ekso-20210930

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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, 2021


☐			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.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

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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 29, 2021 was 12,663,717.

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Ekso Bionics Holdings, Inc.

Quarterly Report on Form 10-Q

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		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2021 and 2020 (unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2021 and 2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 6.	Exhibits	39

	Signatures	40

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Ekso Bionics Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value)


	September 30, 2021		December 31, 2020
	(unaudited)		(Note 2)
Assets
Current assets:
Cash	$	43,439	$	12,862
Accounts receivable, net of allowances of $2 and $42, respectively	3,121		3,224
Inventories	1,751		1,978
Prepaid expenses and other current assets	788		356
Total current assets	49,099		18,420
Property and equipment, net	1,172		1,172
Right-of-use assets	337		685
Other assets	125		320
Total assets	$	50,733	$	20,597
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,308	$	1,501
Accrued liabilities	1,704		1,429
Deferred revenues, current	1,291		1,496

Lease liabilities, current	372		548
Total current liabilities	4,675		4,974
Deferred revenues	1,449		1,806
Notes payable, net	1,992		3,075

Warrant liabilities	3,501		6,037
Other non-current liabilities	54		271
Total liabilities	11,671		16,163
Commitments and contingencies (Note 13)
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2021 and December 31, 2020	—		—
Common stock, $0.001 par value; 141,429 shares authorized; 12,664 and 8,349 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	13		8
Additional paid-in capital	245,299		204,376
Accumulated other comprehensive loss	(246)		(847)
Accumulated deficit	(206,004)		(199,103)
Total stockholders’ equity	39,062		4,434
Total liabilities and stockholders’ equity	$	50,733	$	20,597

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

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Ekso Bionics Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	3,049	$	2,897	$	7,170	$	6,628
Cost of revenue	1,242		1,084		2,836		2,919
Gross profit	1,807		1,813		4,334		3,709

Operating expenses:
Sales and marketing	1,685		1,740		5,265		5,972
Research and development	618		599		1,930		1,762
General and administrative	2,293		1,706		6,415		5,836
Impairment of goodwill	—		189		—		189
Restructuring	—		—		—		244
Total operating expenses	4,596		4,234		13,610		14,003

Loss from operations	(2,789)		(2,421)		(9,276)		(10,294)

Other income (expense), net:
Interest expense	(24)		(23)		(77)		(113)
Gain (loss) on revaluation of warrant liabilities	1,125		4,476		2,011		(1,579)
Warrant issuance expense	—		—		—		(329)
Gain on forgiveness of note payable	—		—		1,099		—
Other (expense) income, net	(270)		420		(658)		466
Total other income (expense), net	831		4,873		2,375		(1,555)

Net (loss) income	$	(1,958)	$	2,452	$	(6,901)	$	(11,849)
Other comprehensive income (loss)	261		(415)		601		(435)
Comprehensive (loss) income	$	(1,697)	$	2,037	$	(6,300)	$	(12,284)

Net (loss) income per share applicable to common shareholders, basic	$	(0.15)	$	0.30	$	(0.57)	$	(1.75)
Net loss per share applicable to common shareholders, diluted	$	(0.17)	$	(0.01)	$	(0.62)	$	(1.78)

Weighted average number of shares outstanding, basic	12,661		8,236		12,029		6,772
Weighted average number of shares outstanding, diluted	12,710		8,379		12,133		6,829

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

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Ekso Bionics Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	—	$	—	8,349	$	8	$	204,376	$	(847)	$	(199,103)	$	4,434
Net loss	—	—		—	—		—		—		(3,670)		(3,670)
Issuance of common stock under:
Equity financing, net	—	—		3,980	4		35,356		—		—		35,360
Exercise of warrants	—	—		300	1		3,877		—		—		3,878
Matching contribution to 401(k) plan	—	—		26	—		152		—		—		152
Stock-based compensation expense	—	—		—	—		356		—		—		356
Foreign currency translation adjustments	—	—		—	—		—		465		—		465
Balance at March 31, 2021	—	—		12,655	13		244,117		(382)		(202,773)		40,975
Net loss	—	—		—	—		—		—		(1,273)		(1,273)
Stock-based compensation expense	—	—		—	—		519		—		—		519
Foreign currency translation adjustments	—	—		—	—		—		(125)		—		(125)
Balance at June 30, 2021	—	—		12,655	13		244,636		(507)		(204,046)		40,096
Net loss	—	—		—	—		—		—		(1,958)		(1,958)
Issuance of common stock under:
Equity incentive plan	—	—		9	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		663		—		—		663
Foreign currency translation adjustments	—	—		—	—		—		261		—		261
Balance at September 30, 2021	—	—		12,664	$	13	$	245,299	$	(246)	$	(206,004)	$	39,062

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	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ 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 loss	—	—		—	—		—		—		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

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

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Ekso Bionics Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net loss	$	(6,901)	$	(11,849)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	431		465
Changes in allowance for doubtful accounts	48		43
Gain on forgiveness of note payable	(1,099)		—
Loss on impairment of goodwill	—		189
(Gain) loss on revaluation of warrant liabilities	(2,011)		1,579
Finance cost attributable to issuance of warrants	—		329
Stock-based compensation expense	1,538		1,612
Common stock contribution to 401(k) plan	141		155
Other adjustments	3		55
Unrealized loss (gain) on foreign currency transactions	640		(424)
Changes in operating assets and liabilities:
Accounts receivable	(10)		715
Inventories	(171)		469
Prepaid expenses, right-of-use assets, and other assets current and noncurrent	97		169
Accounts payable	(189)		(90)
Accrued, lease and other noncurrent liabilities	(70)		(409)
Deferred revenues	(528)		(23)
Net cash used in operating activities	(8,081)		(7,015)
Investing activities:
Acquisition of equipment	(60)		—
Net cash used in investing activities	(60)		—
Financing activities:
Proceeds from issuance of common stock and warrants, net	37,295		7,082
Principal payments on note payable	—		(1,278)
Payment of remaining balance on long-term debt	—		(1,512)
Proceeds from issuance of long-term debt	—		3,078
Proceeds from exercise of warrants	1,417		3,334
Net cash provided by financing activities	38,712		10,704
Effect of exchange rate changes on cash	6		(12)
Net increase in cash	30,577		3,677
Cash at beginning of period	12,862		10,872
Cash at end of period	$	43,439	$	14,549

Supplemental disclosure of cash flow activities
Cash paid for interest	$	69	$	86
Cash paid for income taxes	—		6

Supplemental disclosure of non-cash activities
Fair value of warrants issued upon equity financing	$	1,936	$	—

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Reclassification of warrant liability to equity upon exercise of warrants	2,461	—
Transfer of inventory to (from) property and equipment	387	(160)
Share issuance for common stock contribution to 401(k) plan	152	155
Share issuance in lieu of cash compensation	—	50

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

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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

Ekso Bionics Holdings, Inc. (the “Company”) designs, develops, and markets exoskeleton products to augment human strength, endurance and mobility. The Company’s exoskeleton technology serves multiple markets and can be utilized both by able-bodied users and persons with physical disabilities. The Company has marketed devices that (i) enable individuals with neurological conditions affecting gait (acquired brain injury 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 10, Capitalization and Equity Structure – Reverse Stock Split.

Liquidity and Capital Resources

As of September 30, 2021, the Company had an accumulated deficit of $206,004. 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, 2021, the Company used $8,081 of cash in its operations. Cash on hand as of September 30, 2021 was $43,439.

As described in Note 8, Notes payable, net, borrowings under the Company’s 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, 2021, $2,000 of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of September 30, 2021 is approximately $41,439. With this unrestricted cash balance, 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.

2. Basis of Presentation and Summary of Significant Accounting Policies and Estimates

Basis of Presentation and Consolidation

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, 2020, which was filed with the SEC on February 25, 2021.

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, 2020, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or any future periods.

The condensed consolidated financial statements include the financial statements of Ekso Bionics Holdings, Inc. and its subsidiaries. All significant transactions and balances between Ekso Bionics Holdings, Inc. and its subsidiaries have been eliminated in consolidation.

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Use of Estimates

The preparation of the condensed 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 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 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 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 inventory.

Leases

At the inception of any lease arrangement, the Company determines whether the arrangement is or contains a lease under ASC 842 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 and lease liabilities, current.

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

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and subscription of the EksoNR, associated software (SmartAssist and VariableAssist), the sale and subscription of the EksoUE, the sale of accessories, and the sale of support and maintenance contracts (Ekso Care). In 2021, the Company moved to a customer subscription sales model and away from a rental sales model. Under the rental sales model, the Company offered customers a short term rental arrangement of its products to help bridge to a capital purchase since customers typically have challenges in obtaining approvals for capital expenditures. Subscription sales arrangements, however, bypass the customer capital purchase process, are intended to renew annually, and provide a long term revenue stream.

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, 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 evenly over the term of the contracts. Revenue from medical device subscriptions is recognized evenly over the initial contract term, typically over 12 months.

The Company’s industrial device segment (EksoWorks) revenue is generated through the sale and subscription of the upper body exoskeletons (EksoVest and the recently introduced EVO) 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. Revenue from industrial device subscriptions is recognized evenly over the contract term, typically 12 months.

The Company has exercised judgement to determine that straight-line is the most appropriate method of recognizing revenue for the aforementioned service and subscription contracts.

Refer to Note 6, Revenue Recognition for further information, including revenue disaggregated by source.

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 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. 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 and services performed for customers primarily located in the U.S., Europe, Asia, and Australia. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectability and provides an allowance for potential credit losses. The Company has not experienced material losses related to accounts receivable as of September 30, 2021 and December 31, 2020. 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 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 September 30, 2021, the Company had no customers with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable, as compared with two customers at December 31, 2020 (10% and 13%).

During the three months ended September 30, 2021, the Company had no customers with sales of 10% or more of the Company’s total revenue, as compared with one customer in the three months ended September 30, 2020 (13%).

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

During the nine months ended September 30, 2021 and 2020, the Company had no customers with sales of 10% or more of the Company’s total revenues.

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 condensed 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. The Company is currently evaluating the impact this guidance will have on its condensed consolidated financial statements.

3. Accumulated Other Comprehensive Loss

The Company's accumulated other comprehensive 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 condensed consolidated balance sheets for the nine months ended September 30, 2021 and 2020, is reflected in the table below net of tax:


	Nine Months Ended September 30,
	2021		2020
Balance at beginning of period	$	(847)	$	50
Net unrealized gain (loss) on foreign currency translation	601		(435)
Balance at end of period	$	(246)	$	(385)

4. 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.

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

•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
September 30, 2021
Liabilities
Warrant liabilities	$	3,501	$	—	$	—	$	3,501

December 31, 2020
Liabilities
Warrant liabilities	$	6,037	$	—	$	—	$	6,037

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the period ended September 30, 2021, which were measured at fair value on a recurring basis:


	Warrant Liability
Balance at December 31, 2020	$	6,037
Initial fair value of warrants in connection with 2021 financing	1,936
Gain on revaluation of warrants issued in connection with the February 2021, June 2020, December 2019 and May 2019 financings	(2,011)
Reclassification of warrant liability to equity upon exercise of warrants	(2,461)
Balance at September 30, 2021	$	3,501

Refer to Note 10. Capitalization and Equity Structure – Warrants for additional information regarding the valuation of warrants.

5. Inventories

Inventories consisted of the following:


	September 30, 2021		December 31, 2020
Raw materials	$	1,442	$	1,724
Work in progress	177		18
Finished goods	132		236


Inventories	$	1,751	$	1,978

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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, judgment is made to estimate the selling price based on market conditions and entity-specific factors including cost plus analyses, features and functionality of the product and/or services, the geography of the Company’s customers, and 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. The Company periodically validates the stand-alone selling price for performance obligations by evaluating whether changes in the key assumptions used to determine the stand-alone selling prices will have a significant effect on the allocation of transaction price between multiple performance obligations.

The Company exercised judgement to determine that a product returns reserve was not required as historical returns activity have not been material.

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 subscription of its products, the Company generally recognizes revenue over the subscription 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, 2021		December 31, 2020
Deferred extended maintenance and support	$	2,387	$	2,902
Deferred royalties	280		282
Deferred device and advances	73		118
Total deferred revenues	2,740		3,302
Less current portion	(1,291)		(1,496)
Deferred revenues, non-current	$	1,449	$	1,806

Deferred revenue activity consisted of the following for the nine months ended September 30, 2021:



Beginning balance	$	3,302
Deferral of revenue	799
Recognition of deferred revenue	(1,361)
Ending balance	$	2,740

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

As of September 30, 2021, the Company’s deferred revenue was $2,740. The Company expects to recognize approximately $443 of the deferred revenue during the remainder of 2021, $1,055 in 2022, and $1,242 thereafter.

In addition to deferred revenue, the Company has non-cancellable backlog of $1,103 related to its contracts for subscription units with its customers. These subscription contracts typically have 12-month terms and subscription income is recognized on a straight-line basis over the lease term.

As of September 30, 2021 and December 31, 2020, total accounts receivable, net of allowance for doubtful accounts, were $3,245 and $3,439, respectively, and are included in accounts receivable, net and other 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.

Disaggregation of revenue

The following table disaggregates the Company’s revenue by major source for the three months ended September 30, 2021:


	EksoHealth		EksoWorks		Total
Device revenue	$	1,791	$	240	$	2,031
Service and support	477		—		477
Subscriptions	173		66		239
Parts and other	233		27		260
Collaborative arrangements	42		—		42
	$	2,716	$	333	$	3,049

The following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2021:


	EksoHealth		EksoWorks		Total
Device revenue	$	3,900	$	625	$	4,525
Service and support	1,412		—		1,412
Subscriptions	510		188		698
Parts and other	427		51		478
Collaborative arrangements	57		—		57
	$	6,306	$	864	$	7,170

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

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)


	EksoHealth		EksoWorks		Total
Device revenue	$	2,018	$	127	$	2,145
Service and support	455		—		455
Rentals and subscriptions	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 revenue	$	3,706	$	543	$	4,249
Service and support	1,170		—		1,170
Rentals and subscriptions	656		10		666
Parts and other	255		60		315
Collaborative arrangements	228		—		228
	$	6,015	$	613	$	6,628

7. Accrued Liabilities

Accrued liabilities consisted of the following:


	September 30, 2021		December 31, 2020
Salaries, benefits and related expenses	$	1,515	$	1,194
Device warranty	157		188


Other	32		47
Total	$	1,704	$	1,429

The current portion of the device warranty liability is classified as a component of accrued liabilities, while the long-term portion of the device warranty liability is classified as a component of other non-current liabilities in the condensed consolidated balance sheets. A reconciliation of the changes in the device warranty liability for the three and nine months ended September 30, 2021 is as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2021
Balance at beginning of period	$	199	$	226
Additions for estimated future costs	68		185
Incurred costs	(56)		(200)
Balance at end of period	$	211	$	211

	Balance as of September 30, 2021
Current portion	$	157
Long-term portion	54
Total	$	211

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

8. Notes Payable, net

WAB and PWB Term Loans

WAB Term Loan

In December 2016, the Company entered into a loan agreement with Western Alliance Bank (the "WAB loan") and received a loan in the principal amount of $7,000 that bore interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The Company was required to pay accrued interest on the WAB 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 maturing on January 1, 2021. On April 29, 2020 the Company entered into a second amendment to the WAB loan to defer principal payments for three months beginning in May 2020, with adjustments when the principal payments resumed on August 1, 2020. During the three-month deferral period the Company was required to make interest only payments.

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 for the WAB loan of 8.49% for the year ended December 31, 2020. The final payment fee, debt issuance costs and the initial fair value of the success fee were accreted/amortized to interest expense using the effective interest method over the life of the loan.

PWB Term Loan

In August 2020, the Company entered into a new loan agreement (the "PWB Loan Agreement") with a different lender, Pacific Western Bank, and received a loan in the principal amount of $2,000 (the "PWB Term Loan") that bears interest on the outstanding daily balance at a rate equal to the greater of: (a) 0.50% above the variable rate of interest announced by the lender as its “prime rate” then in effect; or (b) 4.50%. The PWB 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 proceeds of the PWB Term Loan were used to pay off the entire amount of the Company's indebtedness on the WAB loan, which amounted to $1,512. Pursuant to the PWB Loan Agreement, the remainder of the PWB Term Loan proceeds may be used for general corporate purposes, which totaled $480, net of debt discounts and issuance costs.

The Company is required to pay accrued interest on the current loan on the 13th day of each month through and including August 13, 2023. The principal balance of the PWB Term Loan matures on August 13, 2023, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. The interest rate of the PWB Term Loan is subject to increase in the event of late payments and after occurrence of and during the continuation of an event of default. Upon maturity, all unpaid principal and accrued and unpaid interest shall be due and payable in full. The Company may elect to prepay the PWB Term Loan at any time, in whole or in part, without penalty or premium.

The PWB Loan Agreement contains a liquidity covenant, which requires 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 the outstanding balance of the PWB Term Loan, which was $2,000 as of September 30, 2021. On September 30, 2021, with cash on hand of $