appropriate to change our accounting policies or the manner in which they are implemented as circumstances change and additional information becomes known. A change in applicable rules, their interpretation, or their application could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

Changes in tax laws or exposure to additional income tax liabilities could have a material adverse impact on our financial condition and results of operations.

We are subject to income taxes as well as non-income based taxes, in both the U.S. and various jurisdictions outside the U.S. On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. This law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21%, limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. We are currently assessing the impact of this legislation, but currently anticipates no major short-term impact.

In addition, we are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes and penalties. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our consolidated earnings and financial condition.

Risks Related to our Common Stock

We may raise additional funds in the future through the issuances of equity securities or debt, which funding may be dilutive to stockholders or impose operational restrictions on us.

We may need to raise additional capital through the sale of equity securities or the issuance of short- and long-term debt. If we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution. If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Further, prices at which new investors would be willing to purchase our securities may be lower than the price at which existing stockholders purchased their shares, which may create downward pressure on the trading price of the common stock. In addition, the terms of any new securities may include liquidation or other preferences that may adversely affect the rights of our existing stockholders.

Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity securities or debt that we issue may have rights, preferences and privileges senior to those of the securities held by our stockholders.

The ability of our Board of Directors to issue additional stock may prevent us from making more difficult transactions, including a sale or merger.

Our Board of Directors is authorized to issue up to 10 million shares of preferred stock with powers, rights and preferences designated by it. Shares of voting or convertible preferred stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of us. The ability of the Board of Directors to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage

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an attempt by a party to acquire control of us by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board of Directors could make it more difficult to remove incumbent officers and directors from office even if such change were to be favorable to stockholders generally.

Being a public company is expensive and administratively burdensome.

As a public reporting company, we are subject to the information and reporting requirements of the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended (the "Exchange Act"), and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires the time and attention of our Board of Directors and management, and increases our expenses. Among other things, we are required to:



	·	maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
	·	maintain policies relating to disclosure controls and procedures;
	·	prepare and distribute periodic reports in compliance with our obligations under federal securities laws;
	·	institute a more comprehensive compliance function, including with respect to corporate governance; and
	·	involve, to a greater degree, our outside legal counsel and accountants in the above activities.

The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the attention of management. We anticipate that these costs and compliance initiatives will increase as a result of the fact that we ceased to be an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, as of December 31, 2017. In particular, we are now subject to certain disclosure requirements that are applicable to other public companies that had not been applicable to us as an emerging growth company. These requirements include:



	·	compliance with the auditor attestation requirements in the assessment of our internal control over financial reporting;
	·	compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
	·	full disclosure and analysis obligations regarding executive compensation; and
	·	compliance with regulatory requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our Board of Directors, particularly directors willing to serve on our audit committee.

Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include in our annual reports on Form 10-K and quarterly reports on Form 10-Q an assessment by management of the effectiveness of our internal control over financial reporting. We previously reported a material weakness in our information technology general controls as of December 31, 2016, and as a result, determined that our internal control over financial reporting was not effective at December 31, 2016.

As a natural course of business, management has, over the course of 2017 and 2018, been working to further strengthen our internal controls. Specifically, we have increased segregation of duties and implemented a more robust accounting and enterprise resource planning system (which became operational in October 2017). While we believe that the policies, processes and procedures we have put in place will be sufficient to render our internal controls over financial reporting effective, our initiatives may not prove successful and management may not be able to conclude that our internal control over financial reporting is effective. Furthermore, even if management were to reach such a conclusion, if our independent registered public accounting firm is not satisfied with the adequacy of our internal control over financial reporting, or if the independent auditors interpret the requirements, rules or

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regulations differently than we do, then (if required in the future) they may decline to attest to management’s assessment or may issue a report that is qualified. Any of these events could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively affect the price of our common stock

In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts.

We have never paid and do not intend to pay cash dividends.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of common stock. If we do not pay dividends, our common stock may be less valuable because a return on investment will only occur if our stock price appreciates

The market price of our common stock has been, and may continue to be, highly volatile, and such volatility could cause the market price of our common stock to decrease and could cause you to lose some or all of your investment in our common stock.

During the period from our initial listing on Nasdaq on August 9, 2016 through December 31, 2019, the closing price of our common stock fluctuated from a high of $6.21 per share to a low of $0.35 per share, and our stock price continues to fluctuate. The market price of our common stock may continue to fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:



	·	our ability to grow our revenue and customer base;
	·	the announcement of new products or product enhancements by us or our competitors;
	·	developments concerning regulatory oversight and approvals;
	·	variations in our and our competitors’ results of operations;
	·	changes in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;
	·	successes or challenges in our collaborative arrangements or alternative funding sources;
	·	developments in the rehabilitation and industrial robotics markets;
	·	the results of product liability or intellectual property lawsuits;
	·	future issuances of common stock or other securities;
	·	the addition or departure of key personnel;
	·	announcements by us or our competitors of acquisitions, investments or strategic alliances; and
	·	general market conditions and other factors, including factors unrelated to our operating performance.

Trading of our common stock is limited, and trading restrictions imposed on us by applicable regulations may further reduce trading in our common stock, making it difficult for our stockholders to sell their shares; and future sales of common stock could reduce our stock price.

Trading of our common stock is currently conducted on Nasdaq. The liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but also as it may be adversely affected by delays in the timing of transactions and low coverage by research analysts’ the media, if at all. These factors may result in different prices for our common stock than might otherwise be obtained in a more liquid market and could also result in a larger spread between the bid and asked prices for our common stock. In addition, without a large public float, our common stock is less liquid than the stock of companies with broader public ownership, and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his or her investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future, if at all.

Sales by stockholders of substantial amounts of our shares of common stock, the issuance of new shares of common stock by us or the perception that these sales may occur in the future could materially and adversely affect the market price of our common stock, and you may lose all or a portion of your investment in our common stock.

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Our stock price does not meet and may in the future fail to meet the continued listing requirements of the Nasdaq Capital Market. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from the Nasdaq Capital Market.

As previously disclosed in our Current Report on Form 8-K filed on September 20, 2019, we received a notification letter from the Listing Qualifications Department of the Nasdaq Capital Market indicating that as of September 16, 2019 we were not in compliance with the $1.00 minimum closing bid price requirement. We have been given a grace period of 180 days from the notification, or until March 16, 2020, to regain compliance, by having the closing bid price of our common stock exceed $1.00 for a minimum of ten (10) consecutive trading days during the grace period. If we do not regain compliance by March 16, 2020, we may be eligible for a second 180 day compliance period, provided that, on such date, we meet the continued listing requirement for market value of publicly held shares and all other applicable initial listing requirements for the Nasdaq Capital Market (other than the minimum closing bid price requirement) and we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

There is no assurance, however, that we will regain compliance during the grace period or be able to maintain compliance with Nasdaq’s listing requirements in the future. If we are not able to regain compliance during the grace period, or any extension of the grace period for which we may be eligible, Nasdaq will notify us that our common stock will be suspended and subject to delisting. If we are subject to delisting, we may appeal Nasdaq’s determination to delist to a hearings panel. During any appeal process, shares of our common stock would continue to trade on Nasdaq. If our common stock were delisted from Nasdaq, among other things, it would likely lead to a number of negative implications, including an adverse effect on the price of our common stock, reduced liquidity in our common stock, the loss of federal preemption of state securities laws with respect to shares issued in future offerings, greater difficulty in obtaining financing, potential loss of confidence by employees, loss of institutional investor interest and fewer business development opportunities. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

Our principal executive offices are currently located at 1414 Harbour Way South, Suite 1201, Richmond, CA 94804, where we leased approximately 45,000 square feet. The Richmond office serves as headquarters for our medical device and industrial device sales segments. In addition, we entered into a 5-year operating lease agreement in July 2017 to rent approximately 1,400 square feet of office space at Friesenweg 4, House 13, 4th floor, 22763 Hamburg, Germany for our European headquarters. Until April 2019, we also had an unoccupied leased sales office in Freiburg, Germany which had an original lease term expiring in December 2020. In April 2019, we entered an agreement with the lessor of the Freiburg office releasing us from future lease payments after April 30, 2019.

We do not own any real property.

Item 3. LEGAL PROCEEDINGS

In December 2017, we disclosed that management had identified a material weakness in our internal controls over financial reporting due to a deficiency in our information technology (IT) general controls and segregation of duties. We have since implemented a more robust accounting and enterprise resource planning system. In response to our announcement, on February 5, 2018, a shareholder filed a derivative action in Nevada state court: D’Arcy v. Looby et al. (Clark County, Nevada), Case No. a-18-768970-B (filed Feb. 5, 2018). The complaint alleged state law claims of breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. On March 1, 2019, we filed motions to dismiss the complaint. In lieu of defending the complaint, plaintiff filed an amended complaint on May 28, 2019. On July 2, 2019, we filed motions to dismiss the amended complaint. In lieu of defending the amended complaint, plaintiff agreed to voluntarily dismiss this action. On October 17, 2019, following the filing of a joint stipulation by the parties, the court dismissed the action without prejudice. We did not enter into a settlement with plaintiff in connection with the voluntary dismissal and neither plaintiff nor his counsel have received, nor will receive, any form of consideration from us in exchange for the dismissal of the action.

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On July 26, 2018, July 31, 2018, and August 14, 2018, three shareholders filed separate derivative actions in California state court: Elmes v. Peurach et al. (Contra Costa County, California), Case No. CIVMSC18-01470 (filed July 26, 2018); Leung v. Peurach et al. (Contra Costa County, California), Case No. CIVMSC18-01554 (filed July 31, 2018); and Herby v. Hamilton et al. (Contra Costa County, California), Case No. CIVMSC18-01642 (filed August 14, 2018). The Elmes, Leung, and Herby complaints alleged state law claims for breach of fiduciary duties, unjust enrichment, and waste of corporate assets. On October 3, 2018, the court consolidated the Elmes, Leung, and Herby actions, which are now maintained as one action: Elmes v. Peurach et al. (Contra Costa County, California), Case No. CIVMSC18-01470 (filed July 26, 2018). On December 20, 2018, we filed a motion to dismiss the actions. In lieu of defending the complaint, plaintiffs sought to amend the complaint. On April 4, 2019, plaintiffs filed a consolidated complaint in the Elmes action. On May 7, 2019, we filed a motion to dismiss the consolidated complaint. On July 10, 2019, the court issued an order dismissing the consolidated complaint with leave to amend. In lieu of amending the consolidated complaint, plaintiffs agreed to voluntarily dismiss this action. On October 25, 2019, following the filing of a joint stipulation by the parties, the court dismissed the action without prejudice. We did not enter into a settlement with plaintiffs in connection with the voluntary dismissal and neither plaintiffs nor their counsel have received, nor will receive, any form of consideration from us in exchange for the dismissal of the action.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Dividend Policy

Our common stock has been traded on the Nasdaq Capital Market under the symbol “EKSO” since August 9, 2016. Prior to August 9, 2016, our common stock was eligible for quotation and traded on the OTC Market. The quotation of our common stock on the OTC market began on or about January 16, 2014. The closing price of EKSO stock as of February 21, 2020 was $0.38.

As of February 21, 2020, we had approximately 204 stockholders of record of our common stock. This number does not include stockholders whose shares are held in investment accounts by other entities. We believe that the actual number of stockholders is greater than the number of holders of record.

We have never declared or paid cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends, current and anticipated cash needs and other factors the board of directors deems relevant.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K for information regarding securities authorized for issuance under equity compensation plans.

Item 6. SELECTED FINANCIAL DATA

The following table sets forth certain financial data with respect to our business. The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and the consolidated financial statements and related notes thereto in Item 8. The statement of operations data for the years ended December 31, 2019 and 2018, and the balance sheet data as of December 31, 2019 and 2018 are derived from, and are qualified by reference to, the audited consolidated financial statements that are included in this Annual Report. The remaining financial data are derived from audited, consolidated financial statements which are not included in this Annual Report. All share and per share data has been retroactively adjusted to give effect to the one-for-seven reverse stock split in May of 2016. Amounts in the following table are in thousands, except share and per share amounts:



	2019			2018			2017			2016			2015
Statement of Operations Data:
Revenue₍₁₎	$	13,917		$	11,332		$	7,353		$	14,221		$	8,661
Loss from operations	(16,639		)	(27,030		)	(31,612		)	(27,586		)	(21,561		)
Gain on warrant liabilities	6,376			1,063			3,909			4,286			2,505
Net loss	(12,132		)	(26,992		)	(29,122		)	(23,470		)	(19,590		)
Preferred deemed dividend	—			—			—			10,345			4,655
Net loss per share, basic	$	(0.17	)	$	(0.44	)	$	(0.82	)	$	(1.87	)	$	(1.66	)

Balance Sheet Data:
Cash	$	10,872		$	7,655		$	27,813		$	16,846		$	19,552
Total assets	21,915			17,655			37,988			24,425			32,198
Note payable, net	2,740			4,981			6,969			6,789			—
Warrant liability	$	4,307		$	585		$	1,648		$	3,546		$	9,195


(1)	In 2016, we commenced recognition of revenue based on a multiple element approach in which revenue is recognized upon the delivery of the separate elements to the customer. As a result of this change, we recognized EksoHealth revenue previously deferred at December 31, 2015 of $6,517 and associated cost of revenue of $4,159, resulting in additional gross profit, reduction

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in net loss from operations, and reduction of net loss applicable to common stockholders of $2,358, or $0.13 per share, in our consolidated statement of operations and comprehensive loss for the year ended December 31, 2016.

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Annual Report. See also "Cautionary Note Regarding Forward-Looking Statements."

Overview

The following discussion highlights the results of our operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our financial condition and results of operations presented herein. The following discussion and analysis is based on our audited consolidated financial statements contained in this Annual Report on Form 10-K, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.

Operational Highlights


•	In January 2019, we entered into the JV Agreement to develop and serve the exoskeleton market in China and other Asian markets through the China JV and to create a global exoskeleton manufacturing center.


•	In July 2019, we announced the expansion of our medical exoskeleton portfolio with an upper extremity rehabilitation device called EksoUE. Our EksoUE’s wearable upper body exoskeleton 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.

•

In August 2019, we introduced our next generation lower extremity rehabilitation exoskeleton, EksoNR, which succeeds our EksoGT. Our EksoNR, is used as a rehabilitation tool to allow physicians and therapists to rehabilitate patients who have suffered a stroke or spinal cord injury. With its unique features designed specifically for hospitals and its proprietary SmartAssist software, EksoNR allows for the early mobilization of patients, enabling increased endurance during rehabilitation sessions through higher step counts and for longer periods. The intent is to allow the patient’s central nervous system to take advantage of a patient’s neuroplasticity to maximize the patient’s recovery.

•

In October 2019, we entered into a Technology License Agreement, with the China JV pursuant to the terms of the JV Agreement. Pursuant to the Technology License Agreement, we granted a nontransferable, non-sublicensable, irrevocable, and exclusive right and license to patented and non-patented manufacturing technologies involved in the manufacture of certain products for the China JV. In the fourth quarter of 2019, we completed technology transfer for EksoVest (but not transfer of patented technologies).


•	In 2019, we booked a total of 98 EksoGT and EksoNR units, 17 of which were rental units and 25 of which were previously rented units that were converted to sales.

•

In February 2020, we announced the worldwide launch of our upgraded EksoPulse platform, an innovative cloud-based information technology platform that measures and analyzes progress using the EksoNR robotic exoskeleton. The improved analytics system provides an easy-to-use dashboard to chart activity in rehabilitation sessions, enhancing the clinician, institutional, and patient experience of the most clinically used exoskeleton.

2019 Financing Activities


•	In January 2019, and in connection with the China JV, one of the Joint Venture Partner affiliates purchased an aggregate of 3,067,485 shares of our common stock at a price per share equal to $1.63, for aggregate proceeds to us of $5.0 million.


•	In May 2019, we sold 6,666,667 shares of our common stock and warrants to purchase up to 6,666,667 shares of our common stock, or May 2019 Warrants, at a combined public offering price of $1.50 per share for proceeds, net of expenses and underwriting discount and commission, of $9.0 million.

•

In December 2019, we sold 11,111,116 shares of our common stock and warrants to purchase up to 8,333,337 shares of our common stock, or December 2019 Warrants, at a combined price of $0.45 per share for proceeds, net of placement agent fees and expenses, of $4.2 million. Additional details discussed in Note 13 in the notes to our consolidated financial statements, which appear under Item 8 in this Annual Report on Form 10-K, under the caption Capitalization and Equity Structure – Warrants.

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•	Since inception to December 31, 2019, we have sold 4.2 million shares of our common stock under our “at the market offering” program at an average price of $1.86 per share, for aggregate proceeds of $7.2 million, net of commission and issuance costs, to us.

Business

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 leased 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

Our latest product, the EksoNR, is a wearable bionic suit that allows our hospital and rehabilitation customers to provide in-patients and out-patients with SCI and hemiplegia due to stroke the ability to stand and walk over ground with a full weight-bearing, reciprocal gait using a cane, crutches or a walker under the supervision of a physical therapist. Walking is achieved by a user shifting their weight, balancing to walk as an unimpaired person would and initiating steps when safe to progress forward. If needed, some patients utilize sensors in the device which in turn initiate steps. Battery-powered motors drive the legs, detecting the deficient neuromuscular function and providing the level of assistance necessary for a user to complete their step. Users can expect to walk with aid from the device the first time they put on the EksoNR exoskeleton (after passing an assessment). Physical therapists can transfer patients to or from their wheelchair and don or remove the EksoNR in less than ten minutes.

The EksoNR is used by customers in both in-patient and out-patient settings. Our customers believe that for patients with some motor ability preserved (for example, after a stroke or an incomplete SCI), the EksoNR exoskeleton offers unique benefits to help therapists teach proper step patterns and weight shifts, allowing patients to potentially mobilize earlier and ultimately to walk again. By allowing individuals to stand and walk in a full weight-bearing setting, early clinical evidence is also beginning to show that EksoNR may offer potential healthcare benefits (including for patients with complete SCI) including reducing post-injury medical costs through reduction in secondary complications such as pressure sores, urinary tract infections, bowel problems, pneumonia and other respiratory issues, bone loss/osteoporosis, cardiovascular disease and psychological disorders.

In 2019, we entered the market for upper extremity rehabilitation devices with the EksoUE. EksoUE is a wearable assistive device that helps reduce the effect of gravity on a patient’s shoulders and arms. While worn, EksoUE allows longer, more intense rehabilitation sessions by reducing fatigue, while also allowing the patient to achieve a larger active range of motion. Similar to EksoNR, EksoUE is a tool used by trained clinicians, primarily physical and occupational therapists, during rehabilitation sessions. Based on the same technology that is used in our industrial products, EksoUE uses a passive (non-motorized) design, which avoids the need to charge or replace batteries and other electrical systems.

EksoUE shipments in 2019 have been to key rehabilitation centers for clinical feedback. In 2020, we plan to launch EksoUE in the broader rehabilitation market in the U.S., EMEA and APAC.

EksoWorks

Our EksoVest is an upper body exoskeleton that elevates and supports a worker's arms to assist them with tasks ranging from chest height to overhead. In 2019, we are focusing on increasing sales of the EksoVest and the support arm, EksoZeroG, by pursuing alternative channels, such as rental agreements with construction equipment and heavy tool providers and working with automotive and related manufacturers to roll out our product(s) globally within their assembly operations. In addition, we believe that there

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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.

Critical Accounting Policies, Estimates, and Judgments

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations.

Our EksoHealth segment revenue is primarily generated through the sale and rental of our EksoNR and associated software (SmartAssist and VariableAssist), sale of accessories, and support and maintenance contracts (Ekso Care). Revenue from EksoHealth sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility for sales of our EksoNR, software, and accessories. Ekso Care support and maintenance contracts extend coverage beyond our standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. We receive payment at the inception of the contract and recognize revenue over the term of the agreement. Revenue from medical device rentals is recognized over the lease term, typically over 12 months.

Our EksoWorks segment revenue is generated by the sales of our EksoVest and our EksoZeroG. Revenue from EksoWorks device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility.

Inventory valuation

Inventories are recorded at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress, or WIP. Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. We periodically evaluate the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge to the consolidated statements of operations and comprehensive loss. Our estimate of write-downs for excess and obsolete inventory is based on a detailed analysis of on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of an inventory reserve.

Stock-based Compensation

We measure stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes option-pricing model, or the Black-Scholes Model, and recognize the fair value on a straight-line basis over the requisite service periods of the awards.

Our determination of the fair value of stock options on the date of grant using the Black-Scholes Model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, we estimate the expected term of options granted by taking the average of the vesting term and the contractual term of the option.

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We have, from time to time, modified the terms of stock options granted to our employees. We account for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value based measure of the modified award on the date of modification over the fair value of the original award immediately before the modification.

Warrant Valuation

We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash.

Where there is a possibility that we may have to settle warrants in cash, we estimate the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Black-Scholes option-pricing model (the “Black-Scholes Model”) and the Binomial Lattice model (the “Lattice Model”). The Black-Scholes Model requires inputs, such as the expected volatility, expected term, exercise price, risk-free interest rate, and the value of the underlying security. The Lattice Model provides for assumptions regarding expected volatility, expected term, exercise price, risk-free interest rates, the value of the underlying security, and the probability of and likely timing of a specific event within the period to maturity. These values are subject to a significant degree of judgment on our part. Our common stock price represents a significant input that affects the valuation of our warrants.

Business Combinations

We account for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification, or ASC, 805, Business Combinations, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one-year from the acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

Contingent consideration, if any, is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in our consolidated statement of operations and comprehensive loss.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

Going Concern

We assess our ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40, Presentation of Financial Statements – Going Concern. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern.

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Comparison of the year ended December 31, 2019 to the year ended December 31, 2018 (dollars in thousands):



	Years ended December 31,
	2019			2018			Change			% Change

Revenue	$	13,917		$	11,332		$	2,585		23	%
Cost of revenue	7,153			7,023			130			2	%
Gross profit	6,764			4,309			2,455			57	%
Gross profit %	49		%	38		%

Operating expenses:
Sales and marketing	11,398			13,827			(2,429		)	(18	)%
Research and development	4,596			5,847			(1,251		)	(21	)%
General and administrative	7,409			11,665			(4,256		)	(36	)%
Total operating expenses	23,403			31,339			(7,936		)	(25	)%

Loss from operations	(16,639		)	(27,030		)	10,391			(38	)%

Other income, net:
Interest expense	(384		)	(600		)	216			(36	)%
Finance cost associated with warrant issuance	(1,096		)	—			(1,096		)	nm⁽¹⁾
Gain on warrant liabilities	6,376			1,063			5,313			500	%
Loss on modification of warrants	(257		)	—			(257		)	nm⁽¹⁾
Other expense, net	(132		)	(425		)	293			(69	)%
Total other income, net	4,507			38			4,469			11,761	%

Net loss	$	(12,132	)	$	(26,992	)	$	14,860		(55	)%

(1) Not meaningful

Revenue

Revenue increased $2.6 million, or 23%, for the year ended December 31, 2019, compared to the same period of 2018. This increase was comprised of a $3.1 million increase in EksoHealth revenue due to an increased volume of device sales, including a significant increase in conversion of device rentals into sales, partially offset by a $0.5 million decrease in EksoWorks revenue primarily due to a decrease in volume of device sales.

Gross Profit

Gross profit increased $2.5 million, or 57%, for the year ended December 31, 2019, compared to the same period of 2018, primarily attributable to our EksoHealth business. We achieved higher average selling prices and lower production costs for our EksoGT and EksoNR devices.

Operating Expenses

Sales and marketing expenses decreased $2.4 million, or 18%, for the year ended December 31, 2019, compared to the same period of 2018, primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with the departure of the former president of our EksoWorks business unit, our chief marketing officer and other marketing employees, a decrease in advertising and trade show activities, a decrease in clinical trial activities, and the absence of amortization expense related to intangible assets as intangible assets were fully amortized by December 31, 2018. The decrease in sales and marketing expenses were partially offset by an increase in commissions associated with the higher level of sales in 2019.

Research and development expenses decreased $1.3 million, or 21%, for the year ended December 31, 2019, compared to the same period of 2018, primarily due to lower employee compensation expense from decreased headcount in the EksoWorks business unit.

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General and administrative expenses decreased $4.3 million, or 36%, for the year ended December 31, 2019, compared to the same period of 2018, primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with former executive officers, lower external consulting costs associated with our business development activities in China, lower compensation expense from decreased headcount, and lower legal expenses.

Other Income, Net

Gain on revaluation of warrant liabilities of $6.4 million for the year ended December 31, 2019, related to warrants issued in 2019 and 2015. Gain on revaluation of warrant liabilities of $1.1 million for the year ended December 31, 2018, related to warrants issued in 2015. Gains and losses on revaluation of warrants are primarily driven by changes in our stock price.

Loss on modification of warrants of $0.3 million for the year ended December 31, 2019, was due to the reduction of the exercise price of the 2015 Warrants (refer to Note 13. Capitalization and Equity Structure in the notes to our consolidated financial statements). There was no comparable amount during the same period in 2018.

Warrant issuance expense of $1.1 million for the year ended December 31, 2019 was recorded in connection with our underwritten common stock and warrant financing in May 2019 and December 2019. We incurred $1.7 million in direct financing costs, which were allocated on a relative fair value basis between the common stock and warrant issuances, of which $1.1 million was allocated to warrants and expensed immediately. There was no comparable amount of warrant issuance expense for the same period in 2018.

Other expense, net decreased $0.3 million, or 69%, for the year ended December 31, 2019, compared to the same period of 2018, due to unrealized gains and losses on foreign currency revaluations of our inter-company monetary assets and liabilities.

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 to 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

At December 31, 2019, we had working capital of $11.0 million, compared to working capital of $4.9 million at December 31, 2018. The increase in working capital is primarily due to higher cash balance from equity financings and an increase in accounts receivable due to an increase in sales. Our cash and cash equivalents as of December 31, 2019 consisted of bank deposits with third party financial institutions. As of December 31, 2019, of our $10.9 million of cash, $10.2 million was held domestically while $0.7 million was held by foreign subsidiaries.

As of December 31, 2019, we had an accumulated deficit of $183.3 million and cash on hand of $10.9 million. Largely as a result of significant research and development activities related to our advanced technology and commercialization of this technology into our medical device business, we have incurred significant operating losses and negative cash flows from operations since inception. We have incurred net losses of $12.1 million and $27.0 million for the years ended December 31, 2019 and 2018, respectively (with gains from a decrease on common stock purchase warrant liabilities due to a drop in our stock price accounting for a $6.4 million decrease in net losses as of December 31, 2019). In the year ended December 31, 2019, we used $15.8 million of cash in our operations.

As noted in Note 9 in the notes to our consolidated financial statements under the caption Long-Term Debt, borrowings under our long-term debt agreement have a requirement of minimum cash on hand equivalent to three months of cash burn. As of December 31, 2019, the most recent determination of this restriction, $3.6 million of cash must remain as unrestricted, with such amounts to be re-computed at each month end. After considering cash restrictions, effective unrestricted cash as of December 31, 2019 is estimated to be $7.3 million. Based on current forecasted amounts, our cash on hand will not be sufficient to satisfy our operations for the next twelve months from the date of issuance of these consolidated financial statements, which raises substantial doubt about our ability to continue as a going concern.

Based upon our current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue offset by incremental increases in expenses related to increased sales and marketing, we believe that we have sufficient resources to operate in compliance with our debt covenants until the end of the third quarter of 2020.While we will require significant additional financing, our actual capital requirements may vary significantly and will depend on many factors.

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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.

We are actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings, corporate collaborations and government grants or other funding. Sales of additional equity securities by us could result in the dilution of the interests of our existing stockholders. Our use of any government grants or funds may require us to give preferential licensing terms to such source of funding, or to commit to conduct operations in certain jurisdictions. 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 for the periods stated (in thousands):



	Years ended December 31,
	2019			2018
Cash, beginning of period	$	7,655		$	27,813
Net cash used in operating activities	(15,772		)	(22,165		)
Net cash used in investing activities	(60		)	(131		)
Net cash provided by financing activities	19,039			2,273
Effect of exchange rate changes on cash	10			(135		)
Cash, end of period	$	10,872		$	7,655

Net Cash Used in Operating Activities

Net cash used in operations decreased $6.4 million, or 29%, for the year ended December 31, 2019, compared to the same period of 2018, primarily due to a decrease in employee-related costs as a result of lower average headcount, lower legal costs, a reduction in inventory, and a decrease in advertising, trade show, and clinical trial activities.

Net Cash Used in Investing Activities

Net cash used in investing activities decreased $0.1 million, or 54%, during the year ended December 31, 2019, compared to the same period of 2018, primarily due to lower hardware and software purchases due to lower headcount.

Net Cash Provided by Financing Activities

Net cash provided by financing activities of $19.0 million for the year ended December 31, 2019 was from the sale of common stock and warrants for net proceeds of $9.0 million in connection with the equity financing in May 2019, net proceeds of $4.2 million with the equity financing in December 2019, net proceeds of $2.8 million from our “at the market offering” program, net proceeds of $5.0 million from equity investors associated with the JV Agreement, and proceeds of $0.2 million from the exercise of stock options, partially offset by aggregate principal payments of $2.4 million against our term loan

Net cash provided by financing activities of $2.3 million for the year ended December 31, 2018 was from the sale of common stock under our "at the market offering" program resulting in cash proceeds of $4.4 million, partially offset by aggregate principal payments of $2.2 million related to our term loan.

Off-Balance Sheet Arrangements

Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of December 31, 2019, we had no such arrangements. There has been no material change in our contractual obligations other than in the ordinary course of business since our fiscal year ended December 31, 2019.

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Contractual Obligations and Commitments

The following table summarizes our outstanding contractual obligations, including interest payments, as of December 31, 2019 and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):



	Payments Due By Period
	Total		Less than one year		1-3 Years		3-5 Years		After 5 Years
Term loan	$	2,878	$	2,437	$	441	$	—	$	—
Facility operating leases	1,278		515		763		—		—
Purchase obligations	709		709		—		—		—
Capital lease	22		22		—		—		—
Total	$	4,887	$	3,683	$	1,204	$	—	$	—

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 the U.S. government. In the event of a sublicense, we will owe 21% of license fees and must pass through 1% of the sub-licensee’s net sales of products sold to entities other than the U.S. government. The license agreements also stipulate minimum annual royalties of $50,000 per year.

In connection with our acquisition of Equipois in December 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 will be required to pay 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 $0.7 million as of December 31, 2019, 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.

Recent Accounting Pronouncements

See Note 2 in the notes to our consolidated financial statements under the caption Recent Accounting Pronouncements for a discussion of new accounting pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We report our financial results in U.S. dollars; however, we conduct business in foreign countries. For U.S. reporting purposes, we translate all assets and liabilities of our non-U.S. subsidiaries at the period-end exchange rate, equity at historical exchange rates, and revenue and expenses at the average exchange rates in effect during the periods. The net effect of these translation adjustments is shown in the accompanying consolidated financial statements as a component of stockholders’ equity.

We generate a portion of our revenue and collect receivables in foreign currencies outside of the U.S. and, as such, we have foreign currency exposure. Currently, we sell our products mainly in United States dollars, Euros, and Singapore dollars although we may in the future transact business in other currencies. Future fluctuations in the foreign exchange rates of these currencies can result in foreign exchange gains and losses which may impact our financial results. In the past, we have not hedged our exposures to foreign currencies or entered into any other derivative instruments and we have no current plans to do so. For the year ended December 31, 2019, sales denominated in foreign currencies were approximately 29% of total revenue. A hypothetical 10% increase in the United States dollar exchange rate used would have resulted in a $0.4 million decrease to revenues for 2019.

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily to our term loan. The variable interest rate related to our long-term debt is charged at a floating rate based on a U.S. 30-day London Interbank Offered Rate (“LIBOR”) plus 5.41%. A hypothetical 10% change in the LIBOR rate would have an immaterial impact on our annualized interest expense.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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The following financial statements are filed as part of this Annual Report on Form 10-K



	Page Number
Reports of Independent Registered Public Accounting Firm	48

Consolidated Balance Sheets as of December 31, 2019 and 2018	50

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2019 and 2018	51

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019 and 2018	52

Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018	53

Notes to Consolidated Financial Statements	55

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Ekso Bionics Holdings, Inc.

Richmond, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Ekso Bionics Holdings, Inc. as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 27, 2020 expressed an unqualified opinion thereon.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant recurring losses and negative cash flows from operations since inception and an accumulated deficit. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ OUM & CO. LLP

San Francisco, California

February 27, 2020

We have served as the Company's auditor since 2010.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Ekso Bionics Holdings, Inc.

Richmond, California

Opinion on Internal Control over Financial Reporting

We have audited Ekso Bionics Holdings, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and our report dated February 27, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ OUM & CO. LLP

San Francisco, California

February 27, 2020

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Ekso Bionics Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except par value amounts)



	December 31,
	2019			2018
Assets
Current assets:
Cash	$	10,872		$	7,655
Accounts receivable, net of allowances of $121 and $128, respectively	5,208			3,660
Inventories, net	2,489			3,371
Prepaid expenses and other current assets	238			281
Total current assets	18,807			14,967
Property and equipment, net	1,657			2,365
Right-of-use assets	1,084			—
Goodwill	189			189
Other assets	178			134
Total assets	$	21,915		$	17,655

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,903		$	3,156
Accrued liabilities	1,683			3,489
Deferred revenues, current	1,492			1,102
Note payable, current	2,333			2,333
Lease liabilities, current	421			—
Total current liabilities	7,832			10,080
Deferred revenues	1,789			1,495
Note payable	407			2,648
Lease liabilities	711			—
Warrant liabilities	4,307			585
Other non-current liabilities	72			119
Total liabilities	15,118			14,927
Commitments and contingencies (Note 16)
Stockholders' equity:
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued and outstanding at December 31, 2019 and 2018	—			—
Common stock, $0.001 par value; 141,429 shares authorized; 86,920 and 62,963 shares issued and outstanding at December 31, 2019 and 2018, respectively	87			63
Additional paid-in capital	189,938			173,903
Accumulated other comprehensive income (loss)	50			(92		)
Accumulated deficit	(183,278		)	(171,146		)
Total stockholders' equity	6,797			2,728
Total liabilities and stockholders' equity	$	21,915		$	17,655

See accompanying notes to consolidated financial statements

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Ekso Bionics Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)



	Years ended December 31,
	2019			2018
Revenue	$	13,917		$	11,332
Cost of revenue	7,153			7,023
Gross profit	6,764			4,309

Operating expenses:
Sales and marketing	11,398			13,827
Research and development	4,596			5,847
General and administrative	7,409			11,665
Total operating expenses	23,403			31,339

Loss from operations	(16,639		)	(27,030		)

Other income, net:
Interest expense	(384		)	(600		)
Finance cost associated with warrant issuance	(1,096		)	—
Gain on warrant liabilities	6,376			1,063
Loss on modification of warrants	(257		)	—
Other expense, net	(132		)	(425		)
Total other income, net	4,507			38

Net loss	(12,132		)	(26,992		)
Foreign currency translation adjustments	142			248
Comprehensive loss	$	(11,990	)	$	(26,744	)

Basic and diluted net loss per share applicable to common shareholders	$	(0.17	)	$	(0.44	)
Weighted average number of shares outstanding, basic and diluted	71,911			61,229

See accompanying notes to consolidated financial statements

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Ekso Bionics Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)



	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017	—	$	—	59,943	$	60	$	165,825		$	(340	)	$	(144,154	)	$	21,391
Net loss	—	—		—	—		—			—			(26,992		)	(26,992		)
Issuance of common stock under:
ATM program, net of commission & issuance costs of $274	—	—		2,032	2		4,444			—			—			4,446
Equipois sales earn-out	—	—		18	—		28			—			—			28
Equity incentive plan	—	—		571	1		(61		)	—			—			(60		)
Matching contribution to 401(k) plan	—	—		221	—		508			—			—			508
In lieu of cash compensation	—	—		178	—		291			—			—			291
Stock-based compensation expense	—	—		—	—		2,868			—			—			2,868
Foreign currency translation adjustments	—	—		—	—		—			248			—			248
Balance at December 31, 2018	—	—		62,963	63		173,903			(92		)	(171,146		)	2,728
Net loss	—	—		—	—		—			—			(12,132		)	(12,132		)
Issuance of common stock under:
Equity financing, net	—	—		22,995	23		12,421			—			—			12,444
Equipois sales earn-out	—	—		18	—		22			—			—			22
Equity incentive plan	—	—		186	—		228			—			—			228
Matching contribution to 401(k) plan	—	—		141	—		191			—			—			191
In lieu of employee cash bonus	—	—		617	1		918			—			—			919
Stock-based compensation expense	—	—		—	—		2,255			—			—			2,255
Foreign currency translation adjustments	—	—		—	—		—			142			—			142
Balance at December 31, 2019	—	$	—	86,920	$	87	$	189,938		$	50		$	(183,278	)	$	6,797

See accompanying notes to consolidated financial statements

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Ekso Bionics Holdings, Inc.

Consolidated Statement of Cash Flows

(In thousands)



	Years ended December 31,
	2019			2018
Operating activities
Net loss	$	(12,132	)	$	(26,992	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	690			1,515
Provision for excess and obsolete inventories	66			191
Changes in allowance for doubtful accounts	52			(50		)
Loss on disposal of property and equipment	—			126
Amortization of debt discount and accretion of final payment fee	92			152
Change in fair value of contingent liabilities	(28		)	(35		)
Common stock contribution to 401(k) plan	142			212
Stock-based compensation expense	2,255			2,868
Finance cost attributable to issuance of warrants	1,096			—
Gain on revaluation of warrant liabilities	(6,376		)	(1,063		)
Loss on modification of warrants	257			—
Unrealized loss on foreign currency transactions	133			381
Changes in operating assets and liabilities
Accounts receivable	(1,599		)	(850		)
Inventories	893			(1,655		)
Prepaid expense, operating lease right-of-use assets, and other assets, current and noncurrent	369			1,046
Accounts payable	(1,231		)	752
Accrued and lease liabilities	(1,135		)	559
Deferred revenues	684			678
Net cash used in operating activities	(15,772		)	(22,165		)
Investing activities
Acquisition of property and equipment	(60		)	(131		)
Net cash used in investing activities	(60		)	(131		)
Financing activities
Proceeds from issuance of common stock and warrants, net	21,188			4,446
Principal payments on notes payable	(2,377		)	(2,174		)
Proceeds from exercise of stock options	228			1
Net cash provided by financing activities	19,039			2,273
Effect of exchange rate changes on cash	10			(135		)
Net (decrease) increase in cash	3,217			(20,158		)
Cash at beginning of the period	7,655			27,813
Cash at end of the period	$	10,872		$	7,655

Supplemental disclosure of cash flow activities
Cash paid for interest	$	309		$	457
Cash paid for income taxes	$	23		$	18

Supplemental disclosure of non-cash activities
Initial recognition of operating right-of-use assets	$	1,454		$	—

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Initial recognition of operating lease liabilities	$	1,498		$	—
Change in deferred rent associated with ASC 842	$	44		$	—
Transfer of inventory to (from) property and equipment	$	(77	)	$	1,118
Share issuance for common stock contribution to 401(k) plan	$	191		$	508
Share issuance for employee bonuses	$	919		$	291
Share issuance for vesting of restricted stock	$	63		$	1
Equipois sales earn-out	$	22		$	28

See accompanying notes to consolidated financial statements

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

1. Organization

Description of Business

Ekso Bionics Holdings, Inc., or the Company, designs, develops and sells exoskeleton technology to augment human strength, endurance and mobility.

The Company’s exoskeleton technology serves multiple markets and can be used both by able-bodied persons as well as by persons with physical disabilities. The Company has sold and leased devices that (i) enable individuals with neurological conditions affecting gait (stroke and spinal cord injury) to rehabilitate and 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.

Unless otherwise indicated, all dollar and share amounts included in these notes to the consolidated financial statements are in thousands.

Liquidity and Going Concern

As of December 31, 2019, the Company had an accumulated deficit of $183,278. Largely as a result of significant research and development activities related to the development of the Company’s advanced technology and commercialization of this technology into its medical device business, the Company has incurred significant operating losses and negative cash flows from operations since inception. In the year ended December 31, 2019, the Company used $15,772 of cash in its operations.

Cash on hand at December 31, 2019 was $10,872, compared to $7,655 at December 31, 2018. As noted in Note 9, Long-Term Debt, borrowings under the Company's long-term debt agreement have a requirement of minimum cash on hand equivalent to three months of cash burn. As of December 31, 2019, the most recent determination of this restriction, $3,564 of cash must remain as restricted, with such amounts to be re-computed at each month end. After considering cash restrictions, effective unrestricted cash as of December 31, 2019 is estimated to be $7,308. Based on the current forecast, the Company’s cash on hand will not be sufficient to satisfy the Company’s operations for the next twelve months from the date of issuance of these consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern.

On September 16, 2019, the Company received a written notice (the “Deficiency Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that because the closing bid price for the Company’s common stock listed on the Nasdaq Capital Market was below $1.00 per share for 30 consecutive business days, the Company does not meet the minimum closing bid price requirement for continued listing on the Nasdaq Capital Market. Under Nasdaq Listing Rules, the Company has 180 calendar days from the date of the notification, or until March 16, 2020, to regain compliance with Nasdaq Listing Rules. To regain compliance, the closing bid price of the Company’s common stock on the Nasdaq Capital Market must be at least $1.00 per share for a minimum of ten consecutive business days prior to the expiration of such 180-day compliance period. If the Company does not regain compliance by March 16, 2020, the Company may be eligible for a second 180-day compliance period, provided that, on such date, the Company meets the continued listing requirement for market value of publicly held shares and all other applicable initial listing requirements for the Nasdaq Capital Market (other than the minimum closing bid price requirement) and the Company provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. The Company intends to take all reasonable measures available to regain compliance under the Nasdaq Listing Rules and to maintain the listing of its common stock on the Nasdaq Capital Market. The Company will monitor the closing bid price for its common stock between now and March 16, 2020.

Based upon the Company’s current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue, the Company believes it has sufficient resources to operate in compliance with its debt covenants until the end of the third quarter of 2020. While the Company will require significant additional financing, the Company’s actual capital requirements may vary significantly and will depend on many factors. The Company plans to continue its investments in its (i) clinical and 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.

The Company is actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings and corporate collaborations. Sales of additional equity securities by the Company could result in the dilution of the

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

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, the Company may be required to further reduce its discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.

2. Summary of Significant Accounting Policies and Estimates

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States or U.S. GAAP. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. Such reclassifications had no net effect on previously reported financial results. The Company’s investment in a variable interest entity (“VIE”) in which it exercises significant influence, but does not control and is not the primary beneficiary, is accounted for using the equity method. Refer to Note 4. Investment in Unconsolidated Affiliate for more information.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. For the Company, these estimates include, but are not limited to, revenue recognition, deferred revenue and the deferral of the associated costs, the valuation of warrants and employee stock options, future warranty costs, accounting for leases, useful lives assigned to long-lived assets, valuation of inventory, realizability of deferred tax assets, and contingencies. Actual results could differ from those estimates.

Foreign Currency

The assets and liabilities of foreign subsidiaries and equity investments, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date and revenue and expense amounts are translated at average rates during the period, with resulting foreign currency translation adjustments recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Gains and losses from the re-measurement of balances denominated in currencies other than the entities' functional currencies, are recorded in other expense, net in the accompanying consolidated statements of operations and comprehensive loss.

Investment in Unconsolidated Affiliate

Equity investments in which the Company exercises significant influence, but does not control and is not the primary beneficiary, are accounted for using the equity method. Investments accounted for under the equity method of accounting are recorded at cost within other assets on the consolidated balance sheets and subsequently increased or decreased by the Company’s proportionate share of the net income or loss of the investee. The Company records its proportionate share of net income or loss of the investee in net investment income. The Company records its proportionate share of other comprehensive income or loss of the investee as a component of other comprehensive income. Dividends or other equity distributions in excess of the Company’s cumulative equity in earnings of the investee are recorded as a reduction of the investment. Differences in the basis of the investments and the separate net asset values of the investees, if any, are amortized into net income over the remaining useful lives of the underlying assets and liabilities, except for the excess related to goodwill, if any. Refer to Note 4. Investment in Unconsolidated Affiliate for more information.

The Company believes the equity method is an appropriate means for it to recognize increases or decreases measured by U.S. GAAP in the economic resources underlying the investments. Regular evaluation of these investments is appropriate to evaluate any potential need for impairment. The Company uses evidence of a loss in value to identify if an investment has an other-than-temporary decline in value.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

Variable Interest Entities

The Company determines whether it has relationships with entities defined as VIEs in accordance with Accounting Standards Codification ("ASC") 810, Consolidation. Under this guidance, a VIE is consolidated by the variable interest holder that is determined to be the primary beneficiary.

An entity in which the Company holds a variable interest is a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) as a group, the holders of equity investment at risk lack either the direct or indirect ability through voting rights or similar rights to make decisions about an entity’s activities that most significantly impact the entity’s economic performance or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (a) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (b) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether an entity is a VIE at the inception of its variable interest in the entity and upon the occurrence of certain reconsideration events. The Company routinely reassesses whether it is the primary beneficiary of VIEs in which it holds a variable interest.

Accumulated Other Comprehensive Income (Loss)

The Company's accumulated other comprehensive income (loss) consists of the accumulated net unrealized gains or losses on foreign currency translation adjustments. The change in accumulated other comprehensive income (loss) presented on the consolidated balance sheets for the year ended December 31, 2019, is reflected in the table below net of tax:



	Foreign Currency Translation
Balance at December 31, 2018	$	(92	)
Current period other comprehensive income	142
Balance at December 31, 2019	$	50

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents in highly liquid instruments with, and in the custody of, financial institutions with high credit ratings. The Company did not have any cash equivalents or investments in money market funds as of December 31, 2019 and 2018.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains cash accounts in excess of federally insured limits. However, the Company believes it is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held. The Company extends credit to customers in the normal course of business and performs ongoing credit evaluations of its customers. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the consolidated financial statements. The Company does not require collateral from its customers to secure accounts receivable.

Accounts receivable are derived from the sale of products shipped and services performed for customers primarily located in the U.S., Europe and Asia. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectibility and provides an allowance for potential credit losses. The Company has not experienced material losses related to accounts receivable during the years ended December 31, 2019 and 2018. Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S. dollar. The Company does not enter into any foreign currency

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

hedging agreements and is susceptible to gains and losses from foreign currency fluctuations. To date, the Company has not experienced significant gains or losses upon settling contracts denominated in a foreign currency.

At December 31, 2019, the Company had one customer with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable (11%), as compared with one customer at December 31, 2018 (19%).

The Company had one customer with sales of 10% or more of the Company’s total revenue for the year ended December 31, 2019 (15%) as compared with none at December 31, 2018. Refer to Note 17. Segment Disclosures for more information.

Inventories, net

Inventories are recorded at the lower of cost or net realizable value. Cost is computed using the standard cost method, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress ("WIP"). Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge within the consolidated statements of operations and comprehensive loss. The Company's estimate of write-downs for excess and obsolete inventory is based on a detailed analysis which includes on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of an inventory reserve.

Inventories consisted of the following:



	December 31,
	2019		2018
Raw materials	$	2,208	$	1,689
Work in progress	29		331
Finished goods	252		1,351
Inventories, net	$	2,489	$	3,371

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update (“ASU”), No. 2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted the standard effective January 1, 2019.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items, such as initial direct costs paid or incentives received.

Lease expense is recognized over the expected lease term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, lease liabilities current and lease liabilities non-current. As a result, the Company no longer recognizes deferred rent on the balance sheet.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes the lease expense for such leases on a straight-line basis over the lease term.

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally ranging from three to ten years. Leasehold improvements are amortized over the

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

shorter of the estimated useful life or the related term of the lease. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized.

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from the Company’s use or eventual disposition. If estimates of future undiscounted net cash flows are insufficient to recover the carrying value of the assets, the Company will record an impairment loss in the amount by which the carrying value of the assets exceeds the fair value. If the assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the Company will depreciate or amortize the net book value of the assets over the newly determined remaining useful lives. None of the Company’s property and equipment or intangible assets were impaired as of December 31, 2019 and 2018. No impairment loss has been recognized in the years ended December 31, 2019 and 2018.

Goodwill

The Company records goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. The Company performs an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of goodwill. The Company performs impairment tests using a fair value approach when necessary. None of the Company’s goodwill was impaired as of December 31, 2019 and 2018. No impairment loss has been recognized in the years ended December 31, 2019 and 2018.

Warrant Valuation

The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that it may need to settle the warrants in cash.

Where there is a possibility that the Company may have to settle warrants in cash, it estimates the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Black-Scholes option-pricing model (the “Black-Scholes Model”) and the Binomial Lattice model (the “Lattice Model”). The Black-Scholes Model requires inputs, such as the expected volatility, expected term, exercise price, risk-free interest rate, and the value of the underlying security. The Lattice Model provides for assumptions regarding expected volatility, expected term, exercise price, risk-free interest rates, the value of the underlying security, and the probability of and likely timing of a specific event within the period to maturity. These values are subject to a significant degree of the Company’s judgment. The Company’s common stock price represents a significant input that affects the valuation of the warrants.

Business Combinations

The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification or ASC, 805, Business Combinations, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one-year from the acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

Going Concern

The Company assesses its ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40, Presentation of Financial Statements – Going Concern. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Revenue Recognition

The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and rental of the EksoGT and the recently introduced EksoNR, associated software (SmartAssist and VariableAssist), the sale of the EksoUE, the sale of accessories, and the sale of support and maintenance contracts (Ekso Care). Revenue from medical device product sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility for sales of the EksoNR or EksoGT, software and accessories. Ekso Care support and maintenance contracts extend coverage beyond the Company’s standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. The Company receives payment at the inception of the contract and recognizes revenue over the term of the agreement. Revenue from medical device leases is recognized over the lease term, typically over 12 months.

The Company’s industrial device segment (EksoWorks) revenue is generated through the sale of the upper body exoskeleton (EksoVest) and the support arm (EksoZeroG). Revenue from industrial device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility.

Government Grants

The Company accounts for nonreciprocal government grants by applying the contributions received guidance in ASC Topic 958-605 by analogy. To determine if a grant is non-reciprocal or reciprocal and whether the application of ASC 606 is required, the Company considers whether the transfer of resources is one in which commensurate value is exchanged. If commensurate value is not exchanged for the goods or services provided, the Company assesses whether the grant is conditional or unconditional. Grants that contain both a barrier and right to return are considered conditional and revenue is deferred until such conditions are satisfied. In January 2019, the Company received a government grant from the Singapore Economic Development Board (“SEDB”) in the amount of approximately $1,500. The receipt of the funds is conditional upon certain operational milestones that must be met and maintained through December 31, 2021. Therefore, the Company has not recognized revenue related to the government grant from the SEBD nor received cash from the SEBD during the twelve months ended December 31, 2019. The Company does not expect to recognize revenue until December 31, 2021.

Research and Development

Research and development costs consist of costs incurred for internal research and development activities. These costs primarily include salaries and other personnel-related expenses, contractor fees, legal fees associated with developing and maintaining intellectual property, facility costs, supplies, and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. Such costs are expensed as incurred.

Advertising Costs

Advertising costs are recorded in sales and marketing expense as incurred. Advertising expense was $14 and $123 for the years ended December 31, 2019 and 2018, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, income tax expense or benefit is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The Company accounts for any income tax contingencies in accordance with accounting guidance for income taxes. The measurement of current and deferred tax assets and liabilities is based on provisions of currently enacted tax laws. The effects of any future changes in tax laws or rates have not been considered.

For the preparation of the Company's consolidated financial statements included herein, the Company estimates its income taxes and tax contingencies in each of the tax jurisdictions in which it operates prior to the completion and filing of its tax returns. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in net deferred tax assets and liabilities. The Company must then assess the likelihood that the deferred tax assets will be realizable, and to the extent they believe that realizability is not likely, the Company must establish a valuation allowance. In assessing the need for any additional valuation allowance, the Company considers all the evidence available to it, both positive and negative, including historical levels of income, legislative developments, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies.

Stock-based Compensation

The Company measures stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes Model and recognizes the fair value on a straight-line basis over the requisite service periods of the awards.

The Company’s determination of the fair value of stock options on the date of grant using the Black-Scholes Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Company adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, the Company estimated the expected term of options granted by taking the average of the vesting term and the contractual term of the option.

The Company has, from time to time, modified the terms of its stock options to employees. The Company accounts for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value of the modified award on the date of modification over the fair value of the original award immediately before the modification.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities are required to record an impairment charge based on the excess of the carrying amount over its fair value. This update will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not expect the impact of adopting ASU 2017-04 to be material on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The standard modifies the disclosure requirements on fair value measurements in Topic 820 by removing the requirement to disclose the reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The standard expands the disclosure requirements for Level 3 fair value measurement, primarily focused on changes in unrealized gains and losses included in other comprehensive income. The amendments in this update will be effective for the Company in the first quarter of 2020. Early adoption is permitted. The Company does not expect the impact of adopting ASU 2018-03 to be material on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The update was initially effective for the Company in the first quarter

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

of 2020. However, in August 2019, the FASB issued a proposed ASU, which defers the effective date for this guidance until the first quarter of 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

Accounting Pronouncements Adopted in 2019

In February 2016, the FASB issued ASU 2016-02-Leases (ASC 842) and subsequent amendments to the initial guidance under ASU 2017-13, ASU 2018-10 and ASU 2018-11 (collectively, Topic 842) which superseded existing guidance on accounting for leases in ASC 840, Leases (ASC 840). Topic 842 requires the Company to recognize on its balance sheet a lease liability representing the present value of future lease payments and a right-of-use asset representing the lessee’s right to use, or control the use of a specified asset for the lease term for any operating lease with a term greater than one year. This standard became effective for the Company in the first quarter of 2019. The Company used the modified retrospective transition method, under which the Company applied the standard to each lease that had commenced as of the beginning of January 1, 2019. In addition, the Company elected to apply the package of practical expedients permitted under the transition guidance, which among other things, allowed the Company to carry forward the historical lease classification.

Upon adoption of this standard on January 1, 2019, the Company recorded right-of-use assets and corresponding lease liabilities of $1,454 and $1,498, respectively. As of December 31, 2019, the right-of-use assets and corresponding lease liabilities in the Company’s consolidated balance sheets were $1,084 and $1,132, respectively. The adoption of this standard did not have a material impact on the Company’s consolidated statements of operations or cash flows, nor did it have a material impact on the financial covenants set forth in the Company’s long-term debt agreement. The Company has provided detailed disclosures as required by the new standard (refer to Note 10. Lease Obligations).

3. Net Loss Per Share of Common Stock

Basic net loss per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted average number of common stock, adjusted to include conversion of certain stock options and warrants for common stock and release of common stock in connection with restricted stock units during the period, as follows:



	Years ended December 31,
	2019			2018
Numerator:

Net loss	$	(12,132	)	$	(26,992	)
Adjustment for gain on fair value of warrant liability	$	—		$	—
Adjusted net loss used for dilution calculation	$	(12,132	)	$	(26,992	)

Denominator
Weighted-average number of shares outstanding	71,911			61,229
Effect of potential dilutive shares	—			—
Dilutive weighted-average number of shares outstanding	71,911			61,229

Net loss per share
Basic	$	(0.17	)	$	(0.44	)
Diluted	$	(0.17	)	$	(0.44	)

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:



	Years ended December 31,
	2019	2018
Options to purchase common stock	7,411	6,466
Restricted stock units	1,328	278
Warrants for common stock	17,670	3,396
Total common stock equivalents	26,409	10,140

4. Investment in Unconsolidated Affiliate

On January 30, 2019, the Company and its wholly-owned subsidiary, Ekso Bionics, Inc. (“Ekso US”), entered into an agreement with Zhejiang Youchuang Venture Capital Investment Co., Ltd (“ZYVC”) and another partner (collectively, the “JV Partners”), as amended by the Amendment to the Joint Venture Agreement, dated April 30, 2019 (as amended, the “JV Agreement”) to establish Exoskeleton Intelligent Robotics Co. Limited (the “Investee” or the “China JV”), a Chinese limited liability company designed to develop and serve the exoskeleton market in China and other Asian markets and to create a global exoskeleton manufacturing center in the Zhejiang Province of China.

Ekso US entered into a Technology License Agreement, dated October 22, 2019 (the “Technology License Agreement”) with the China JV pursuant to the terms of the JV Agreement. Pursuant to the Technology License Agreement, Ekso US granted to the China JV a nontransferable, non-sublicensable, irrevocable, and exclusive right and license in China, Hong Kong, Singapore, Malaysia and other countries to be mutually agreed upon by the parties to the JV Agreement, but excluding Japan, India and Australia (the “JV Territory”) to patented technologies and non-patented manufacturing technologies (collectively, the “IP”) involved in the manufacture of certain products, including EksoGT, EksoVest and EksoZeroG Arm units (collectively, the “JV Products”) and their improvements, to (i) manufacture, assemble, make and have made, use the JV Products in China and to sell such products in the JV Territory, (ii) provide marketing promotion, technical training and maintenance associated with such products and (iii) make investment in research and development projects undertaken by Ekso US. Under the Technology License Agreement, Ekso US will also provide marketing promotion, maintenance, training and technical support to the China JV in connection with the licensed activities, and the China JV will reimburse the reasonable costs and expenses of Ekso US for the training and technical support services so provided. In consideration for the improvements made by Ekso US to the JV Products, pursuant to the Technology License Agreement, following a specified royalty-free period, Ekso US will receive mid-single digit percentages of the net sales revenue of the JV Products sold by the China JV. The Technology License Agreement will be in effect until terminated for cause by Ekso US or until the earlier expiration or termination of the JV Agreement. Pursuant to the JV Agreement and the Technology License Agreement, the Company will receive a 20% ownership interest in the China JV. Under the Technology License Agreement, the Company will also be entitled to receive royalties on the China JV’s sales of the JV Products in the JV Territory. As of December 31, 2019, the Company had not transferred the patented technologies pursuant to the Technology License Agreement.

Since the licensed IP was developed internally by the Company, all previous expenditures to develop the technology were recognized as expense in the period incurred and there was no carrying value on the Company’s consolidated balance sheet. The Company expects that it will recognize a gain on the Technology License Agreement based on the fair value of the Company’s equity interest in the China JV once control of the intellectual property is transferred.

The China JV is a VIE for which the Company is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly influence the economic performance of the entity. In addition to the Company’s exchange of license rights for the manufacturing technology, the China JV will be capitalized through cash investments of up to approximately $92,000 (or RMB 624,000) by the JV Partners over the initial ten-year term of the JV Agreement. The investment in the Investee is accounted for under the equity method of accounting because the Company has significant influence over the Investee through its ownership interest, technology license and manufacturing service agreements and representation on the board of directors. As of December 31, 2019, there was no impact to the Company’s consolidated balance sheet except for the direct transaction costs which have been capitalized and will be included as part of the investment balance when the intellectual property is transferred Direct costs of $36 are included in other assets in the Company’s consolidated balance sheets as of December 31, 2019. In addition to contributing the licensed IP, the Company’s obligations to the Investee include assisting the Investee to become proficient in using the intellectual property to manufacture products that meet regulatory standards, and providing supervision of appointed

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

directors. The primary risks that the Company is exposed to from its involvement with the VIE include operational risk, foreign currency exposure risk and foreign regulatory risk. As of December 31, 2019, the Company has no other implied or unfunded commitments related to the Investee and its maximum exposure to risk of loss will be limited to the carrying value of the investment.

Under the JV Agreement, the JV Partners are required, within 90 days of the formation of the China JV, to contribute RMB 62.4 million, with a further RMB 124.8 million capital contribution required from the JV Partners upon notice by the China JV based on the China JV’s then-current operating plan. The remaining RMB 436.8 million capital contribution of the JV Partners will be paid by them within the 10 years after the formation of the China JV as previously contemplated under the JV Agreement.

Equity Investments

Under the JV Agreement, ZYVC or its designees have agreed to invest an aggregate of $10,000 in equity investments in the Company, taking place in two tranches. On January 30, 2019, the Company executed a Share Purchase Agreement (the “JV SPA”) under which the Company sold 3,067 shares of its common stock for $5,000 at a purchase price of $1.63 per share. The Company recorded $8 in direct issuance costs as a reduction to the gross equity proceeds.

The remaining $5,000 investment by the China JV or ZYVC or its designees is contingent upon the China JV shipping the first batch of EksoGT, EksoVest and EksoZeroG Arm products to Ekso Bionics, its affiliates or a third party. The investment will be made through the purchase of shares of the Company's common stock at a per share price equal to the volume weighted average price of 20 trading days before the issue date, but not less than $1.30 nor more than $1.96.

5. Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which are the following:


•	Level 1—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.


•	Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.

The Company’s fair value hierarchies for its financial assets and liabilities which require fair value measurement on a recurring basis are as follows:



	Total		Level 1		Level 2		Level 3
December 31, 2019
Liabilities
Warrant liabilities	$	4,307	$	—	$	—	$	4,307
Contingent success fee liability	$	6	$	—	$	—	$	6

December 31, 2018
Liabilities
Warrant liability	$	585	$	—	$	—	$	585
Contingent success fee liability	$	34	$	—	$	—	$	34

During the years ended December 31, 2019 and 2018, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The following table sets forth a summary of the changes in the fair value of Company’s Level 3 financial liabilities during the year ended December 31, 2019, which were measured at fair value on a recurring basis:



	Warrant Liability			Contingent Success Fee Liability
Balance at December 31, 2018	$	585		$	34
Initial fair value of warrants issued in conjunction with May 2019 financing	7,334			0
Initial fair value of warrants issued in conjunction with December 2019 financing	2,507			0
Gain on revaluation of warrants issued in December 2019, May 2019 financing, and December 2015 financing	(6,376		)	0
Loss on modification of 2015 Warrants	257			—
Gain on revaluation of contingent liabilities	—			(28		)
Balance at December 31, 2019	$	4,307		$	6

See Note 13 in the notes to consolidated financial statements under the caption Capitalization and Equity Structure – Warrants for a description of the warrants accounted for as a liability, including the method and inputs used to estimate their fair value.

6. Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations. Revenue recognition is evaluated based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are determined based on observable prices at which the Company separately sells its products or services. If a standalone selling price is not directly observable, the Company estimates the selling price based on market conditions and entity-specific factors including features and functionality of the product and/or services, the geography of the Company’s customers, type of the Company’s markets. Any discounts or other reductions to the transaction price are allocated proportionately to all performance obligations within the multiple-element arrangement.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers and receipt of payment. For the sale of its products, the Company generally recognizes revenue at a point in time through the ship-and-bill performance obligations. For the lease of its products, the Company generally recognizes revenue over the lease term commencing upon the completion of customer training. For service agreements, the Company generally invoices customers at the beginning of the coverage period and records revenue related to the billed amounts over time, equivalent to the coverage period of the maintenance and support contract.

Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts (Ekso Care), but also includes other offerings that the Company was paid in advance and will earn revenue when it transfers control of the product or service.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

Deferred revenue consisted of the following:



	December 31, 2019			December 31, 2018
Deferred extended maintenance and support	$	2,837		$	2,114
Deferred royalties	290			300
Deferred device revenues	125			70
Customer deposits and advances	23			62
Deferred rental income	6			51
Total deferred revenues	3,281			2,597
Less current portion	(1,492		)	(1,102		)
Deferred revenues, non-current	$	1,789		$	1,495

Deferred revenue activity consisted of the following for the year ended December 31, 2019:



Beginning balance	$	2,597
Deferral of revenue	2,621
Recognition of deferred revenue	(1,937		)
Ending balance	$	3,281

At December 31, 2019, the Company’s deferred revenue was $3,281. Excluding customer deposits, the Company expects to recognize approximately $1,303 of the deferred revenue during 2020, $906 in 2021, and $1,049 thereafter.

In addition to deferred revenue, the Company has a non-cancellable backlog of $524 related to its contracts for rental units with its customers. These rental contracts are classified as operating leases, with typically 12-month lease terms.

As of December 31, 2019 and 2018, accounts receivable, net of allowance for doubtful accounts, were $5,208 and $3,660, respectively, and are included in current assets on the Company’s consolidated balance sheets.

The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days.

Disaggregation of revenue

The following table disaggregates the Company’s revenue by major source for the year ended December 31, 2019:



	EksoHealth		EksoWorks		Total
Device revenue	$	9,064	$	1,726	$	10,790
Service, support and rentals	2,560		—		2,560
Parts and other	259		234		493
Collaborative arrangements	74		—		74
	$	11,957	$	1,960	$	13,917

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The following table disaggregates the Company’s revenue by major source for the year ended December 31, 2018:



	EksoHealth		EksoWorks		Total
Device revenue	$	6,403	$	2,360	$	8,763
Service, support and rentals	2,100		—		2,100
Parts and other	323		118		441
Collaborative arrangements	28		—		28
	$	8,854	$	2,478	$	11,332

7. Property and Equipment, net

Property and equipment, net consisted of the following:



	Estimated	December 31,
	Life (Years)	2019			2018
Company owned fleet	3-4	$	3,385		$	3,794
Computer software	3-5	851			818
Leasehold improvement	5-10	631			631
Furniture, office and leased equipment	3-7	554			555
Machinery and equipment	3-7	289			289
Tools, molds, dies and jigs	5	96			69
Computers and peripherals	3-5	77			77
		5,883			6,233
Accumulated depreciation and amortization		(4,226		)	(3,868		)
Property and equipment, net		$	1,657		$	2,365

Depreciation and amortization expense of property and equipment, net totaled $690 and $1,009 for the years ended December 31, 2019 and 2018, respectively.

8. Accrued Liabilities

Accrued liabilities consisted of the following:



	December 31,
	2019		2018
Salaries, benefits and related expenses	$	1,098	$	2,446
Device warranty	285		255
Clinical trials	203		227
Financing lease liability	18		35
Severance	—		270
Other	79		256
Total	$	1,683	$	3,489

Warranty

Sales of devices generally include an initial warranty for parts and services for one year in the U.S., two years in Europe, the Middle East, Africa, and one or two years in Asia. A liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. Specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. Warranty costs are reflected in the consolidated statements of operations and comprehensive loss as a component of costs

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

of revenue. The current portion of the warranty liability is classified as a component of accrued liabilities, while the long-term portion of the warranty liability is classified as a component of other non-current liabilities in the consolidated balance sheets.



	Warranty
	2019			2018
Balance at beginning of the period	$	319		$	232
Additions for estimated future expense	416			374
Incurred costs	(385		)	(287		)
Balance at end of the period	$	350		$	319

Current portion	285			255
Long-term portion	65			64
Total	$	350		$	319

9. Long-Term Debt

In December 2016, the Company entered into a loan agreement and received $7,000 that bears interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The loan agreement created a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.

The Company was required to pay accrued interest on the current loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company was required to make equal monthly payments of principal, together with accrued and unpaid interest. The principal balance of the current loan amortizes ratably over 36 months, and matures on January 1, 2021, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment of $245 will be due on the maturity date, of which $228 has accreted as of December 31, 2019, and is included as a component of note payable on the Company’s consolidated balance sheets.

In December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which the Company agreed to pay the lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for the Company’s common stock being $8.00 or more for five successive business days. The estimated fair value of the success fee was determined using the Lattice Model and was recorded as a discount to the debt obligation. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in the consolidated statements of operations and comprehensive loss. The success fee is classified as a component of other non-current liabilities in the consolidated balance sheets. At December 31, 2019, the fair value of the contingent success fee liability was $6.

The loan agreement includes a liquidity covenant requiring that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least three months of “Monthly Cash Burn,” which is the Company’s average monthly net income (loss) for the trailing six-month period plus (a) certain expenses and (b) the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month period. Such amount was determined to be $3,564 as of December 31, 2019, the most current determination date, with the amount subject to change on a month-to-month basis. At December 31, 2019, with cash on hand of $10,872, the Company was compliant with this liquidity covenant and all other covenants.

The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate of 10.23% for the year ended December 31, 2019. The final payment fee, the initial fair value of the success fee and the debt issuance costs are being accreted/amortized to interest expense using the effective interest method over the life of the loan.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The following table presents scheduled principal payments of the Company's long-term debt and final payment fee as of December 31, 2019:



Period	Amount
2020	$	2,333
2021	440
Total principal payments	2,773
Less final payment fee, discount and issuance cost	33
Long-term debt, net	$	2,740

Current portion	2,333
Long-term portion	407
Long-term debt, net	$	2,740

The following table sets forth interest expense information related to the long-term debt, including interest expense associated with the final payment and initial success fee, for the periods presented:



	Twelve months ended
	December 31, 2019		December 31, 2018
Contractual interest expense	$	278	$	441
Amortization of debt issuance costs	19		32
Accretion of final payment	49		82
Amortization of initial success fee	23		39
	$	369	$	594

10. Lease Obligations

In May 2017, the Company renewed its operating lease agreement for its headquarters and manufacturing facility in Richmond, California. The operating lease agreement expires in May 2022, with no further options to extend or terminate. During the renewal period, the base rent is approximately $32 per month during the first year, with incremental 3% increases per annum thereafter. The lease includes non-lease components (i.e. common area maintenance costs) that are paid separately from rent based on actual costs incurred, and therefore, were not included in the right-of-use asset and lease liability but are reflected as an expense in the period incurred.

In July 2017, the Company entered into an operating lease agreement for its European operations office in Hamburg, Germany. The initial Hamburg lease term ends in July 2022. The Company has an option to extend the lease for another five-year term.

Through April 2019, the Company had an unoccupied leased sales office in Freiburg, Germany, which had a lease term expiring in December 2020. During the year ended December 31, 2018, the Company recorded a $175 charge in sales and marketing expense in the consolidated statement of operations and comprehensive loss relating to remaining obligation of the lease. In April 2019, the Company entered an agreement with the lessor of the Freiburg office releasing the Company from future lease payments after April 30, 2019. As a result, the Company recorded a credit of $125 for the year ended December 31, 2019 to sales and marketing expenses in the consolidated statements of operations and comprehensive loss relating to the remaining obligation of the lease.

The Company’s future lease payments as of December 31, 2019 are as follows, which are presented as lease liabilities, current and lease liabilities on the Company’s consolidated balance sheets:

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



Period	Operating Leases
2020	$	515
2021	531
2022	232
Thereafter	—
Total lease payments	1,278
Less: imputed interest	(146		)
Present value of lease liabilities	$	1,132

Lease liabilities, current	$	421
Lease liabilities, noncurrent	711
Total lease liabilities	$	1,132

Weighted-average remaining term (in years)	2.44
Weighted-average discount rate	10.5		%

Lease expense under the Company’s operating leases was $551 and $719, for the years ended December 31, 2019 and 2018, respectively.

Practical Expedients

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes the lease expense for such leases on a straight-line basis over the lease term.

The Company has elected to account for lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area maintenance costs) as a single combined lease component under ASC 842 as the lease components are the predominant elements of the combined components.

As part of the transition to ASC 842, the Company elected to use the modified retrospective transition method with the new standard being applied as of the January 1, 2019 adoption date. Additionally, the Company has elected, as of the adoption date, not to reassess whether expired or existing contracts contain leases under the new definition of a lease; the lease classification for expired or existing leases; or whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

11. Employee Benefit Plan

The Company administers a 401(k) retirement plan or the 401(k) Plan in which all employees are eligible to participate. Each eligible employee may elect to contribute to the 401(k) Plan. The Company has made matching contributions in the form of shares of the Company's common stock to the 401(k) Plan in an amount equal to 50% of employee contributions (up to the statutory limit), subsequent to year-end. The expense related to the contribution was $142 and $212 for the year ended December 31, 2019 and 2018, respectively.

12. Related Party Transactions

One of the Company’s directors, Dr. Ted Wang, is the founder, general partner and Chief Investment Officer of Puissance Capital Management LP, or Puissance Capital, which is an affiliate of Puissance Cross-Border Opportunities II LLC, one of the Company’s largest stockholders. Prior to Dr. Wang’s appointment to the Board in connection with the Rights Offering in September 2017, the Company entered into a one-year consulting agreement with Angel Pond Capital LLC, or Angel Pond, an entity solely owned and managed by Dr. Wang and affiliated with Puissance Capital. Angel Pond assists the Company with strategic positioning in the Asia Pacific region, including the introduction to potential strategic and capital partners and the development of strategic partnerships for the sale and manufacture of the Company’s products in that market. During the year ended December 31, 2017, the Company made aggregate payments of $2,195 to Angel Pond, representing consulting services for one year. These fees were

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

recognized ratably to expense over the one-year period, resulting in $1,075 expense charged to general and administrative expense for the year ended December 31, 2018. During the year ended December 31, 2018, the Company made additional aggregate payments of $90 to Angel Pond and an additional $30 during the year ended December 31, 2019 in connection with consulting services provided by Angel Pond, which were expensed in the consolidated statement of operations and comprehensive loss.

In connection with the consulting agreement with Angel Pond, the Company is required to make a payment of $1,000 to Angel Pond when the China JV is consummated. This amount has not yet been recorded in the Company’s consolidated financial statements as the joint venture has not successfully completed registration in China and therefore has not achieved consummation.

During the year ended December 31, 2019, the Company sold EksoVest raw material inventory and tooling to the China JV for

$14.

13. Capitalization and Equity Structure

Summary

The Company’s authorized capital stock at December 31, 2019 consisted of 141,429 shares of common stock and 10,000 shares of preferred stock. At December 31, 2019, 86,920 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding.

Common Stock

The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Board of Directors may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting for the election of directors. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and validly issued, fully paid, and non-assessable.

December 2019 Common Stock Offering

In December 2019, the Company entered into a securities purchase agreement, or the December 2019 Purchase Agreement, with certain purchasers. Pursuant to the December 2019 Purchase Agreement, the Company agreed to sell in a registered direct offering, or the December 2019 Offering, an aggregate of 11,111 shares of its common stock, and accompanying warrants, or the December 2019 Warrants, to purchase 8,333 shares of its common stock at a combined purchase price of $0.45 for each share and related warrant, for gross proceeds of $5,000. Each December 2019 Warrant has an exercise price of $0.5402 per share, subject to adjustment in certain circumstances, and will be exercisable commencing six months and one day from the date of issuance and will expire five years from the date the warrants become exercisable.

As compensation for services provided by the underwriters or placement agent for the December 2019 Offering, or Placement Agent, the Company paid a cash fee equal to 7.0% ($350) and a management fee equal to 1.0% of the aggregate gross proceeds raised in the registered direct offering ($50), and issued warrants to purchase shares of common stock, or the December 2019 Placement Agent Warrants, in an amount equal to 7.0% of the aggregate number of shares of common stock placed in the registered direct offering, or 778 shares in the aggregate, in substantially the same form as the December 2019 Warrants, except that the December 2019 Placement Agent Warrants will expire five years from the effective date of the December 2019 Offering and have an exercise price per share equal to $0.5625. In connection with the December 2019 Offering, the Company also incurred $95 in other expenses of the Placement Agent.

Of the $5,000 in proceeds, $2,507 was allocated to the December 2019 Warrants and December 2019 Placement Agent Warrants based on the fair value method, with the remaining proceeds of $2,493 allocated to the common stock shares. In connection with the December 2019 Offering, the Company incurred approximately $777 in direct financing costs, including fair value of $200 of December 2019 Placement Agent Warrants, which were allocated on the fair value basis between the common stock shares and the applicable warrants: $389 was allocated to the December 2019 Warrants and the December 2019 Placement Agent Warrants

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

and expensed immediately in other income, net in the accompanying consolidated statements of operations and comprehensive loss and $388 was allocated to the common stock shares and recorded as a reduction to additional paid in capital.

May 2019 Common Stock Offering

In May 2019, the Company entered into an underwriting agreement, or the May 2019 Underwriting Agreement, with Cantor Fitzgerald & Co. and SunTrust Robinson Humphrey, Inc., or the Underwriters, for the underwritten public offering of its common stock and warrants to purchase common stock, or the May 2019 Offering. Pursuant to the May 2019 Underwriting Agreement, on May 24, 2019, the Company sold 6,667 shares of its common stock, and accompanying warrants, or the May 2019 Warrants, to purchase 6,667 shares of its common stock at a combined price to the public of $1.50 per share of common stock and accompanying warrant, for total gross proceeds of $10,000. Each warrant had an initial exercise price of $2.00 per share, subject to adjustment in certain circumstances, and will expire five years from the date of issuance. Of the $10,000 in proceeds, $7,334 was allocated to the warrants based on the fair value method, with the remaining proceeds of $2,666 allocated to the common stock shares.

In connection with the May 2019 financing, the Company incurred approximately $963 in direct financing costs which have been allocated on the fair value basis between the common stock shares and the warrants. Of the $963 in direct financing costs, $706 was allocated to the warrants and expensed immediately in other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss and $257 was allocated to the common stock shares and recorded as a reduction to additional paid in capital.

The May 2019 Warrants contain a price protection feature, pursuant to which, in connection with the December 2019 Offering, the exercise price of the May 2019 Warrants was reduced to $0.38 per share.

Equity Investments

On January 30, 2019, the Company sold 3,067 shares of its common stock for $5,000 at a purchase price of $1.63 per share under the JV SPA, in connection with the JV Agreement. Refer to Note 4. Investment in Unconsolidated Affiliate - Equity Investments for additional information.

At-the-Market Offering

In August 2018, the Company entered into a Controlled Equity Offering^SM Sales Agreement, or ATM Agreement, with Cantor Fitzgerald & Co., or the Agent, under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent, by methods deemed to be an “at the market offering.” Shares having an aggregate offering price of up to $25,000 may be offered and sold under the prospectus and prospectus supplement filed with the SEC related to such offering, or the ATM Prospectus. For the year ended December 31, 2019, the Company sold 2,150 shares of common stock under the ATM Agreement at an average price of $1.35 per share, for aggregate proceeds of $2,776, net of commission and issuance costs, to the Company. From inception to December 31, 2019, the Company has sold 4,182 shares of its common stock under the ATM Agreement at an average price of $1.86 per share, for aggregate proceeds of $7,206, net of commission and issuance costs, to the Company. As of December 31, 2019, approximately $17,241 aggregate offering price of the Company's common stock remained available for issuance pursuant to the ATM Prospectus.

Preferred Stock

The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by its Board of Directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors.

Warrants

Warrant share activity for the year ended December 31, 2019 was as follows:

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



Source	Exercise Price		Term (Years)	December 31, 2018	Issued	Expired		Exercised	December 31, 2019
December 2019 Warrants	$	0.5402	5	—	8,333	—		—	8,333
December 2019 Placement Agent Warrants	$	0.5625	5	—	778	—		—	778
May 2019 Warrants	$	0.38	5	—	6,667	—		—	6,667
2017 Information Agent Warrants	$	1.50	3	200	—	—		—	200
2015 Warrants	$	2.75	5	1,604	—	—		—	1,604
2014 PPO and Merger warrants
Placement agent warrants	$	7.00	5	426	—	(426	)	—	—
PPO warrants	$	14.00	5	1,078	—	(1,078	)	—	—
Pre-2014 warrants	$	9.66	9-10	88	—	—		—	88
				3,396	15,778	(1,504	)	—	17,670

December 2019 Warrants

In December 2019, pursuant to the December 2019 Purchase Agreement the Company issued warrants to purchase 8,333 shares of common stock, or the December 2019 Offering, with an exercise price of $0.5402 per share, or the December 2019 Warrants. The December 2019 Warrants will be exercisable six months and one day from their issuance date, or from and after June 21, 2020, and will expire five years from the date they initially become exercisable, or on June 21, 2025.

In addition, the December 2019 Warrants contain a cashless exercise provision and could require cash payments in the event of a failure to timely deliver securities or in the event of insufficient authorized shares. The December 2019 Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the December 2019 Warrants, the Company or any successor entity will, at the option of a holder of a December 2019 Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s December 2019 Warrant by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s December 2019 Warrant within five trading days after the notice of exercise by the holder of the put option. Because of this put-option provision, the December 2019 Warrants are classified as a liability and are marked to market at each reporting date.

The warrant liability related to the December 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the December 2019 Warrants:



	December 31, 2019			December 20, 2019
Current share price	$	0.39		$	0.39
Conversion price	$	0.5402		$	0.5402
Risk-free interest rate	1.73		%	1.73		%
Expected term (years)	5.47			5.50
Volatility of stock	95.7		%	96.3		%

December 2019 Placement Agent Warrants

In December 2019, in connection with the December 2019 Offering, the Company issued warrants to purchase 778 shares of the Company’s common stock to the placement agent for such offering, or the December 2019 Placement Agent Warrants. The December 2019 Placement Agent Warrants have substantially the same form as the December 2019 Warrants, except that they have an exercise price per share equal to $0.5625, subject to adjustment in certain circumstances, and will expire on December 18, 2025.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



	December 31, 2019			December 20, 2019
Current share price	$	0.39		$	0.39
Conversion price	$	0.5625		$	0.5625
Risk-free interest rate	1.69		%	1.69		%
Expected term (years)	4.97			5.00
Volatility of stock	93.1		%	92.7		%

Management has assessed that the likelihood of a Change of Control occurring during the term of the December 2019 Placement Agent Warrants is low, and that if such an event were to occur, the difference between the cashless exercise value and the warrants fair value is nominal.

May 2019 Warrants

In May 2019, pursuant to the May 2019 Underwriting Agreement and as part of the May 2019 Offering, the Company issued the May 2019 Warrants with an initial exercise price of $2.00 per share. The May 2019 Warrants will expire five years from the date of their issuance, or on May 24, 2024. The May 2019 Warrants contain a price protection feature, pursuant to which, subject to certain exceptions, if shares of common stock are sold or issued in the future, or securities convertible or exercisable for shares of the Company’s common stock are sold or issued in the future, for consideration, or with an exercise price or conversion price, as applicable, per share less than the exercise price per share then in effect for the May 2019 Warrants, the exercise price of the May 2019 Warrants is reduced to the consideration paid for, or the exercise price or conversion price of, as the case may be, the securities issued in such offering. Pursuant to this provision, in connection with the December 2019 Offering, the exercise price of the May 2019 Warrants was reduced to $0.38 per share, being the amount that is equal to the lower of (x) the consideration paid for the securities issued in the December 2019 Offering, or $0.45 per share, (y) the lowest exercise price of the December 2019 Warrants, or $0.5402, and (z) the lowest one-day volume-weighted average price of the Company’s Common Stock on the Nasdaq Capital Market as measured each day during the five trading day period starting on December 19, 2019, rounded to the nearest share, or $0.38.

In addition, if the Company effects or enters into any issuance of common stock or options or convertible securities exercisable for or convertible into common stock at a price which varies or may vary with the market price of the shares of the Company's common stock, subject to certain exceptions, a May 2019 Warrant holder may, at the time of exercise of the holder’s warrant, elect to exercise the warrant at such variable price.

Further, the May 2019 Warrants contain a cashless exercise provision and could require cash payments in the event of a failure to timely deliver securities or in the event of insufficient authorized shares. As well, the May 2019 Warrants include a put option, whereby while the May 2019 Warrants are outstanding, if the Company enters into a Change of Control, as defined in the May 2019 Warrants, the Company or any successor entity will, at the option of a 2019 Warrant holder exercise within 90 days after the public disclosure of the Change of Control transaction, purchase such holder’s May 2019 Warrants by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such warrants on the later date of consummation of the Change of Control transaction or two trading days after the notice of such request. Because of this put option provision, the May 2019 Warrants are classified as a liability and are marked to market at each reporting date.

The warrant liability related to the May 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in a combination of the Black-Scholes Model and the Lattice Model to measure the fair value of the 2019 Warrants:

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



	December 31, 2019			May 24, 2019
Current share price	$	0.39		$	1.49
Conversion price	$	0.38		$	2.00
Risk-free interest rate	1.67		%	2.12		%
Expected term (years)	4.40			5.00
Volatility of stock	93.9		%	98		%

Management has assessed that the likelihood of a Change of Control occurring during the term of the warrants is low, and that if such an event were to occur, the difference between the cashless exercise value and the May 2019 Warrants fair value is nominal.

2017 Information Agent Warrants

In September 2017, in connection with a rights offering in August 2017, the Company issued warrants to purchase 200 shares of the Company’s common stock with an exercise price of $1.50 per share to an information agent, or the 2017 Information Agent Warrants. The 2017 Information Agent Warrants became exercisable immediately upon issuance and will remain exercisable until September 13, 2020. These warrants were recorded in stockholders’ equity on the Company’s consolidated balance sheet.

2015 Warrants

In December 2015, the Company issued warrants to purchase 2,122 shares with an exercise price of $3.74 per share, or the 2015 Warrants. The 2015 Warrants contain a put-option provision. Under this provision, while the 2015 Warrants are outstanding, if the Company enters into a Fundamental Transaction, as defined in the 2015 Warrants, the Company or any successor entity shall, at the option of each warrant holder, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the Black-Scholes Model value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction. Because of this put-option provision, the 2015 Warrants are classified as a liability and are marked to market at each reporting date. Through December 31, 2018, 518 shares of the 2015 Warrants were exercised. During the year ended December 31, 2019, none of the 2015 Warrants were exercised.

On March 8, 2019, in connection with the Company entering into the JV Agreement, the Company entered into an amendment to the December 2019 Purchase Agreement under which the 2015 Warrants were issued with the holders of the 2015 Warrants, or the 2015 SPA Amendment, 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. Pursuant to the 2015 SPA Amendment, the Company also entered into an amendment to the 2015 Warrants to reduce the exercise price of each such warrant from $3.74 per share to $2.75 per share, subject to further adjustments under certain circumstances pursuant to the existing terms of such warrant. In the year ended December 31, 2019, the Company recorded a $257 loss on the modification of these warrants.

The warrant liability related to the 2015 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the 2015 Warrants as of the years ended:



	December 31, 2019			December 31, 2018
Current share price	$	0.39		$	1.24
Conversion price	$	2.75		$	3.74
Risk-free interest rate	1.59		%	2.48		%
Expected term (years)	0.99			1.99
Volatility of stock	98		%	104		%

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

2014 PPO and Merger Warrants and Pre-Merger Warrants

On January 15, 2014, a wholly-owned subsidiary of Ekso Bionics Holdings, Inc. named Ekso Acquisition Corp. merged with and into Ekso Bionics, Inc., or the Merger. Concurrently with the closing of the Merger and in contemplation of the Merger, the Company closed a private placement offering, or PPO, in which it issued warrants to purchase a total of 5,151 shares of common stock of which 4,329 were at an exercise price of $14.00 per share, and the balance of which were at an exercise price of $7.00 per share. The aforementioned warrants expired January 14, 2019.

Warrants to purchase preferred stock of Ekso Bionics Inc. outstanding prior to the Merger were converted into warrants to purchase 89 shares of common stock of the Company in connection with the Merger, or the Merger Warrants. As of December 31, 2019, there remained Merger Warrants to purchase 88 shares of the Company’s common stock outstanding, with the following terms: (1) the Merger Warrants expire on various dates from June 1, 2022 to August 30, 2023; (2) the Merger Warrants have an exercise price of $9.66 per share; and (3) at the option of the holder, the Merger Warrants may be exercised on a “cashless exercise” basis in which shares are retained to cover the exercise price based on the market value of the Company’s common stock on the date of exercise.

14. Stock-based Compensation

2014 Equity Incentive Plan

In 2014, prior to the Merger, the Board of Directors and a majority of the stockholders adopted the 2014 Equity Incentive Plan, or the 2014 Plan, allowing for the issuance of 2,058 shares of common stock. The 2014 Plan has since been amended and restated with approval by the stockholders to increase the maximum number of shares issuable, as shown in the table below:



Original share pool	2,058
2015 increase	1,656
June 2017 increase	1,000
December 2017 increase (ratified in June 2018)	4,400
2019 increase	3,500
Total share authorized for grant as of December 31, 2019	12,614

As of December 31, 2019, the total shares authorized for grant under the 2014 Plan was 12,614, of which 1,798 were available for future grants.

Under the terms of the 2014 Plan, the Board of Directors may award stock, options, or similar rights having either a fixed or variable price related to the fair market value of the shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions or any other security with the value derived from the value of the shares. Such awards include stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights.

Shares available for future grant under the 2014 Plan was as follows:



	Shares Available For Grant
Available as of December 31, 2018	1,267
Granted	(4,344	)
Forfeited	938
Expired	437
Share pool increase	3,500
Available as of December 31, 2019	1,798

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

Stock Options

The Board of Directors may grant stock options under the 2014 Plan at a price of not less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The maximum term of an incentive stock option granted to participants may not exceed ten years. Subject to the limitations discussed above, the Board of Directors determines the term and exercise or purchase price of other awards granted under the 2014 Plan. To date, no incentive stock options have been granted. The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2014 Plan vest upon the passage of time, generally four years, or upon the attainment of certain performance criteria established by the Board of Directors. The Company may grant options to purchase common stock to non-employees for advisory and consulting services. Upon exercise of a stock option, the Company issues new shares of common stock.

A summary of the stock option activity during the year ended December 31, 2019 is presented below:



	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at beginning of year	6,466		$	3.05
Granted	2,414		$	0.85
Exercised	(186	)	$	1.23
Forfeited	(846	)	$	2.02
Expired	(437	)	$	3.94
Outstanding at end of year	7,411		$	2.44	8.08	$	—
Vested and expected to vest	7,411		$	2.44	8.08	$	—
Exercisable at year end	3,258		$	3.86	6.31	$	—

In 2019, the Company received $228 in cash from exercised stock options. The intrinsic value of the options exercised totaled $233 and $1, for the years ended December 31, 2019 and 2018, respectively.

The weighted-average grant date fair value of stock options granted for the years ended December 31, 2019 and 2018 was $0.68 and $1.57, respectively. The total grant date fair value of stock option vested during the years ended December 31, 2019 and 2018 was $2,602 and $1,725, respectively.

As of December 31, 2019, total unrecognized compensation cost related to unvested stock options was $4,172. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.7 years.

The following table summarizes information about stock options outstanding as of December 31, 2019:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted-Average Remaining Contractual Life (Years)	Weighted Average Price		Number of Shares	Weighted Average Price
$0.49 - $0.61	1,768	9.7	$	0.61	64	$	0.56
$1.13 - $1.79	1,970	8.67	$	1.54	742	$	1.59
$1.82 - $2.33	1,773	8.6	$	1.97	829	$	1.99
$2.68 - $15.33	1,900	5.46	$	5.52	1,623	$	5.99
	7,411	8.08	$	2.44	3,258	$	3.86

The Company recognizes compensation expense using the straight-line method over the requisite service period. The share fair value of each stock option was determined on the date of grant using the Black-Scholes Model under the following assumptions:

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



	Years Ended December 31,
	2019	2018
Dividend yield	—	—
Risk-free interest rate	1.67% - 2.45%	2.68% - 3.0%
Expected term (in years)	6.08	5.27-10
Volatility	100%-103%	88%-106%

Restricted Stock Units

The Company issues restricted stock units, or RSUs, to employees and non-employee service providers. Each RSU represents the right to receive one share of the Company’s common stock upon vesting and subsequent settlement. The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.

RSU activity for the year ended December 31, 2019 is summarized below:



	Number of Shares		Weighted Average Grant- Date Fair Value
Unvested as of January 1, 2019	278		$	1.83
Granted	1,763		$	0.94
Vested	(621	)	$	1.66
Forfeited	(92	)	$	1.93
Unvested as of December 31, 2019	1,328		$	0.72

The total grant-date fair value of RSUs that vested in 2019 was $1,001. As of December 31, 2019, $895 of total unrecognized compensation expense related to unvested RSUs was expected to be recognized over a weighted average period of 3.60 years.

Additionally, during the year ended December 31, 2019, the Compensation Committee of the Board of Directors issued an aggregate 1,145 RSUs to the Company's executives and other officers, which are contingent on the later of the Company receiving the stockholder approval of an increase to the number of shares authorized to be issued under the 2014 Plan at the next stockholder meeting and the filing of a registration statement on Form S-8 with the SEC. If stockholder approval is not obtained at the next stockholder meeting, or if a registration statement on Form S-8 is not filed with the SEC and made effective by the date on which the 2014 Plan expires or on which the applicable executive or officer ceases to provide services to the Company, the executive RSUs applicable to such executive or officer shall be automatically cancelled and not granted.

Compensation Expense

Stock-based compensation is included in the consolidated statements of operations and comprehensive loss in general and administrative, research and development, or sales and marketing expenses, depending upon the nature of services provided. Stock-based compensation expense related to stock options and RSUs granted to employees and non-employees was as follows:



	Years Ended December 31,
	2019		2018
Sales and marketing	$	653	$	611
Research and development	241		426
General and administrative	1,361		1,831
	$	2,255	$	2,868

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan, or ESPP. Under the ESPP, the Company has 500 shares of common stock reserved for issuance, subject to adjustment in the event of a stock split, stock dividend, combination or reclassification or similar event. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 25% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods. At the end of each offering period, employees can purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. As of December 31, 2019, the Company had not initiated employee enrollment to the plan.

15. Income Taxes

The domestic and foreign components of pre-tax loss for the years ended December 31, 2019 and 2018 were as follows:



	Years Ended December 31,
	2019			2018
Domestic	$	(10,321	)	$	(24,787	)
Foreign	(1,811		)	(2,205		)
Loss before income taxes	$	(12,132	)	$	(26,992	)

The Company had no current or deferred federal and state income tax expense or benefit for the years ended December 31, 2019 and 2018 because the Company generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized. The Company’s non-U.S. tax obligation is primarily for business activities conducted through Germany and Singapore for which taxes were included in other expense, net for the years ended December 31, 2019 and 2018 and determined to be immaterial and accordingly, such amounts were excluded from the following tables.

Income tax expense (benefit) for the years ended December 31, 2019 and 2018 differed from the amounts computed by applying the statutory federal income tax rate of 21% to pretax loss as a result of the following:



	Years Ended December 31,
	2019		2018
Federal tax at statutory rate	21.0	%	21.0	%
State tax, net of federal tax effect	—		—
R&D credit	1.0		1.3
Change in valuation allowance	(27.2	)	(21.1	)
Unrealized gain on warrant	8.7		0.8
Foreign exchange	0.9		1.0
Other	(4.4	)	(3.0	)
Total tax expense (benefit)	—	%	—	%

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

The tax effects of temporary differences and related deferred tax assets and liabilities as of December 31, 2019 and 2018 were as follows:



	December 31,
	2019			2018
Deferred tax assets:
Depreciation and other	$	263		$	248
Net operating loss carryforwards	40,683			36,970
Research and development tax credits	1,817			1,769
Accruals and reserves	289			480
Deferred revenue	220			221
Stock compensation expense	2,197			1,888
Lease assets	224			—
Other	45			55

Deferred tax liabilities:
Lease liabilities	(214		)	—
Prepaid expenses	(43		)	(49		)
Less: Valuation allowance	(45,481		)	(41,582		)
Net deferred tax asset (liability)	$	—		$	—

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance was established and no deferred tax assets were shown in the accompanying consolidated balance sheets. The valuation allowance increased by $3,899 and $5,608 in the years ended December 31, 2019 and December 31, 2018, respectively.

For tax years beginning after December 31, 2018, the Global Intangible Low-taxed Income ("GILTI") took effect. Due to the aggregated losses of the foreign subsidiaries, there was no GILTI inclusion for the years ended December 31, 2019 and December 31, 2018.

As of December 31, 2019 the Company had federal net operating loss carryforwards of $155,352. The federal net operating loss carryforwards of $120,792 generated before January 1, 2018 will begin to expire in 2027, and $34,560 will carryforward indefinitely but are subject to the 80% taxable income limitation. The Company also had federal research and development tax credit carryforwards of $1,943 that will expire beginning in 2031, if not utilized.

As of December 31, 2019, the Company had state net operating loss carryforwards of $99,966, which will begin to expire in 2028. The Company also had state research and development tax credit carryforwards of $608, which have no expiration.

As of December 31, 2019, the Company had foreign net operating loss carryforwards of $8,785. The foreign net operating loss carryforwards do not expire.

As of December 31, 2018, $1,749 of federal and $689 of state net operating loss was attributed to stock-based compensation deductions in excess of book expense. Upon adoption of ASU 2016-09-Compensation-Stock Compensation, the benefit of the tax deduction related to these options did not affect retained earnings due to the Company applying a full valuation allowance against the deferred tax assets, as is the Company’s current policy

Utilization of the Company’s net operating losses and credit carryforwards may be subject to annual limitations in the event of a Section 382 ownership change. Such future limitations could result in the expiration of net operating losses and credit carryforwards before utilization as a result of such an ownership change.

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:



Balance as of December 31, 2018	628
Increase of unrecognized tax benefits taken in prior years	(46		)
Increase of unrecognized tax benefits related to current year	55
Balance as of December 31, 2019	$	637

If the Company is able to recognize these uncertain tax positions, the unrecognized tax benefits would not impact the effective tax rate if the Company applies a full valuation allowance against the deferred tax assets, as provided in the Company’s current policy.

The Company had not incurred any material tax interest or penalties as of December 31, 2019. The Company does not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions. The Company is subject to taxation in the United States and various state jurisdictions, Germany, and Singapore. There are no ongoing examinations by taxing authorities at this time. The Company’s tax years 2007 through 2019 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits. The Company’s 2015 to 2019 tax years will remain open for examination by the German tax authority for four years from the end of the year in which the applicable return was filed. The Company’s 2018 to 2019 tax years will remain open for examination by the Singapore tax authority for four years from the date of the applicable assessment.

16. Commitments and Contingencies

Commitments

Material Contracts

The Company has two license agreements with the Regents of the University of California to maintain exclusive rights to patents. The Company is required to pay 1% of net sales of licensed medical devices sold to entities other than the U.S. government. In addition, the Company is required to pay 21% of consideration collected from any sub-licensee for the grant of the sub-license.

In connection with acquisition of Equipois, LLC ("Equipois"), the Company 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 the Company an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company is required to pay the developer a single-digit royalty on net receipts, subject to a $50 annual minimum royalty requirement.

Purchase Obligations

The Company purchases components from a variety of suppliers and uses contract manufacturers to provide manufacturing services for its 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. The Company had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling $709 as of December 31, 2019, 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.

Other Contractual Obligations

The following table summarizes the Company's outstanding contractual obligations, including interest payments, as of December 31, 2019 and the effect those obligations are expected to have on its liquidity and cash flows in future periods:

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)



	Payments Due By Period
	Total		Less than one year		1-3 Years		3-5 Years
Term loan	$	2,878	$	2,437	$	441	$	—
Facility operating lease	1,278		515		763		—
Capital lease	22		22		—		—
Total	$	4,178	$	2,974	$	1,204	$	—

Contingencies

In the normal course of business, the Company is subject to various legal matters. In the opinion of management, the resolution of such matters will not have a material adverse effect on the Company’s consolidated financial statements.

17. Segment Disclosures

The Company has two reportable segments: EksoHealth and EksoWorks. The EksoHealth segment designs, engineers, manufactures, and sells exoskeletons for applications in the medical markets. The EksoWorks segment designs, engineers, manufactures, and sells exoskeleton devices to allow able-bodied users to perform difficult repetitive work for extended periods.

The Company evaluates performance and allocates resources based on segment gross profit margin. The reportable segments are each managed separately because they serve distinct markets. The Company does not consider net assets as a segment measure and, accordingly, assets are not allocated.

Segment reporting information is as follows:



	EksoHealth		EksoWorks		Total
Year ended December 31, 2019
Revenue	$	11,957	$	1,960	$	13,917
Cost of revenue	5,404		1,749		7,153
Gross profit	$	6,553	$	211	$	6,764

Year ended December 31, 2018
Revenue	$	8,854	$	2,478	$	11,332
Cost of revenue	4,968		2,055		7,023
Gross profit	$	3,886	$	423	$	4,309

Revenues from one customer of the Company’s EksoHealth segment represents approximately $2,138 of the Company’s consolidated revenues.

Geographic revenue information based on location of customer is as follows:



	Years Ended December 31
	2019		2018
United States	$	9,071	$	7,028
All Other	4,846		4,304
	$	13,917	$	11,332

18. Subsequent Events

After receiving questions from the Committee on Foreign Investment in the United States (“CFIUS”), in December 2019, the Company and the China JV submitted a joint voluntary notice to CFIUS to review the China joint venture transaction. In February 2020, CFIUS imposed interim measures that temporarily suspend the Company’s contributions to the China JV and other integration activities pending completion of its investigation. The Company continues to engage with CFIUS to address its concerns, and

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Ekso Bionics Holdings, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

expects the CFIUS review and investigation, as well as its assessment of whether its concerns can be mitigated, to end by April 13, 2020.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2019. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment and makes assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Management believes that the financial statements included in this Annual Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the U.S. Securities Exchange Act, Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Our management believes that based on this criteria, as of December 31, 2019, our internal control over financial reporting is effective.

The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by OUM LLP or OUM, an independent registered public accounting firm, as stated in their attestation report, which appears under Item 8 of this Annual Report on Form 10-K. OUM has issued an attestation report on our internal control over financial reporting, which report is included in OUM’s report on our consolidated financial statements, which appear under Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting:

There were no other changes in our internal control over financial reporting identified in connection with the evaluation required by (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2020 Annual Meeting of Shareholders, under the heading “Corporate Governance,” to be filed with the SEC within 120 days of December 31, 2019.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2020 Annual Meeting of Shareholders, under the headings “Executive Compensation” and “Director Compensation,” to be filed with the SEC within 120 days of December 31, 2019.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2020 Annual Meeting of Shareholders, under the heading “Common Stock Ownership of Certain Beneficial Owners and Management,” to be filed with the SEC within 120 days of December 31, 2019.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2020 Annual Meeting of Shareholders, under the heading “Certain Relationships and Related Party Transactions,” to be filed with the SEC within 120 days of December 31, 2019.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2020 Annual Meeting of Shareholders, under the headings “Audit Committee Report” and “Audit Fees and Services,” to be filed with the SEC within 120 days of December 31, 2019.

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PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


(a)	Financial Statements and Schedules: The following financial statement documents are included as part of Item 8 to this Form 10-K:

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations and Comprehensive loss for the years ended December 31, 2019 and 2018

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018

Notes to the Consolidated Financial Statements

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.


(b)	Exhibits. The exhibits filed with this Annual Report are set forth in the Exhibit Index.

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Exhibit Index



Exhibit Number		Description

1.1		Controlled Equity OfferingSM Sales Agreement, dated August 21, 2018 between Ekso Bionics Holdings,Inc. and Cantor Fitzgerald &Co. (incorporated by reference from Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed August 21, 2018)

2.1		Agreement and Plan of Merger and Reorganization, dated as of January 15, 2014, by and among the Registrant, Acquisition Sub and Ekso Bionics, Inc. (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

3.1		Articles of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed on March 19, 2015)

3.2		Certificate of Merger of Ekso Bionics, Inc., with and into Acquisition Sub, filed January 15, 2014 (incorporated by reference from Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

3.3		By-Laws of the Registrant (incorporated by reference from Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

3.4		Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, filed on December 23, 2015 (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 24, 2015)

3.5		Certificate of Amendment to Certificate of Designation of Series A Convertible Preferred Stock, filed on April 4, 2016 (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 7, 2016)

3.6		Certificate of Change of Ekso Bionics Holdings, Inc. effective May 4, 2016 (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 5, 2016)

3.7		Certificate of Amendment of Certificate of Incorporation of Ekso Bionics Holdings, Inc. (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 27, 2017)

4.1		Form of specimen certificate (incorporated by reference from Exhibit 4.4 to the Registrant’s Registration Statement on Form S-3 filed on June 23, 2015)

4.2		Form of Ekso Bionics’ Warrant to purchase shares of its common stock (converted under the Merger Agreement into warrants to purchase shares of the Registrant’s Common Stock) (incorporated by reference from Exhibit 10.24 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

4.3		Form of Warrant to purchase shares of the Registrant’s common stock (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 24, 2015)

4.4		Form of Amendment to Common Stock Purchase Warrant (incorporated by reference from Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed March 11, 2019)

4.5		Form of Warrant to Purchase Common Stock (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed September 19, 2017)

4.6		Form of Common Stock Purchase Warrant (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 20, 2019)

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4.7		Form of Placement Agent Common Stock Purchase Warrant (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 20, 2019)

4.8		Form of Warrant (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 30, 2019)

4.9*		Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10.1		Form of Registration Rights Agreement (incorporated by reference from Exhibit 10.10 of the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

10.2†		Amended and Restated 2014 Equity Incentive Plan (incorporated by reference from Appendix A to the Registrant’s Proxy Statement on Schedule 14A filed on April 30, 2019)

10.3		Form of Director Option Agreement under 2014 Equity Incentive Plan (incorporated by reference from Exhibit 10.13 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

10.4†		Form of Employee Option Agreement under 2014 Equity Incentive Plan (incorporated by reference from Exhibit 10.14 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

10.5†		Form of Employee Restricted Stock Unit Award under 2014 Equity Incentive Plan (incorporated by reference from Exhibit 10.46 to the Registrant’s Quarterly Report on Form 10-Q filed August 7, 2017)

10.6†		2017 Employee Stock Purchase Plan (incorporated by reference from Appendix A to Registrant’s Proxy Statement on Schedule 14 filed on April 28, 2017)

10.7†		Jack Glenn Offer Letter dated July 24, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 13, 2018)

10.8†		Jack Glenn Employment Agreement effective August 13, 2018 (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed August 13, 2018)

10.9†		Steven Sherman Offer Letter dated October 30, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 5, 2018)

10.10†		Jack Peurach Employment Agreement dated August 7, 2018 (incorporated by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed November 7, 2018)

10.11†* **		Jason Jones Offer Letter dated September 19, 2018

10.12†		William Shaw Offer Letter dated April 2, 2019 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 6, 2019)

10.13		Exclusive License Agreement, dated as of November 15, 2005, by and between The Regents of the University of California and Berkeley ExoTech, Inc., d/b/a Berkeley ExoWorks (incorporated by reference from Exhibit 10.19 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

10.14		Exclusive License Agreement, dated as of July 14, 2008, by and between The Regents of the University of California and Berkeley ExoTech, Inc., d/b/a/ Berkeley Bionics and formerly d/b/a Berkeley ExoWorks (as amended by Amendment #1 to Exclusive License Agreement, dated as of May 20, 2009, by and between The Regents of the University of California and Berkeley Bionics) (incorporated by reference from Exhibit 10.20 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

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10.15**		Government Field Cross License Agreement dated as of July 1, 2013 between Ekso Bionics and Lockheed Martin Corporation (incorporated by reference from Exhibit 10.25 to the Amendment No. 2 to the Registrations’ Current Report on Form 8-K filed March 31, 2014)

10.16**		Medical License Agreement dated as of July 1, 2013 between Ekso Bionics and Lockheed Martin Corporation (incorporated by reference from Exhibit 10.26 to the Amendment No. 2 to the Registrations’ Current Report on Form 8-K filed March 31, 2014)

10.17**		Cross License Agreement dated as of July 1, 2013 between Ekso Bionics and Lockheed Martin Corporation (incorporated by reference from Exhibit 10.27 to the Amendment No. 2 to the Registrations’ Current Report on Form 8-K filed March 31, 2014)

10.18†		Form of Non-Employee Director Indemnification Agreement (incorporated by reference from Exhibit 10.20 to the Registrant’s Quarterly Report on Form 10-Q filed on May 13, 2014)

10.19†		Form of Executive Officer Indemnification Agreement (incorporated by reference from Exhibit 10.21 to the Registrant’s Quarterly Report on Form 10-Q filed on May 13, 2014)

10.20		Securities Purchase Agreement dated December 23, 2015, between Ekso Bionics Holdings, Inc. and each purchaser thereto (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 24, 2015)

10.21		Form of Amendment to Securities Purchase Agreement (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed April 7, 2016)

10.22		Form of Amendment to Purchase Agreement (incorporated by reference from Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed March 11, 2019)

10.23		Form of Waiver of Subsequent Equity Sale Prohibition (incorporated by reference from Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed August 21, 2018)

10.24		Purchase Agreement, dated as of July 19, 2017, by and between Ekso Bionics Holdings, Inc. and Puissance Cross-Border Opportunities II LLC (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July 25, 2017)

10.25		Registration Rights Agreement, dated as of July 19, 2017, by and between Ekso Bionics Holdings, Inc. and Puissance Cross-Border Opportunities II LLC (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed July 25, 2017)

10.26		Form of Securities Purchase Agreement (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 20, 2019)

10.27		Lease, dated November 29, 2011, between FPOC, LLC and Berkeley Bionics, Inc dba Ekso Bionics (incorporated by reference from Exhibit 10.21 to the Registrant’s Current Report on Form 8-K filed on January 23, 2014)

10.28*		First Amendment to Lease Agreement, dated March 28, 2012, between FPOC LLC and Berkeley Bionics, Inc. DBA Ekso Bionics, Inc.

10.29		Second Amendment to Lease Agreement dated November 5, 2016, between FPOC, LLC and Ekso Bionics, Inc. (incorporated by reference from Exhibit 10.38 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016)

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10.30		Loan and Security Agreement dated as of December 30, 2016 by and among the Registrant, Ekso Bionics, Inc. and Western Alliance Bank (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed January 6, 2017)

10.31		Success Fee Agreement dated as of December 30, 2016 by and among the Registrant, Ekso Bionics, Inc. and Western Alliance Bank (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed January 6, 2017)

10.32		First Amendment to Loan and Security Agreement, dated as August 3, 2017, by and among EKSO Bionics Holdings, Inc., EKSO Bionics, Inc. and Western Alliance Bank (incorporated by reference from Exhibit 10.48 to the Registrant’s Quarterly Report on Form 10-Q filed August 7, 2017)

10.33		Agreement for Consulting Services between Ekso Bionics Holdings, Inc and Angel Pond Capital, LLC, dated July 2017 (incorporated by reference from Exhibit 10.36 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018)

10.34**		Equity Joint Venture Contract, dated January 30, 2019, by and among Ekso Bionics Holdings, Inc., Ekso Bionics, Inc., a wholly-owned subsidiary of Ekso Bionics Holdings, Inc., Zhejiang Youchuang Venture Capital Investment Co., Ltd. and Shaoxing City Keqiao District Paradise Silicon Intelligent Robot Industrial Investment Partnership (incorporated by reference to Exhibit 10.1 on the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 1, 2019).

10.35**		Amendment to the Joint Venture Contract of Exoskeleton Intelligent Robotics Co. Limited, dated April 30, 2019, by and among Ekso Bionics Holdings, Inc., Ekso Bionics, Inc., a wholly-owned subsidiary of Ekso Bionics Holdings, Inc., Zhejiang Youchuang Venture Capital Investment Co., Ltd. and Shaoxing City Keqiao District Paradise Silicon Intelligent Robot Industrial Investment Partnership (incorporated by reference to Exhibit 10.2 on the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 1, 2019).

10.36		Share Purchase Agreement, dated January 30, 2019, between Ekso Bionics Holdings, Inc., Ekso Bionics, Inc., a wholly-owned subsidiary of Ekso Bionics Holdings, Inc. and the parties listed thereto. (incorporated by reference to Exhibit 10.2 on the Company's Quarterly Report on Form 10-Q filed with the SEC on May 1, 2019)

10.37* **		Technology License Agreement, dated October 22, 2019, between Ekso Bionics Holdings, Inc., Ekso Bionics, Inc., a wholly-owned subsidiary of Ekso Bionics Holdings, Inc. and Eksoskeleton Intelligent Robotics Co. Limited

21.1*		Subsidiaries of the Registrant

23.1*		Consent of Independent Registered Public Accounting Firm

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1*		Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101 §*	Interactive Data Files of Financial Statements and Notes.
101.ins §*	Instant Document
101.sch §*	XBRL Taxonomy Schema Document
101.cal §*	XBRL Taxonomy Calculation Linkbase Document
101.def §*	XBRL Taxonomy Definition Linkbase Document
101.lab §*	XBRL Taxonomy Label Linkbase Document
101.pre §*	XBRL Taxonomy Presentation Linkbase Document

* Filed herewith


**	Confidential Treatment portions of this exhibit have been omitted as permitted by applicable regulations.

† Management contract or compensatory plan or arrangement

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SIGNATURES

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



	By:	/S/ Jack Peurach
February 27, 2020		President and Chief Executive Officer (Principal Executive Officer)

POWERS OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and Jack Peurach and John F. Glenn, and each of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/S/ Jack Peurach	President and Chief Executive Officer	February 27, 2020
Jack Peurach	(Principal Executive Officer)

/S/ John F. Glenn	Chief Financial Officer	February 27, 2020
John F. Glenn	(Principal Accounting and Financial Officer)

/S/ Steven Sherman	Chairman of the Board	February 27, 2020
Steven Sherman

/S/ Marilyn Hamilton	Director	February 27, 2020
Marilyn Hamilton

/S/ Charles Li	Director	February 27, 2020
Charles Li

/S/ Thomas A. Schreck	Director	February 27, 2020
Thomas A. Schreck

/S/ Stanley Stern	Director	February 27, 2020
Stanley Stern

/S/ Ted Wang	Director	February 27, 2020
Ted Wang