ekso-20220930

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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, 2022


☐			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.)


101 Glacier Point, Suite A San Rafael, CA						94901
(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 November 1, 2022 was 13,142,418.

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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, 2022 (unaudited) and December 31, 2021	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 6.	Exhibits	41

	Signatures	42

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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, 2022		December 31, 2021
	(unaudited)		(Note 2)
Assets
Current assets:
Cash	$	29,180	$	40,406
Accounts receivable, net of allowances of $30 and $28, respectively	3,398		4,662
Inventories	3,508		2,242
Prepaid expenses and other current assets	668		485
Total current assets	36,754		47,795
Property and equipment, net	959		991
Right-of-use assets	1,374		216
Other assets	224		164
Total assets	$	39,311	$	49,166

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,387	$	3,107
Accrued liabilities	2,172		2,299
Deferred revenues, current	1,059		1,220
Note payable, current	1,996		—
Lease liabilities, current	244		229
Total current liabilities	7,858		6,855
Deferred revenues	1,032		1,475
Note payable, net	—		1,993
Lease liabilities	1,167		—
Warrant liabilities	539		1,550
Other non-current liabilities	101		74
Total liabilities	10,697		11,947
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, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 141,429 shares authorized; 13,127 and 12,693 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	13		13
Additional paid-in capital	247,884		246,090
Accumulated other comprehensive income (loss)	1,486		(17)
Accumulated deficit	(220,769)		(208,867)
Total stockholders’ equity	28,614		37,219
Total liabilities and stockholders’ equity	$	39,311	$	49,166

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,
	2022		2021		2022		2021
Revenue	$	3,329	$	3,049	$	9,361	$	7,170
Cost of revenue	1,643		1,242		4,825		2,836
Gross profit	1,686		1,807		4,536		4,334

Operating expenses:
Sales and marketing	1,742		1,685		5,212		5,265
Research and development	936		618		2,855		1,930
General and administrative	2,662		2,293		7,589		6,415


Total operating expenses	5,340		4,596		15,656		13,610

Loss from operations	(3,654)		(2,789)		(11,120)		(9,276)

Other (expense) income, net:
Interest expense	(34)		(24)		(90)		(77)
Gain on revaluation of warrant liabilities	112		1,125		1,011		2,011

Gain on forgiveness of note payable	—		—		—		1,099
Unrealized loss on foreign exchange	(732)		(268)		(1,704)		(640)
Other income (expense), net	4		(2)		1		(18)
Total other (expense) income, net	(650)		831		(782)		2,375

Net loss	$	(4,304)	$	(1,958)	$	(11,902)	$	(6,901)
Other comprehensive income	652		261		1,503		601
Comprehensive loss	$	(3,652)	$	(1,697)	$	(10,399)	$	(6,300)

Net loss per share applicable to common shareholders, basic	$	(0.33)	$	(0.15)	$	(0.92)	$	(0.57)
Net loss per share applicable to common shareholders, diluted	$	(0.33)	$	(0.17)	$	(0.92)	$	(0.62)

Weighted average number of shares outstanding, basic	13,071		12,661		12,896		12,029
Weighted average number of shares outstanding, diluted	13,071		12,710		12,896		12,133

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 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, 2021	—	$	—	12,693	$	13	$	246,090	$	(17)	$	(208,867)	$	37,219
Net loss	—	—		—	—		—		—		(4,620)		(4,620)
Issuance of common stock under:
Matching contribution to 401(k) plan	—	—		68	—		176		—		—		176
Equity incentive plan	—	—		83	—		—		—		—		—

Stock-based compensation expense	—	—		—	—		499		—		—		499
Foreign currency translation adjustments	—	—		—	—		—		212		—		212
Balance at March 31, 2022	—	$	—	12,844	$	13	$	246,765	$	195	$	(213,487)	$	33,486
Net loss	—	—		—	—		—		—		(2,978)		(2,978)
Issuance of common stock under:
Equity incentive plan	—	—		166	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		582		—		—		582
Foreign currency translation adjustments	—	—		—	—		—		639		—		639
Balance at June 30, 2022	—	$	—	13,010	$	13	$	247,347	$	834	$	(216,465)	$	31,729
Net loss	—	—		—	—		—		—		(4,304)		(4,304)
Issuance of common stock under:
Equity incentive plan	—	—		117	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		537		—		—		537
Foreign currency translation adjustments	—	—		—	—		—		652		—		652
Balance at September 30, 2022	—	$	—	13,127	$	13	$	247,884	$	1,486	$	(220,769)	$	28,614

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Ekso Bionics Holdings, Inc.

Condensed 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

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,
	2022		2021
Operating activities:
Net loss	$	(11,902)	$	(6,901)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	632		782
Changes in allowance for doubtful accounts	(11)		48
Gain on forgiveness of note payable	—		(1,099)

Gain on revaluation of warrant liabilities	(1,011)		(2,011)

Stock-based compensation expense	1,618		1,538
Common stock contribution to 401(k) plan	147		141

Unrealized loss on foreign currency transactions	1,704		640
Changes in operating assets and liabilities:
Accounts receivable	1,044		(10)
Inventories	(1,477)		(171)
Prepaid expenses and other assets, current and noncurrent	(277)		(251)
Accounts payable	(704)		(189)
Accrued, lease and other liabilities, current and noncurrent	(270)		(70)
Deferred revenues	(537)		(528)
Net cash used in operating activities	(11,044)		(8,081)
Investing activities:
Acquisition of property and equipment	(141)		(60)
Net cash used in investing activities	(141)		(60)
Financing activities:
Proceeds from issuance of common stock and warrants, net	—		37,295



Proceeds from exercise of warrants	—		1,417
Net cash provided by financing activities	—		38,712
Effect of exchange rate changes on cash	(41)		6
Net (decrease) increase in cash	(11,226)		30,577
Cash at beginning of period	40,406		12,862
Cash at end of period	$	29,180	$	43,439

Supplemental disclosure of cash flow activities
Cash paid for interest	$	88	$	69
Cash paid for income taxes	$	14	$	—

Supplemental disclosure of non-cash activities
Fair value of warrants issued upon equity financing	$	—	$	1,936
Reclassification of warrant liability to equity upon exercise of warrants	$	—	$	2,461
Transfer of inventory to property and equipment	$	192	$	387
Initial recognition of operating lease liabilities and right of use assets	$	1,459	$	—

Share issuance for common stock contribution to 401(k) plan	$	176	$	152

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 by persons with physical disabilities. The Company has marketed devices that (i) enable individuals with neurological conditions affecting gait, including acquired brain injury ("ABI") and multiple sclerosis ("MS"), and spinal cord injury ("SCI"), 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”.

Liquidity and Capital Resources

As of September 30, 2022, the Company had an accumulated deficit of $220,769. 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, 2022, the Company used $11,044 of cash in its operations. Cash on hand as of September 30, 2022 was $29,180.

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, 2022, $2,000 of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of September 30, 2022 is approximately $27,180. 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, 2021, which was filed with the SEC on February 24, 2022.

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, 2021, 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, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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.

Reclassifications

During the nine months ended September 30, 2022, the Company reclassified the amortization of operating lease right-of-use assets in its condensed consolidated statements of cash flows. Amounts amortized related to operating lease right-of-use assets

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

have been reclassified to "Depreciation and amortization" from "Prepaid expenses and other assets, current and noncurrent" as applicable. Accordingly, prior period amounts have been reclassified to conform to the current period presentation, in all material respects. These reclassifications did not affect changes in cash flow used in operating activities or net (decrease) in cash for the nine months ended September 30, 2021.

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, the valuation of warrants and employee equity awards, 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 materials. 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 inventory.

Leases

The Company records its leases in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842, Leases. 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.

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.

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

Revenue Recognition

The Company records its revenue in accordance with ASC 606, Revenue from Contracts with Customers. 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.

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, 2022 and December 31, 2021. 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 collecting receivables denominated in a foreign currency.

At September 30, 2022, the Company had two customers (13% and 12%) with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable, as compared with zero customers at December 31, 2021.

During the three months ended September 30, 2022, the Company had two customers with sales of 10% or more of the Company’s total revenue (20% and 14%), as compared with none in the three months ended September 30, 2021.

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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, 2022, the Company had one customer with sales of 10% or more of the Company’s total revenue (14%), as compared with none in the nine months ended September 30, 2021.

Recent Accounting Pronouncements

In June 2016, the 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, ASU 2019-10 and ASU 2022-02, 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 beginning 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 2024 and must be applied using either a modified or full retrospective approach. Early adoption is permitted. The Company does not expect the impact of adopting ASU 2020-06 to be material on its consolidated financial statements.

3. 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 condensed consolidated balance sheets for the nine months ended September 30, 2022 and 2021, is reflected in the table below net of tax:


	Nine Months Ended September 30,
	2022		2021
Balance at beginning of period	$	(17)	$	(847)
Net unrealized gain on foreign currency translation	1,503		601
Balance at end of period	$	1,486	$	(246)

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.

•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.

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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 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, 2022
Liabilities
Warrant liabilities	$	539	$	—	$	—	$	539





December 31, 2021
Liabilities
Warrant liabilities	$	1,550	$	—	$	—	$	1,550

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, 2022, which were measured at fair value on a recurring basis:


	Warrant Liability
Balance at December 31, 2021	$	1,550




Gain on revaluation of warrants issued in connection with the February 2021, June 2020, December 2019 and May 2019 financings	(1,011)
Balance at September 30, 2022	$	539

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, 2022		December 31, 2021
Raw materials	$	2,845	$	2,061
Work in progress	373		145
Finished goods	290		36


Inventories	$	3,508	$	2,242

6. Revenue

The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and subscription of the EksoNR, the sale of support and maintenance contracts (Ekso Care), and the sale of accessories for the EksoNR. 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

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

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 to 24 months.

The Company’s industrial device segment (EksoWorks) revenue is generated through the sale of the upper body exoskeletons (EksoVest and the 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.

At the end of the second quarter of 2022, the Company ceased commercialization of the EksoZeroG support arm and related products and accessories. The Company may continue to sell parts and accessories to existing EksoZeroG customers to deplete its current stock of EksoZeroG inventories, however, the Company does not expect any future revenues derived from the sale of the EksoZeroG product line to have a material contribution to EksoWorks segment revenues. Refer to Note 13 Commitment and Contingencies for further information regarding commitments and obligations related to the EksoZeroG product line.

Deferred Revenue

For the sale of its products, the Company recognizes revenue upon the transfer of control of products to its customers, typically upon shipment from its facilities. 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 service agreement 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, 2022		December 31, 2021
Deferred extended maintenance and support	$	2,056	$	2,349
Deferred royalties	—		280
Customer advances	35		66
Total deferred revenues	2,091		2,695
Less current portion	(1,059)		(1,220)
Deferred revenues, non-current	$	1,032	$	1,475

Deferred revenue activity consisted of the following for the nine months ended September 30, 2022:



Beginning balance	$	2,695
Deferral of revenue	1,014
Recognition of deferred revenue	(1,618)
Ending balance	$	2,091

As of September 30, 2022, the Company’s deferred revenue was $2,091. The Company expects to recognize approximately $375 of the deferred revenue during the remainder of 2022, $897 in 2023, and $819 thereafter.

In addition to deferred revenue, the Company has a non-cancellable backlog of $2,527 related to its contracts for subscription units with its customers. These subscription contracts typically have 12 to 24 month terms, and subscription income is recognized on a straight-line basis over the term of the contract.

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Ekso Bionics Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

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

(Unaudited)

In the nine months ended September 30, 2022, the Company recognized revenue of $280 related to a $300 upfront royalty payment associated with a license and distribution agreement that expired. The unrecognized royalty balance of $280 was included in deferred revenue as of December 31, 2021.

As of September 30, 2022 and December 31, 2021, total accounts receivable, net of allowance for doubtful accounts, were $3,536 and $4,824, 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, 2022:


	EksoHealth		EksoWorks		Total
Device revenue	$	2,338	$	72	$	2,410
Service and support	484		—		484
Subscriptions	237		14		251
Parts and other	165		19		184

	$	3,224	$	105	$	3,329

The following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2022:


	EksoHealth		EksoWorks		Total
Device revenue	$	5,670	$	544	$	6,214
Service and support	1,440		—		1,440
Subscriptions	678		134		812
Parts and other	438		350		788
Collaborative arrangements	107		—		107
	$	8,333	$	1,028	$	9,361

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
Rentals and subscriptions	173		66		239
Parts and other	233		27		260
Collaborative arrangements	42		—		42
	$	2,716	$	333	$	3,049

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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 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
Rentals and subscriptions	510		188		698
Parts and other	427		51		478
Collaborative arrangements	57		—		57
	$	6,306	$	864	$	7,170

7. Accrued Liabilities

Accrued liabilities consisted of the following:


	September 30, 2022		December 31, 2021
Salaries, benefits and related expenses	$	1,822	$	2,015
Device warranty	224		195


Other	126		89
Total	$	2,172	$	2,299

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, 2022 is as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2022		September 30, 2022
Balance at beginning of period	$	275	$	270
Additions for estimated future costs	124		256
Incurred costs	(74)		(201)
Balance at end of period	$	325	$	325

			Balance as of September 30, 2022
Current portion			$	224
Long-term portion			101
Total			$	325

8. Notes Payable, net

PWB Term Loan

In August 2020, the Company entered into a new loan agreement (the "PWB Loan Agreement") with a 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.

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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 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. 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, 2022. On September 30, 2022, with cash on hand of $29,180, the Company was compliant with this liquidity covenant and all other covenants.

The debt issuance costs and debt discounts combined with the stated interest resulted in an effective interest rate of 6.45% and 5.37% for the three and nine months ended September 30, 2022, respectively. The debt issuance costs are amortized to interest expense using the effective interest method over the life of the loan.

The following table presents scheduled principal payments of the Company’s PWB term loan as of September 30, 2022:


Period	Amount
Remainder of 2022	$	—
2023	2,000
Total principal payments	2,000