ekso-20200930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________________


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

For the quarterly period ended September 30, 2020


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

For the transition period from ______ to ______

Commission File Number: 001-37854

____________________________________________________________________________________________

Ekso Bionics Holdings, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________________


Nevada						99-0367049
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


1414 Harbour Way South, Suite 1201 Richmond, CA						94804
(Address of principal executive offices)						(Zip Code)

(510) 984-1761

(Registrant’s telephone number, including area code)

________________________________

(Former name, former address, and former fiscal year, if changed since last report)

____________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Name of each exchange on which registered:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

EKSO

Nasdaq Capital Market

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 x 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 x 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.

Table of Contents


Large accelerated filer ¨	Accelerated filer	☒

Non-accelerated filer ¨	Smaller reporting company	☒

	Emerging growth company	☐

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

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

The number of shares of registrant’s common stock outstanding as of October 26, 2020 was 8,316,308.

Table of Contents

Ekso Bionics Holdings, Inc.

Quarterly Report on Form 10-Q

Table of Contents


		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2020 and 2019 (unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months ended September 30, 2020 and 2019 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2020 and 2019 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	42

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 5.	Other Information	36

Item 6.	Exhibits	45

	Signatures	46

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Ekso Bionics Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value)


	September 30, 2020		December 31, 2019
	(unaudited)		(Note 2)
Assets
Current assets:
Cash	$	14,549	$	10,872
Accounts receivable, net of allowances of $20 and $121, respectively	4,450		5,208
Inventories, net	2,180		2,489
Prepaid expenses and other current assets	370		238
Total current assets	21,549		18,807
Property and equipment, net	1,033		1,657
Right-of-use assets	786		1,084
Goodwill	—		189
Other assets	118		178
Total assets	$	23,486	$	21,915
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,813	$	1,903
Accrued liabilities	1,566		1,683
Deferred revenues, current	1,448		1,492
Notes payable, net, current	—		2,333
Lease liabilities, current	406		421
Total current liabilities	5,233		7,832
Deferred revenues	1,810		1,789
Notes payable, net	3,079		407
Lease liabilities	373		711
Warrant liabilities	4,560		4,307
Other non-current liabilities	30		72
Total liabilities	15,085		15,118
Commitments and contingencies (Note 16)
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2020 and December 31, 2019	—		—
Common stock, $0.001 par value; 141,429 shares authorized; 8,316 and 5,795 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	8		6
Additional paid-in capital	203,905		190,019
Accumulated other comprehensive (loss) income	(385)		50
Accumulated deficit	(195,127)		(183,278)
Total stockholders’ equity	8,401		6,797
Total liabilities and stockholders’ equity	$	23,486	$	21,915

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

Table of Contents

Ekso Bionics Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue	$	2,897	$	3,319	$	6,628	$	10,197
Cost of revenue	1,084		1,569		2,919		5,288
Gross profit	1,813		1,750		3,709		4,909

Operating expenses:
Sales and marketing	1,740		2,818		5,972		8,666
Research and development	599		1,149		1,762		4,032
General and administrative	1,706		1,573		5,836		6,011
Impairment of goodwill	189		—		189		—
Restructuring	—		—		244
Total operating expenses	4,234		5,540		14,003		18,709

Loss from operations	(2,421)		(3,790)		(10,294)		(13,800)

Other income (expense), net:
Interest expense	(23)		(88)		(113)		(316)
Gain (loss) on revaluation of warrant liabilities	4,476		4,430		(1,579)		6,045
Loss on modification of warrant	—		—		—		(257)
Warrant issuance expense	—		—		(329)		(706)
Other income (expense), net	420		(346)		466		(377)
Total other income (expense), net	4,873		3,996		(1,555)		4,389

Net income (loss)	$	2,452	$	206	$	(11,849)	$	(9,411)
Other comprehensive (loss) income	(415)		324		(435)		366
Comprehensive income (loss)	$	2,037	$	530	$	(12,284)	$	(9,045)

Basic net income (loss) per share applicable to common shareholders	$	0.30	$	0.04	$	(1.75)	$	(2.01)
Diluted net (loss) income per share applicable to common shareholders	$	(0.01)	$	0.04	$	(1.78)	$	(2.01)

Weighted average number of shares outstanding, basic	8,236		4,996		6,772		4,684
Weighted average number of shares outstanding, diluted	8,379		4,997		6,829		4,684

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

Table of Contents

Ekso Bionics Holdings, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

Equity

(In thousands)

(Unaudited)


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ (Deficit) Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2019	—	$	—	5,795	$	6	$	190,019	$	50	$	(183,278)	$	6,797
Net loss	—	—		—	—		—		—		(2,534)		(2,534)
Issuance of common stock under:
Matching contribution to 401(k) plan	—	—		26	—		155		—		—		155
In lieu of cash compensation	—	—		9	—		50		—		—		50
Shares issued as a result of rounding due to reverse-stock split	—	—		13	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		587		—		—		587
Foreign currency translation adjustments	—	—		—	—		—		173		—		173
Balance at March 31, 2020	—	—		5,843	6		190,811		223		(185,812)		5,228
Net loss	—			—	—		—		—		(11,767)		(11,767)
Issuance of common stock under:
Equity financing, net	—	—		1,748	2		7,080		—		—		7,082
Exercise of warrants	—	—		223	—		1,436		—		—		1,436
Issuance of warrants	—	—		—	—		(2,322)		—		—		(2,322)
Stock-based compensation expense	—	—		—	—		508		—		—		508
Foreign currency translation adjustments	—	—		—	—		—		(193)		—		(193)
Balance at June 30, 2020	—	—		7,814	8		197,513		30		(197,579)		(28)
Net income	—	—		—	—		—		—		2,452		2,452
Issuance of common stock under:													—
Equity incentive plan	—	—		2	—		—		—		—		—
Exercise of warrants	—	—		500	—		5,875		—		—		5,875
Stock-based compensation expense	—	—		—	—		517		—		—		517
Foreign currency translation adjustments	—	—		—	—		—		(415)		—		(415)
Balance at September 30, 2020	—	$	—	8,316	$	8	$	203,905	$	(385)	$	(195,127)	$	8,401

Table of Contents


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2018	—	$	—	4,198	$	4	$	173,962	$	(92)	$	(171,146)	$	2,728
Net loss	—	—		—	—		—		—		(6,551)		(6,551)
Issuance of common stock under:
Equity financing, net	—	—		291	—		7,305		—		—		7,305
Equipois sales earn-out	—	—		1	—		22		—		—		22
Equity incentive plan	—	—		3	—		55		—		—		55
Matching contribution to 401(k) plan	—	—		9	—		191		—		—		191
Stock-based compensation expense	—	—		—	—		636		—		—		636
Foreign currency translation adjustments	—	—		—	—		—		148		—		148
Balance at March 31, 2019	—	—		4,502	4		182,171		56		(177,697)		4,534
Net loss	—	—		—	—		—		—		(3,066)		(3,066)
Issuance of common stock under:
Equity financing, net	—	—		444	—		2,393		—		—		2,393
Equipois sales earn-out	—	—		9	—		173		—		—		173
Equity incentive plan	—	—		37	—		919		—		—		919
Stock-based compensation expense	—	—		—	—		557		—		—		557
Foreign currency translation adjustments	—	—		—	—		—		(106)		—		(106)
Balance at June 30, 2019	—	—		4,992	4		186,213		(50)		(180,763)		5,404
Net income	—	—		—	—		—		—		206		206
Issuance of common stock under:	—	—											—
Equity incentive plan	—	—		4	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		487		—		—		487
Foreign currency translation adjustments	—	—		—	—		—		324		—		324
Balance at September 30, 2019	—	$	—	4,996	$	4	$	186,700	$	274	$	(180,557)	$	6,421

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

Table of Contents

Ekso Bionics Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
Operating activities:
Net loss	$	(11,849)	$	(9,411)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	465		519
Provision for excess and obsolete inventories	101		29
Changes in allowance for doubtful accounts	43		63

Loss of impairment of goodwill	189		—
Loss (gain) on revaluation of warrant liabilities	1,579		(6,045)
Finance cost attributable to issuance of warrants	329		706
Stock-based compensation expense	1,612		1,680
Amortization of debt discount, change in contingent liability and accretion of final payment fee	27		56
Gain on modification of operating lease liabilities	(38)		—
Loss on investment of unconsolidated affiliate	66		—
Common stock contribution to 401(k) plan	155		113
Loss on modification of warrants	—		257
Unrealized (gain) loss on foreign currency transactions	(424)		384
Changes in operating assets and liabilities:
Accounts receivable	715		(1,608)
Inventories	368		195
Prepaid expenses, operating lease right-of-use assets, and other assets current and noncurrent	169		95
Accounts payable	(90)		(1,772)
Accrued and lease liabilities	(409)		(185)
Deferred revenues	(23)		647
Net cash used in operating activities	(7,015)		(14,277)
Investing activities:
Acquisition of property and equipment	—		(60)
Net cash used in investing activities	—		(60)
Financing activities:
Proceeds from issuance of common stock and warrants, net	7,082		16,325
Principal payments on note payable	(1,278)		(1,783)
Payment of remaining balance of long-term debt	(1,512)		—
Proceeds from issuance of long-term debt, net	3,078		—
Proceeds from exercise of warrants, net	3,334		—
Proceeds from exercise of stock options	—		228
Net cash provided by financing activities	10,704		14,770
Effect of exchange rate changes on cash	(12)		(30)
Net increase in cash	3,677		403
Cash at beginning of period	10,872		7,655
Cash at end of period	$	14,549	$	8,058

Table of Contents



Supplemental disclosure of cash flow activities
Cash paid for interest	$	86	$	255
Cash paid for income taxes	6		8


Supplemental disclosure of non-cash activities
Initial recognition of operating lease right-of-use assets	$	—	$	1,454
Initial recognition of operating lease liabilities	—		1,498
Transfer of inventory to property and equipment	(160)		(195)
Share issuance for common stock contribution to 401(k) plan	155		191
Share issuance in lieu of cash compensation	50		919
Equipois sales earn-out	—		22

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

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

1. Organization

Description of Business

The “Company”, “we”, “its” and “our” refers to Ekso Bionics Holdings, Inc. and its wholly-owned subsidiaries. The Company designs, develops, sells, and rents 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 users as well as by persons with physical disabilities. The Company has sold and rented 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. Founded in 2005, the Company is headquartered in the San Francisco Bay area and listed on the Nasdaq Capital Market under the symbol “EKSO”.

All common stock share and per share amounts have been adjusted to reflect the one-for-fifteen reverse stock split effected on March 24, 2020. See Note 13, Capitalization and Equity Structure – Reverse Stock Split.

Liquidity and Going Concern

As of September 30, 2020, the Company had an accumulated deficit of $195,127. Largely as a result of significant research and development activities related to the development of the Company’s advanced technology and commercialization of such technology into its medical device business, the Company has incurred significant operating losses and negative cash flows from operations since inception. In the nine months ended September 30, 2020, the Company used $7,015 of cash in its operations and had cash on hand of $14,549 as of September 30, 2020.

In 2020, management has taken several actions to alleviate the substantial doubt about the Company’s ability to continue as a going concern that existed as of the date of issuance of the December 31, 2019 consolidated financial statements, including, but not limited to, the following:

•streamlined the Company's operations and reduced its workforce by approximately 35% to lower operating expenses and reduce cash burn;

•conducted a registered direct offering for net proceeds of $7,082;

•paid off the entire amount of $1,512 of the Company's indebtedness to Western Alliance Bank with proceeds from a new loan of $2,000 from Pacific Western Bank. The terms of the new loan agreement include monthly interest-only payments over the next three years.

•invested in the development and reliability of its products;

•restructured the Company's commercial organization and strategy which is showing continued adoption; and

•received clearance from the U.S. Food and Drug Administration ("FDA") for Acquired Brain Injury ("ABI") to market the Company's product to a larger patient population increasing the value proposition to its customers.

The Company also received proceeds of $3,334 from warrant exercises in the nine months ended September 30, 2020.

As described in Note 11, Notes payable, net, borrowings under the Company’s new secured term loan agreement with Pacific Western Bank have a liquidity covenant requiring minimum cash on hand equivalent to the current outstanding principal balance. As of September 30, 2020, $2,000 of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of September 30, 2020 is estimated to be $12,549. With this unrestricted cash balance and the impact of management's actions described above, the Company believes that it currently has sufficient cash to fund its operations beyond the look forward period of one year from the issuance of these condensed consolidated financial statements.

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) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use. Consequently, the Company may require significant additional financing in the future, which the Company intends to raise through corporate collaborations, public or private equity offerings, debt financings, or warrant solicitations. Sales of additional equity securities by the Company could

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, 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. Basis of Presentation and Summary of Significant Accounting Policies and Estimates

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on February 27, 2020.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the audited consolidated financial statements for the fiscal year ended December 31, 2019, which included an explanatory paragraph expressing substantial doubt about the Company’s ability to continue as a going concern in the report of the Company’s independent registered public accounting firm, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein.

Certain reclassifications have been made to the amounts in prior periods to conform to the current period’s presentation.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods.

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. The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information, including the potential future effects of COVID-19. Actual results could differ from those estimates. Management regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes.

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 as a component of stockholders’ (deficit) 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 condensed consolidated statements of operations and comprehensive loss.

Inventory

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

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

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 condensed 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.

Impairment of Goodwill

Impairment of goodwill is calculated using the simplified method, whereby the Company compares the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds the carrying value of its net assets, goodwill is not considered impaired. If the carrying value of net assets exceeds the fair value of the reporting unit, then goodwill is considered impaired and an impairment charge equal to that difference is recorded.

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.

Revenue Recognition

The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and rental of the EksoNR and EksoGT, associated software (SmartAssist and VariableAssist), the sale and rental 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 rentals is recognized over the rental term, typically over 12 months.

The Company’s industrial device segment (EksoWorks) revenue is generated through the sale and rental of the upper body exoskeleton (EksoVest) and the support arm (EksoZeroG). Revenue from industrial device sales is recognized at the point in

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility. Revenue from industrial device rentals is recognized over the rental term, typically over 12 months.

Refer to Note 8, Revenue Recognition for further information, including revenue disaggregated by source.

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 nine months ended September 30, 2020 and prior periods. The Company does not expect to recognize revenue until December 31, 2021.

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. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

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 its 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, most of which are hospitals or other large nationally recognizable institutions, in the normal course of business. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the condensed 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 to and services performed for customers. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectability and records an allowance for credit losses, as needed. The Company has not experienced any material losses related to accounts receivable as of September 30, 2020 and December 31, 2019.

Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency. The Company does not enter into any foreign currency 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 foreign currency denominated accounts receivable.

At September 30, 2020, the Company had two customers with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable (10% and 15%), as compared with one customer at December 31, 2019 (11%).

During the three months ended September 30, 2020, the Company had one customer with sales of 10% or more of the Company’s total revenue (13%), as compared with one customer in the three months ended September 30, 2019 (12%).

During the nine months ended September 30, 2020, the Company had no customers with sales of 10% or more of the Company’s total revenue, as compared with one customer in the nine months ended September 30, 2019 (19%).

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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, ASU 2019-05 and ASU 2019-10, 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 will be effective for the Company in 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.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is effective for the Company beginning in the first quarter of 2022 and must be applied using either a modified or full retrospective approach. Early adoption is permitted, but no earlier than annual periods beginning after December 15, 2020. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

Accounting Pronouncements Adopted in 2020

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation of the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted the new guidance as of January 1, 2020, which reduced the complexity surrounding the evaluation of goodwill for impairment. The adoption of this guidance did not have a material impact on the Company's condensed 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 became effective for the Company in the first quarter of 2020. The Company adopted ASU 2018-03 as of January 1, 2020. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements and related disclosures.

3. Restructuring

In May of 2020, the Company streamlined its operations and reduced its workforce by approximately 35% to lower operating expenses and reduce cash burn. The restructuring plan was completed by the end of the second quarter of 2020.

The Company recorded restructuring expense of $244 for the nine months ended September 30, 2020 comprised of employee severance payments. As of September 30, 2020, there was no accrued restructuring cost remaining on the Company’s condensed consolidated balance sheets.

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

4. Goodwill

The Company previously maintained a goodwill balance as a result of a prior acquisition of intangible assets from Equipois, LLC in December 2015 consisting of mechanical balance and support arms technologies, including the rights to the ZeroG product.

As a result of declining sales and gross margin and overall uncertainty about the future of the ZeroG product line, the Company performed an impairment assessment of goodwill utilizing the simplified method, which lead to in an impairment of goodwill of $189 reducing the goodwill balance to zero. In estimating the fair value, the Company utilized a discount cash flow model, which is dependent on a number of assumptions, most significantly forecasted revenues and operation profit margins. The following table sets forth the changes to goodwill for the nine months ended September 30, 2020:


	Goodwill
Balance at December 31, 2019	$	189
Loss on impairment of goodwill	(189)
Balance at September 30, 2020	$	—

5. Accumulated Other Comprehensive Income (Loss)

The following table sets forth the changes to accumulated comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2020:


	Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019	$	50
Net unrealized loss on foreign currency translation	(435)
Balance at September 30, 2020	$	(385)

6. Fair Value Measurements

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.

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

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


	Total		Level 1		Level 2		Level 3
September 30, 2020
Liabilities
Warrant liabilities	$	4,560	$	—	$	—	$	4,560


December 31, 2019
Liabilities
Warrant liabilities	$	4,307	$	—	$	—	$	4,307
Contingent success fee liability	$	6	$	—	$	—	$	6

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2020, which were measured at fair value on a recurring basis:


	Warrant Liability		Contingent Success Fee Liability
Balance at December 31, 2019	$	4,307	$	6
Initial valuation of warrants in connection with June 2020 financing	2,650		—
Loss on revaluation of warrants issued in connection with the June 2020, December 2019, May 2019, and December 2015 equity financings	1,579		—
Gain on revaluation of contingent liability	—		(6)
Reclassification of warrant liability to equity upon exercise of warrants	(3,976)		—
Balance at September 30, 2020	$	4,560	$	—

Refer to Note 13. Capitalization and Equity Structure – Warrants for additional information regarding the valuation of warrants.

7. Inventories, net

Inventories consisted of the following:


	September 30, 2020		December 31, 2019
Raw materials	$	2,020	$	2,208
Work in progress	—		29
Finished goods	160		252


Inventories, net	$	2,180	$	2,489

8. 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.

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

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 rental of its products, the Company generally recognizes revenue over the rental 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 for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.

Deferred revenue consisted of the following:


	September 30, 2020		December 31, 2019
Deferred extended maintenance and support	$	2,823	$	2,837
Deferred royalties	282		290
Deferred device and rental revenues	146		131
Customer deposits and advances	7		23
Total deferred revenues	3,258		3,281
Less current portion	(1,448)		(1,492)
Deferred revenues, non-current	$	1,810	$	1,789

Deferred revenue activity consisted of the following for the nine months ended September 30, 2020:



Beginning balance	$	3,281
Deferral of revenue	1,256
Recognition of deferred revenue	(1,279)
Ending balance	$	3,258

As of September 30, 2020, the Company’s deferred revenue was $3,258. Excluding customer deposits, the Company expects to recognize approximately $507 of the deferred revenue during the remainder of 2020, $1,244 in 2021, and $1,507 thereafter.

In addition to deferred revenue, the Company has non-cancellable backlog of $504 related to its contracts for rental units with its customers. These rental contracts are classified as operating leases, typically with 12-month lease terms, and rental income is recognized on a straight-line basis over the lease term.

As of September 30, 2020, and December 31, 2019, accounts receivable, net of allowance for doubtful accounts, were $4,450 and $5,208, respectively, and are included in current assets on the Company’s condensed 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.

Table of Contents

Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

($ and share amounts in thousands, except per share amounts)

(Unaudited)

Disaggregation of revenue

The following table disaggregates the Company’s revenue by major source for the three months ended September 30, 2020:


	EksoHealth		EksoWorks		Total
Device sales	$	2,018	$	127	$	2,145
Service and support	455		—		455
Rentals	178		7		185
Parts and other	32		24		56
Collaborative arrangements	56		—		56
	$	2,739	$	158	$	2,897

The following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2020:


	EksoHealth		EksoWorks		Total
Device sales	$	3,706	$	543	$	4,249
Service and support	1,170		—		1,170
Rentals	656		10		666
Parts and other	255		60		315
Collaborative arrangements	228		—		228
	$	6,015	$	613	$	6,628

The following table disaggregates the Company’s revenue by major source for the three months ended September 30, 2019:


	EksoHealth		EksoWorks		Total
Device sales	$	2,449	$	289	$	2,738
Service and support	67		—		67
Rentals	208		—		208
Parts and other	257		31		288
Collaborative arrangements	18		—		18