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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 March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ 
Commission File Number: 001-37854 
____________________________________________________________________________________________ 
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 
 


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 April 27, 2020 was 5,843,442.



 Ekso Bionics Holdings, Inc.
 
Quarterly Report on Form 10-Q 

Table of Contents
  
  Page No.
   
     
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4
     
 
5
     
6
 
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9
     
     
     
     
   
     
     
     
 

3

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
 
Ekso Bionics Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
 
  March 31, 2020 December 31, 2019
  (unaudited) (Note 2)
Assets    
Current assets:    
Cash $ 8,516    $ 10,872   
Accounts receivable, net of allowances of $53 and $121, respectively
2,658    5,208   
Inventories, net 2,483    2,489   
Prepaid expenses and other current assets 405    238   
Total current assets 14,062    18,807   
Property and equipment, net 1,530    1,657   
Right-of-use assets 981    1,084   
Goodwill 189    189   
Other assets 182    178   
Total assets $ 16,944    $ 21,915   
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 1,999    $ 1,903   
Accrued liabilities 1,716    1,683   
Deferred revenues, current 1,231    1,492   
Note payable, current 2,170    2,333   
Lease liabilities, current 434    421   
Total current liabilities 7,550    7,832   
Deferred revenues 1,738    1,789   
Lease liabilities 595    711   
Warrant liabilities 1,788    4,307   
Other non-current liabilities 45    479   
Total liabilities 11,716    15,118   
Commitments and contingencies (Note 14)
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding at March 31, 2020 and December 31, 2019
—    —   
Common stock, $0.001 par value; 141,429 shares authorized; 5,843 and 5,795 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
   
Additional paid-in capital 190,811    190,019   
Accumulated other comprehensive income 223    50   
Accumulated deficit (185,812)   (183,278)  
Total stockholders’ equity 5,228    6,797   
Total liabilities and stockholders’ equity $ 16,944    $ 21,915   
 

The accompanying notes are an integral part of these condensed consolidated financial statements
4

Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
March 31,
  March 31, 2020 March 31, 2019
Revenue $ 1,468    $ 3,616   
Cost of revenue 831    2,017   
Gross profit 637    1,599   
Operating expenses:
Sales and marketing 2,520    2,809   
Research and development 711    1,384   
General and administrative 2,187    2,318   
Total operating expenses 5,418    6,511   
Loss from operations (4,781)   (4,912)  
Other income (expense), net:
Interest expense (52)   (121)  
Gain (loss) on revaluation of warrant liabilities 2,519    (1,122)  
Loss on modification of warrant —    (257)  
Other expense, net (220)   (139)  
Total other income (expense), net 2,247    (1,639)  
Net loss $ (2,534)   $ (6,551)  
Other comprehensive income 173    148   
Comprehensive loss $ (2,361)   $ (6,403)  
Basic and diluted net loss per share applicable to common shareholders $ (0.44)   $ (1.51)  
Weighted average number of shares outstanding, basic and diluted 5,803    4,338   
 
The accompanying notes are an integral part of these condensed consolidated financial statements
5

Ekso Bionics Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
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    $   $ 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 —    —      —    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    $   $ 190,811    $ 223    $ (185,812)   $ 5,228   

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, 2018 —    $ —    4,198    $   $ 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 —    —      —    22    —    —    22   
Equity incentive plan —    —      —    55    —    —    55   
Matching contribution to 401(k) plan —    —      —    191    —    —    191   
Stock-based compensation expense —    —    —    —    636    —    —    636   
Foreign currency translation adjustments —    —    —    —    —    148    —    148   
Balance at March 31, 2019 —    $ —    4,502    $   $ 182,171    $ 56    $ (177,697)   $ 4,534   

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

6

Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
  Three Months Ended March 31,
  2020 2019
Operating activities:    
Net loss $ (2,534)   $ (6,551)  
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 164    247   
Provision for excess and obsolete inventories 23    19   
Changes in allowance for doubtful accounts —    55   
(Gain) loss on revaluation of warrant liabilities (2,519)   1,122   
Stock-based compensation expense 587    636   
Amortization of debt discount and accretion of final payment fee 13    29   
Common stock contribution to 401(k) plan 77    55   
Loss on modification of warrants —    257   
Unrealized loss on foreign currency transactions 219    152   
Changes in operating assets and liabilities:
Accounts receivable 2,550    (188)  
Inventories (55)   (154)  
Prepaid expenses, operating lease right-of-use assets, and other assets current and noncurrent (68)   (142)  
Accounts payable 96    (660)  
Accrued and lease liabilities 37    (167)  
Deferred revenues (312)   113   
Net cash used in operating activities (1,722)   (5,177)  
Investing activities:
Acquisition of property and equipment —    (7)  
Net cash used in investing activities —    (7)  
Financing activities:
Proceeds from issuance of common stock and warrants, net —    7,305   
Principal payments on note payable (589)   (591)  
Proceeds from exercise of stock options —    55   
Net cash (used in) provided by financing activities (589)   6,769   
Effect of exchange rate changes on cash (45)   (4)  
Net increase (decrease) in cash (2,356)   1,581   
Cash at beginning of period 10,872    7,655   
Cash at end of period $ 8,516    $ 9,236   
Supplemental disclosure of cash flow activities
Cash paid for interest $ 32    $ 96   
Cash paid for income taxes   —   
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   
7

Transfer of inventory to property and equipment 38    206   
Share issuance for common stock contribution to 401(k) plan 155    191   
Share issuance in lieu of cash compensation 50    —   
Equipois sales earn-out —    22   
 
The accompanying notes are an integral part of these condensed consolidated financial statements
8


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 sells exoskeleton technology to augment human strength, endurance and mobility. The Company’s exoskeleton technology serves multiple markets and can be used both by able-bodied users as well as by persons with physical disabilities. The Company has sold and leased devices that (i) enable individuals with neurological conditions affecting gait (stroke and spinal cord injury) to rehabilitate and to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods. 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 11, Capitalization and Equity Structure – Reverse Stock Split.
 
Liquidity and Going Concern
 
As of March 31, 2020, the Company had an accumulated deficit of $185,812.  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 three months ended March 31, 2020, the Company used $1,722 of cash in its operations.
 
Cash on hand as of March 31, 2020 was $8,516, compared to $10,872 as of December 31, 2019. As noted in Note 9, Note payable, net, borrowings under the Company’s term loan agreement have a requirement of minimum cash on hand equivalent to three months of cash burn. As of March 31, 2020, the most recent determination date of this restriction, $3,565 of cash must remain as restricted, with such amounts to be re-computed at each month end period. After considering cash restrictions, effective unrestricted cash as of March 31, 2020 is estimated to be $4,951. Subsequent to March 31, 2020, the Company entered into an amendment to its term loan agreement, which reduces the minimum liquidity covenant to the current outstanding principal balance. Refer to Note 17. Subsequent events. Based on the current forecast, the Company’s cash on hand will not be sufficient to satisfy the Company’s operations for the next twelve months from the date of issuance of these condensed consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern.

As previously disclosed, on September 16, 2019, the Company received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that because the closing bid price for the Company’s common stock listed on the Nasdaq Capital Market was below $1.00 per share for 30 consecutive business days, the Company does not meet the minimum closing bid price requirement for continued listing on the Nasdaq Capital Market. On March 24, 2020, the Company effected a 1-for-15 reverse stock split of the Company's common stock in order to raise the per share trading price of its common stock above $1.00 and regain compliance with Nasdaq’s listing requirements. On April 7, 2020, the Company regained compliance with the minimum bid price requirement required by the Nasdaq listing rules.
 
Based upon the Company’s current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue, the Company believes that it has sufficient resources to operate in compliance with its debt covenants until the end of the fourth quarter of 2020. While the Company will require significant additional financing, the Company’s actual capital requirements may vary significantly and will depend on many factors. The Company plans to continue its investments in its (i) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use.

The Company is actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings and corporate collaborations. Sales of additional equity securities by the Company could result in the dilution of the 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.
9


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
 
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 Company’s planned investment in a variable interest entity (“VIE”) in which it exercises significant influence, but does not control and is not the primary beneficiary, is accounted for using the equity method. Refer to Note 7, Investment in Unconsolidated Affiliate for more information.

The results of operations for the three months ended March 31, 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. 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.

10


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
Investment in Unconsolidated Affiliate

Equity investments in which the Company exercises significant influence, but does not control and is not the primary beneficiary, are accounted for using the equity method. Investments accounted for under the equity method of accounting are recorded at cost within other assets on the condensed consolidated balance sheets and subsequently increased or decreased by the Company’s proportionate share of the net income or loss of the investee. The Company records its proportionate share of net income or loss of the investee in net investment income. The Company records its proportionate share of other comprehensive income or loss of the investee as a component of other comprehensive income. Dividends or other equity distributions in excess of the Company’s cumulative equity in earnings of the investee are recorded as a reduction of the investment. Differences in the basis of the investments and the separate net asset values of the investees, if any, are amortized into net income over the remaining useful lives of the underlying assets and liabilities, except for the excess related to goodwill, if any. Refer to Note 7, Investment in Unconsolidated Affiliate for more information.

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

Variable Interest Entities

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

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

The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (a) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (b) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether an entity is a VIE at the inception of its variable interest in the entity and upon the occurrence of certain reconsideration events. The Company routinely reassesses whether it is the primary beneficiary of VIEs in which it holds a variable interest.
 
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 an inventory reserve.
11


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)

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

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.

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

The Company’s industrial device segment (EksoWorks) revenue is generated through the sale of the upper body exoskeleton (EksoVest) and the support arm (EksoZeroG). Revenue from industrial device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility.
 
Refer to Note 6, 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
12


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
recognized revenue related to the government grant from the SEBD nor received cash from the SEBD during the three months ended March 31, 2020. 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 March 31, 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 March 31, 2020, the Company had two customers with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable (10% and 12%), as compared with one customer at December 31, 2019 (11%).
 
During the three months ended March 31, 2020, the Company had one customer with sales of 10% or more of the Company’s total revenue (16%), as compared with one customer in the three months ended March 31, 2019 (11%).
 
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 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The update was initially effective for the Company in the first quarter of 2020. However, in August 2019, the FASB issued a proposed ASU, which defers the effective date for this guidance until the first quarter of 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

Accounting Pronouncements Adopted in 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
13


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
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. Accumulated Other Comprehensive Income
 
The following table sets forth the changes to accumulated comprehensive income, net of tax, by component for the three months ended March 31, 2020:
  Foreign Currency Translation
Balance at December 31, 2019 $ 50   
Net unrealized gain on foreign currency translation 173   
Balance at March 31, 2020 $ 223   
 
4. 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.

14


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
March 31, 2020        
Liabilities        
Warrant liabilities $ 1,788    $ —    $ —    $ 1,788   
Contingent success fee liability $   $ —    $ —    $  
December 31, 2019
Liabilities
Warrant liability $ 4,307    $ —    $ —    $ 4,307   
Contingent success fee liability $   $ —    $ —    $  
 
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 March 31, 2020, which were measured at fair value on a recurring basis:
  Warrant Liability Contingent Success
Fee Liability
Balance at December 31, 2019 $ 4,307    $  
Gain on revaluation of warrants issued in connection with the December 2019, May 2019 and December 2015 financings (2,519)   —   
Balance at March 31, 2020 $ 1,788    $  
 
Refer to Note 11. Capitalization and Equity Structure – Warrants for additional information regarding the valuation of warrants.
 
5. Inventories, net
 
Inventories consisted of the following:
  March 31, 2020 December 31, 2019
Raw materials $ 2,027    $ 2,208   
Work in progress 20    29   
Finished goods 436    252   
Inventories, net $ 2,483    $ 2,489   

6. Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations. Revenue recognition is evaluated based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.
 
For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are determined based on observable prices at which the Company separately sells its products or services. If a standalone selling price is not directly observable, the Company estimates the selling price based on market
15


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
conditions and entity-specific factors including features and functionality of the product and/or services, the geography of the Company’s customers, type of the Company’s markets. Any discounts or other reductions to the transaction price are allocated proportionately to all performance obligations within the multiple-element arrangement.
 
Contract Balances
 
Timing of revenue recognition may differ from the timing of invoicing to customers and receipt of payment. For the sale of its products, the Company generally recognizes revenue at a point in time through the ship-and-bill performance obligations. For the lease of its products, the Company generally recognizes revenue over the lease term commencing upon the completion of customer training. For service agreements, the Company generally invoices customers at the beginning of the coverage period and records revenue related to the billed amounts over time, equivalent to the coverage period of the maintenance and support contract.
 
Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts (Ekso Care) but also includes other offerings 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:
March 31, 2020 December 31, 2019
Deferred extended maintenance and support $ 2,628    $ 2,837   
Deferred royalties 285    290   
Deferred device and rental revenues 44    131   
Customer deposits and advances 12    23   
Total deferred revenues 2,969    3,281   
Less current portion (1,231)   (1,492)  
Deferred revenues, non-current $ 1,738    $ 1,789   
 
Deferred revenue activity consisted of the following for the three months ended March 31, 2020:
Beginning balance $ 3,281   
Deferral of revenue 221   
Recognition of deferred revenue (533)  
Ending balance $ 2,969   
 
As of March 31, 2020, the Company’s deferred revenue was $2,969. Excluding customer deposits, the Company expects to recognize approximately $958 of the deferred revenue during the remainder of 2020, $945 in 2021, and $1,054 thereafter.

In addition to deferred revenue, the Company has non-cancellable backlog of $545 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 March 31, 2020 and December 31, 2019, accounts receivable, net of allowance for doubtful accounts, were $2,658 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.
 
Disaggregation of revenue
 
16


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 three months ended March 31, 2020:
  EksoHealth EksoWorks Total
Device revenue $ 306    $ 255    $ 561   
Service, support and rentals 663    —    663   
Parts and other 155    22    177   
Collaborative arrangements 67    —    67   
  $ 1,191    $ 277    $ 1,468   

The following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2019:

  EksoHealth EksoWorks Total
Device revenue $ 2,075    $ 717    $ 2,792   
Service, support and rentals 705    —    705   
Parts and other 34    85    119   
  $ 2,814    $ 802    $ 3,616   

7. Investment in Unconsolidated Affiliate

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

Ekso US entered into a Technology License Agreement, dated October 22, 2019 (the “Technology License Agreement”) with the China JV pursuant to the terms of the JV Agreement. Pursuant to the Technology License Agreement, Ekso US granted to the China JV a nontransferable, non-sublicensable, irrevocable, and exclusive right and license in China, Hong Kong, Singapore, Malaysia and other countries to be mutually agreed upon by the parties to the JV Agreement, but excluding Japan, India and Australia (the “JV Territory”) to patented technologies and non-patented manufacturing technologies (collectively, the “IP”) involved in the manufacture of certain products, including EksoGT, EksoVest and EksoZeroG Arm units (collectively, the “JV Products”) and their improvements, to (i) manufacture, assemble, make and have made, use the JV Products in China and to sell such products in the JV Territory, (ii) provide marketing promotion, technical training and maintenance associated with such products and (iii) make investment in research and development projects undertaken by Ekso US. Under the Technology License Agreement, Ekso US will also provide marketing promotion, maintenance, training and technical support to the China JV in connection with the licensed activities, and the China JV will reimburse the reasonable costs and expenses of Ekso US for the training and technical support services so provided. In consideration for the improvements made by Ekso US to the JV Products, pursuant to the Technology License Agreement, following a specified royalty-free period, Ekso US will receive mid-single digit percentages of the net sales revenue of the JV Products sold by the China JV. The Technology License Agreement will be in effect until terminated for cause by Ekso US or until the earlier expiration or termination of the JV Agreement. Pursuant to the JV Agreement and the Technology License Agreement, the Company will receive a 20% ownership interest in the China JV. As of March 31, 2020, the Company had not transferred the patented technologies pursuant to the Technology License Agreement.

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

The China JV is a VIE for which the Company is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly influence the economic performance of the entity. In addition to the Company’s exchange
17


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
of license rights for the manufacturing technology, the China JV will be capitalized through cash investments of up to approximately $92,000 (or RMB 624,000) by the JV Partners over the initial ten-year term of the JV Agreement. The investment in the Investee is accounted for under the equity method of accounting because the Company has significant influence over the Investee through its ownership interest, technology license and manufacturing service agreements and representation on the board of directors. As of March 31, 2020, there was no impact to the Company’s condensed consolidated balance sheet except for the direct transaction costs which have been capitalized and will be included as part of the investment balance when the intellectual property is transferred. Direct costs of $66 are included in other assets in the Company’s condensed consolidated balance sheets as of March 31, 2020. In addition to contributing the licensed IP, the Company’s obligations to the Investee include assisting the Investee to become proficient in using the intellectual property to manufacture products that meet regulatory standards, and providing supervision of appointed directors. The primary risks that the Company is exposed to from its involvement with the VIE include operational risk, foreign currency exposure risk and foreign regulatory risk. As of March 31, 2020, the Company has no other implied or unfunded commitments related to the Investee and its maximum exposure to risk of loss will be limited to the carrying value of the investment.

Under the JV Agreement, the JV Partners are required, within 90 days of the formation of the China JV, to contribute RMB 62,400, with a further RMB 12,400 capital contribution required from the JV Partners upon notice by the China JV based on the China JV’s then-current operating plan. The remaining RMB 436,800 capital contribution of the JV Partners will be paid by them within the 10 years after the formation of the China JV as previously contemplated under the JV Agreement.

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

The Company and the China JV submitted a joint voluntary notice to CFIUS in December 2019 to review the transaction. CFIUS has determined that the establishment of the China JV is subject to CFIUS’s jurisdiction. CFIUS’s current review and investigation is expected to end by May 28, 2020. The parties have responded to several question sets from CFIUS. On February 20, 2020, CFIUS imposed interim measures to mitigate concerns CFIUS identified pending completion of its investigation. These measures temporarily suspend the company’s contributions to the China JV and its other integration activities for the China JV. The Company continues to engage with CFIUS to address and mitigate its concerns. CFIUS has not yet determined whether its concerns can ultimately be mitigated.

Equity Investments

Under the JV Agreement, ZYVC or its designees agreed to invest an aggregate of $10,000 in equity investments in the Company, taking place in two tranches. On January 30, 2019, the Company executed a Share Purchase Agreement (the “JV SPA”) under which the Company sold 205 shares of its common stock for $5,000 at a purchase price of $24.45 per share. The Company recorded $8 in direct issuance costs as a reduction to the gross equity proceeds.

The remaining $5,000 investment by the China JV or ZYVC or its designees is contingent upon the China JV shipping the first batch of EksoGT, EksoVest and EksoZeroG Arm products to Ekso Bionics, its affiliates or a third party. The investment will be made through the purchase of shares of the Company's common stock at a per share price equal to the volume weighted average price of 20 trading days before the issue date, but with a collar so that the equity price will be no greater than 20% of the first investment price.

18


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
8. Accrued Liabilities
 
Accrued liabilities consisted of the following:
March 31, 2020 December 31, 2019
Salaries, benefits and related expenses $ 1,275    $ 1,098   
Device warranty 220    285   
Other 221    300   
Total $ 1,716    $ 1,683   
 
The current portion of the warranty liability is classified as a component of accrued liabilities, while the long-term portion of the warranty liability is classified as a component of other non-current liabilities in the condensed consolidated balance sheets. A reconciliation of the changes in the device warranty liability for the three months ended March 31, 2020 is as follows:
  March 31, 2020
Balance at beginning of period $ 350   
Additions for estimated future expense 18   
Incurred costs (109)  
Balance at end of period $ 259   
Current portion $ 220   
Long-term portion 39   
Total $ 259   
 
9. Note Payable, net
 
In December 2016, the Company entered into a loan agreement and received $7,000 that bears interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The loan agreement created a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
 
The Company was required to pay accrued interest on the current loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company was required to make equal monthly payments of principal, together with accrued and unpaid interest. The principal balance of the current loan amortizes ratably over 36 months, and matures on January 1, 2021, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment of $245 will be due on the maturity date, of which $235 was accreted as of March 31, 2020 and is included as a component of note payable on the Company’s condensed consolidated balance sheets.
 
In December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which the Company agreed to pay the lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for the Company’s common stock being $120.00 or more for five successive business days. The estimated fair value of the success fee was determined using the Binomial Lattice Model and was recorded as a discount to the debt obligation. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in the condensed consolidated statements of operations and comprehensive loss. The success fee is classified as a liability on the condensed consolidated balance sheets. At March 31, 2020, the fair value of the contingent success fee liability was de minimis.

19


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
The loan agreement includes a liquidity covenant requiring that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least three months of “Monthly Cash Burn,” which is the Company’s average monthly net loss for the trailing six-month period plus certain expenses and plus the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month period. Such amount was determined to be $3,565 as of March 31, 2020, the most current determination date, with the amount subject to change on a month-to-month basis. At March 31, 2020, with cash on hand of $8,516, the Company was compliant with this liquidity covenant and all other covenants. 

The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate of 9.55% for the three months ended March 31, 2020. The final payment fee, initial fair value of the success fee and debt issuance costs are being accreted/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 note payable and final payment fee as of March 31, 2020:
Period Amount
Remainder of 2020 $ 1,749   
2021 440   
Total principal payments 2,189   
Less accreted portion of final payment fee, net of issuance cost and success fee discounts 19   
Note payable, net $ 2,170   

10. Lease Obligations

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

In July 2017, the Company entered into an operating lease agreement for its European operations office in Hamburg, Germany. The initial Hamburg lease term ends in July 2022. The Company has an option to extend the lease for another five-year term.
 
20


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
The Company’s future lease payments as of March 31, 2020 are as follows, which are presented as lease liabilities, current and lease liabilities on the Company’s condensed consolidated balance sheets:
Period Operating Leases
Remainder of 2020 $ 387   
2021 529   
2022 231   
Thereafter —   
Total lease payments 1,147   
Less: imputed interest (118)  
Present value of lease liabilities $ 1,029   
Lease liabilities, current $ 434   
Lease liabilities, noncurrent 595   
Total lease liabilities $ 1,029   
Weighted-average remaining lease term (in years) 2.19
Weighted-average discount rate 10.5  %
 
Lease expense under the Company’s operating leases was $138 and $140 for the three months ended March 31, 2020 and March 31, 2019, respectively.

Practical Expedients

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

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

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

11. Capitalization and Equity Structure

Reverse Stock Split

After the close of the stock market on March 24, 2020, the Company effected a 1-for-15 reverse split of its common stock. As a result, all common stock share amounts included in this filing have been retroactively reduced by a factor of fifteen, rounded up to the nearest whole share, and all common stock per share amounts have been increased by a factor of fifteen, with the exception of the Company's common stock par value and the Company's authorized shares. Amounts affected include common stock outstanding, as well as restricted stock units and common stock underlying stock options and warrants.

21


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
Summary
 
The Company’s authorized capital stock at March 31, 2020 consisted of 141,429 shares of common stock and 10,000 shares of preferred stock. As of March 31, 2020, there were 5,843 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

Common Stock

In August 2018, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "ATM Agreement") with Cantor Fitzgerald & Co. (the "Agent"), under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent, by methods deemed to be an “at the market offering.” Shares having an aggregate offering price of up to $25,000 may be offered and sold under the prospectus and prospectus supplement filed with the SEC related to such offering ("ATM Prospectus"). The Company did not sell any shares of common stock under the ATM Agreement during three months ended March 31, 2020. As of March 31, 2020, approximately $17,241 aggregate offering price of the Company’s common stock remained available for issuance pursuant to the ATM Prospectus.

Warrants
 
Warrant shares outstanding as of December 31, 2019 and March 31, 2020 were as follows:  
Source Exercise
Price
Term
(Years)
December 31, 2019 Expired March 31, 2020
December 2019 Warrants $ 8.10    5 556    —    556   
December 2019 Placement Agent Warrants $ 8.44    5 52    —    52   
May 2019 Warrants $ 5.70    5 444    —    444   
2017 Information Agent Warrants $ 22.50    3 13    —    13   
2015 Warrants $ 41.25    5 107    —    107   
Pre-2014 warrants $ 144.90   
9-10
  (6)   —   
  1,178    (6)   1,172   
 
December 2019 Warrants

In December 2019, pursuant to a securities purchase agreement (the "December 2019 Offering"), the Company issued warrants (the "December 2019 Warrants") to purchase 556 shares of common stock. The December 2019 Warrants have an exercise price of $8.10 per share and will be exercisable six months and one day from their issuance date, or from and after June 21, 2020, and will expire five years from the date they initially became exercisable, or on June 21, 2025.

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

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

22


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
March 31, 2020 December 31, 2019
Current share price $ 2.83    $ 5.86   
Conversion price $ 8.10    $ 8.10   
Risk-free interest rate 0.41  % 1.73  %
Expected term (years) 5.2 5.5
Volatility of stock 95.26  % 95.7  %

December 2019 Placement Agent Warrants
In December 2019, in connection with the December 2019 Offering, the Company issued warrants to purchase 52 shares of the Company’s common stock to the placement agent for such offering (the "December 2019 Placement Agent Warrants"). The December 2019 Placement Agent Warrants have substantially the same form as the December 2019 Warrants, except that they have an exercise price per share equal to $8.44, subject to adjustment in certain circumstances, and will expire on December 18, 2025.
March 31, 2020 December 31, 2019
Current share price $ 2.83    $ 5.86   
Conversion price $ 8.44    $ 8.44   
Risk-free interest rate 0.37  % 1.69  %
Expected term (years) 4.7 5.0
Volatility of stock 95.79  % 93.1  %

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

May 2019 Warrants

In May 2019, pursuant to an underwriting agreement, (the "May 2019 Offering"), the Company issued the warrants (the "May 2019 Warrants") to purchase 444 shares of common stock. The May 2019 Warrants currently have an exercise price of $5.70 per share and will expire five years from the date of their issuance, or on May 24, 2024. The May 2019 Warrants contain a price protection feature, pursuant to which, subject to certain exceptions, if shares of common stock are sold or issued in the future, or securities convertible or exercisable for shares of the Company’s common stock are sold or issued in the future, for consideration, or with an exercise price or conversion price, as applicable, per share less than the exercise price per share then in effect for the May 2019 Warrants, the exercise price of the May 2019 Warrants is reduced to the consideration paid for, or the exercise price or conversion price of, as the case may be, the securities issued in such offering.

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

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

23


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
The warrant liability related to the May 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in a combination of the Black-Scholes Model and the Lattice Model to measure the fair value of the May 2019 Warrants:
March 31, 2020 December 31, 2019
Current share price $ 2.83    $ 5.86   
Conversion price $ 5.70    $ 5.70   
Risk-free interest rate 0.34  % 1.67  %
Expected term (years) 4.2 4.4
Volatility of stock 99.3  % 93.9  %

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

2017 Information Agent Warrants
 
In September 2017, in connection with a rights offering in August 2017, the Company issued warrants (the "2017 Information Agent Warrants") to purchase 13 shares of the Company’s common stock to an information agent. The 2017 Information Agent Warrants have an exercise price of $22.50 per share, and became exercisable immediately upon issuance and will remain exercisable until September 13, 2020. These warrants were recorded in stockholders’ equity on the Company’s condensed consolidated balance sheet.
 
2015 Warrants

In December 2015, the Company issued warrants (the "2015 Warrants") to purchase 141 shares. The 2015 Warrants have an exercise price of $41.25 per share, are immediately exercisable and will remain exercisable until December 23, 2020. The 2015 Warrants contain a put-option provision. Under this provision, while the 2015 Warrants are outstanding, if the Company enters into a Fundamental Transaction, as defined in the 2015 Warrants as a merger, consolidation or similar transaction, the Company or any successor entity shall, at the option of each warrant holder, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction. Because of this put-option provision, the 2015 Warrants are classified as a liability and are marked to market at each reporting date. Through December 31, 2019, 35 shares of the 2015 Warrants were exercised. During the three months ended March 31, 2020, none of the 2015 Warrants were exercised.
 
On March 8, 2019, in connection with an amendment to a securities purchase agreement, which retroactively removed a provision from such securities purchase agreement that prohibited the Company from effecting or entering into an agreement to effect any issuance by the Company of its common stock at a price determined based on the trading price of the Company’s common stock or otherwise at a future determined price, the Company entered into an amendment to the 2015 Warrants to reduce the exercise price of each such warrant from $56.10 per share to $41.25 per share, subject to further adjustments pursuant to the existing terms of such warrant. In the three months ended March 31, 2019, the Company recorded a $257 loss on the modification of these warrants.
 
The warrant liability related to the 2015 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Option Pricing Model to measure the fair value of the 2015 Warrants as of:

24


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
March 31, 2020 December 31, 2019
Current share price $ 2.83    $ 5.86   
Conversion price $ 41.25    $ 41.25   
Risk-free interest rate 0.16  % 1.59  %
Expected term (years) 0.75 0.99
Volatility of stock 103.45  % 98.46  %

Pre-2014 Merger Warrants

As a result of the May 2019 Offering, which was a firm commitment underwritten public offering, warrants to purchase 6 shares of the Company's common stock, which were converted from warrants to purchase preferred stock of Ekso Bionics, Inc. at the time of the merger, expired in accordance with their terms.

12. Stock-based Compensation
 
See Note 11, Capitalization and Equity Structure – Reverse Stock Split.

In March 2020, the Company’s stockholders approved an amendment to the Company’s Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”), to increase the number of shares available for grant by 333 shares.  As of March 31, 2020, the total shares authorized for grant under the 2014 Plan was 1,174, of which 349 were available for future grants.
 
Stock Options
 
The following table summarizes information about the Company’s stock options outstanding as of March 31, 2020, and activity during the three months then ended:
Stock
Awards
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
Balance as of December 31, 2019 494    $ 36.64   
Options granted 90    5.65   
Options exercised —    —   
Options forfeited (3)   30.51   
Options cancelled (5)   57.72   
Balance as of March 31, 2020 576    $ 31.67    8.07 $ —   
Vested and expected to vest at March 31, 2020 576    $ 31.67    8.07 $ —   
Exercisable as of March 31, 2020 268    $ 48.79    6.82 $ —   
 
As of March 31, 2020, total unrecognized compensation cost related to unvested stock options was $3,882. This amount is expected to be recognized as stock-based compensation expense in the Company’s condensed consolidated statements of operations and comprehensive income over the remaining weighted average vesting period of 2.53 years.
 
The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes Model using the following assumptions:
25


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
  Three Months Ended March 31,
  2020 2019
Dividend yield —    —   
Risk-free interest rate 1.58  % 2.45  %
Expected term (in years) 6 6
Volatility 102  % 103  %

 Restricted Stock Units
 
The Company issues restricted stock units (“RSUs”) to employees and non-employee service providers. Each RSU represents the right to receive one share of the Company’s common stock upon vesting and subsequent settlement. The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.
 
RSU activity for the three months ended March 31, 2020 is summarized below:
  Number of
Shares
Weighted-
Average Grant
Date Fair Value
Unvested as of December 31, 2019 89    $ 10.77   
Granted 22    5.74   
Vested (10)   5.74   
Forfeited (2)   11.45   
Unvested at March 31, 2020 99    $ 10.16   
 
As of March 31, 2020, $884 of total unrecognized compensation expense related to unvested RSUs was expected to be recognized over a weighted average period of 3.24 years.
   
Compensation Expense
 
Total stock-based compensation expense related to options and RSUs granted to employees and non-employees is included in the condensed consolidated statements of operations and comprehensive loss as follows:
  Three Months Ended March 31,
  2020 2019
Sales and marketing $ 138    $ 223   
Research and development 73    45   
General and administrative 376    368   
  $ 587    $ 636   
 
401(k) Plan Share Match
 
During the three months ended March 31, 2020, the Company issued 26 shares of common stock to eligible employees’ deferral accounts for the 401(k) Plan matching contribution representing 50% of each eligible employee’s elected deferral (up to the statutory limit) for the fiscal year ended December 31, 2019. The expense related to the contribution was $155 for the three months ended March 31, 2020.
  
13. Income Taxes

There were no material changes to the unrecognized tax benefits in the three months ended March 31, 2020, and the Company does not expect significant changes to unrecognized tax benefits through the end of the fiscal year. Because of the Company’s history of tax losses, all years remain open to tax examination.
26


Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
 
14. Commitments and Contingencies

Material Contracts
 
The Company enters various license, research collaboration and development agreements, which provide for payments to the Company primarily for technology transfer and license fees, and royalty payments on sales.
 
The Company has two license agreements with the Regents of the University of California to maintain exclusive rights to certain patents. Pursuant to those license agreements, the Company is required to pay 1% of net sales of products sold to entities other than the U.S. government and, in the event of a sub-license, the Company owes 21% of license fees and must pass through 1% of the sub-licensee’s net sales of products sold to entities other than the U.S. government. The agreements also stipulate minimum annual royalties of $50.
 
In connection with acquisition of Equipois, LLC ("Equipois"), the Company assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants the Company an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company pays the developer a single-digit royalty on net receipts, subject to a $50 annual minimum royalty requirement.
 
The Company purchases components from a variety of suppliers and uses contract manufacturers to provide manufacturing services for its products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling $881 as of March 31, 2020, which is expected to be paid within a year. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.
 
Contingencies
 
In the normal course of business, the Company is subject to various legal matters. In the opinion of management, the resolution of such matters will not have a material adverse effect on the Company’s condensed consolidated financial statements.
 
15. Net Loss Per Share
 
The following table sets forth the computation of basic and diluted net loss per share:
  Three Months Ended
March 31,
  2020 2019
Numerator:    
Net loss applicable to common stockholders, basic and diluted $ (2,534)   $ (6,551)  
Denominator:
Weighted-average number of shares, basic and diluted 5,803    4,338   
Net loss per share, basic and diluted $ (0.44)   $ (1.51)  
 
The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
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Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)
  Three Months Ended
March 31,
  2020 2019
Options to purchase common stock 576    407   
Restricted stock units 99    18   
Warrants for common stock 1,172    126   
Total common stock equivalents 1,847    551   

16. Segment Disclosures
 
The Company has two reportable segments: EksoHealth (also referred to as the medical devices segment) and EksoWorks (also referred to as the industrial devices segment). The EksoHealth segment designs, engineers, manufactures, and sells exoskeletons for applications in the medical markets. The EksoWorks segment designs, engineers, manufactures, and sells exoskeleton devices to allow able-bodied users to perform difficult repetitive work for extended periods. The reportable segments are each managed separately because they serve distinct markets.
 
The Company evaluates performance and allocates resources based on segment gross profit margin. The Company does not consider net assets as a segment measure and, accordingly, assets are not allocated.
 
Segment reporting information is as follows:
  EksoHealth EksoWorks Total
Three months ended March 31, 2020      
Revenue $ 1,191    $ 277    $ 1,468   
Cost of revenue 618    213    831   
Gross profit $ 573    $ 64    $ 637   
Three months ended March 31, 2019      
Revenue $ 2,814    $ 802    $ 3,616   
Cost of revenue 1,300    717    2,017   
Gross profit $ 1,514    $ 85    $ 1,599   

Geographic information for revenue based on location of customers is as follows:
  Three Months Ended March 31,
  2020 2019
United States $ 1,249    $ 2,371   
All Other 219    1,245   
  $ 1,468    $ 3,616   

17. Related Party Transactions

One of the Company’s directors, Dr. Ted Wang, is the founder, general partner and Chief Investment Officer of Puissance Capital Management LP (“Puissance Capital”), which is an affiliate of Puissance Cross-Border Opportunities II LLC, one of the Company’s largest stockholders. Prior to Dr. Wang’s appointment to the Board in September 2017, the Company entered into a one-year consulting agreement with Angel Pond Capital LLC (“Angel Pond”), an entity solely owned and managed by Dr. Wang and affiliated with Puissance Capital. Angel Pond assists the Company with strategic positioning in the Asia Pacific region, including the introduction to potential strategic and capital partners and the development of strategic partnerships for the sale and manufacture of the Company’s products in that market. During the three months ended March 31, 2019, Angel Pond provided consulting services amounting to $30, which was expensed in the condensed consolidated statement of operations and comprehensive loss.
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Ekso Bionics Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
($ and share amounts in thousands, except per share amounts)
(Unaudited)

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

During the three months ended March 31, 2020, the Company sold EksoVest raw material inventory and tooling to the China JV for $45.

18.  Subsequent events

On April 20, 2020, Ekso Bionics, Inc ("the Borrower"), a wholly-owned subsidiary of the Company, entered into an unsecured note (the “Note”) evidencing an unsecured loan in the amount of $1,086 under the Paycheck Protection Program (the “PPP”). The Note provides for an interest rate of 1.00% per year, and matures two years after the date of initial disbursement. Beginning on the seventh month following the date of initial disbursement, the Borrower is required to make 18 monthly payments of principal and interest. The Note may be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that were incurred before February 15, 2020. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. The terms of any forgiveness may also be subject to further requirements in any regulations and guidelines the SBA may adopt. While the Company currently believes that its use of the Note proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that the Company will obtain forgiveness of the Note in whole or in part.

On April 29, 2020, the Company and Ekso Bionics, Inc. entered into a second amendment to the December 2016 loan agreement, as amended, with Western Alliance Bank, to defer the principal payments on the Company's term loan for the three months beginning May 2020 to be re-amortized when principal payments resume on August 1, 2020. During the three-month deferral period, the Company is required to make monthly payments of interest only. The amendment also replaces the three-months of monthly cash burn liquidity covenant with a minimum liquidity covenant, which requires the Company to maintain cash in accounts with Western Alliance Bank equal to or greater than the outstanding balance of the term loan. The balance of the term loan was $2,170 as of March 31, 2020.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion of our financial condition and results of operation should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (this “Quarterly Report”) and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”).
 
This Quarterly Report contains forward-looking statements. These forward-looking statements include statements other than statements of historical facts contained or incorporated by reference in this Quarterly Report, including statements regarding (i) the plans and objectives of management for future operations, including those relating to the design, development and commercialization of exoskeleton products for humans, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission, (iv) our beliefs regarding the potential for commercial opportunities for exoskeleton technology in general and our exoskeleton products in particular, (v) our beliefs regarding potential clinical and other health benefits of our medical devices, and (vi) the assumptions underlying or relating to any statement described in points (i), (ii), (iii), (iv) or (v) above. The words “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and similar expressions (including the negative of any of the foregoing) are intended to identify forward-looking statements.

The following factors, among others, including those described in the section titled “Risk Factors” included in our Annual Report, as updated and supplemented in this Quarterly Report under the heading “Part II – Item 1A. Risk Factors,” could cause our future results to differ materially from those expressed in the forward-looking information:
 
our ability to obtain adequate financing to fund operations and to develop or enhance our technology;
scope, scale and duration of the impact of outbreaks of a pandemic disease, such as COVID-19 (coronavirus);
our ability to obtain or maintain regulatory approval to market our medical devices;
our ability to complete clinical trials on a timely basis and that completed clinical trials will be sufficient to support commercialization of our products;
the anticipated timing, cost and progress of the development and commercialization of new products or services, and improvements to our existing products, and related impacts on our profitability and cash position;
our ability to effectively market and sell our products and expand our business, both in unit sales and product diversification;
our ability to achieve broad customer adoption of our products and services;
existing or increased competition;
rapid changes in technological solutions available to our markets;
volatility with our business, including long and variable sales cycles, which could have a negative impact on our results of operations for any given quarter;
changes to our domestic or international sales and operations;
our ability to obtain or maintain patent protection for our intellectual property;
the scope, validity and enforceability of our and third-party intellectual property rights;
significant government regulation of medical devices and the healthcare industry;
our ability to receive regulatory clearance from certain government authorities, such as CFIUS (as defined below), including any conditions, limitations or restrictions placed on such approvals;
outbreaks of a pandemic disease, such as COVID-19 (coronavirus);
our customers’ ability to get third-party reimbursement for our products and services associated with them;
our failure to implement our business plan or strategies;
our early termination of leases, difficulty filling vacancies or negotiating improved lease terms;
our ability to retain or attract key employees;
stock volatility or illiquidity;
our ability to maintain adequate internal controls over financial reporting; and
overall economic and market conditions.

Although we believe that the assumptions underlying the forward-looking statements and forward-looking information contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, such statements and information
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included in this Quarterly Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements and forward-looking information included herein, the inclusion of such statements and information should not be regarded as a representation by us or any other person that the results or conditions described in such statements and information or that our objectives and plans will be achieved. Such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
 
Overview
 
We design, develop and sell exoskeleton technology to augment human strength, endurance and mobility. Our exoskeleton technology serves multiple markets and can be used both by able-bodied persons as well as by persons with physical disabilities. We have sold or leased devices that (i) enable individuals with neurological conditions affecting gait (stroke and spinal cord injury) to rehabilitate, and in some cases, to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods.
 
In August 2019, we introduced our next generation lower extremity rehabilitation exoskeleton, EksoNR, which succeeds our EksoGT. Our EksoNR, is used as a rehabilitation tool to allow physicians and therapists to rehabilitate patients who have suffered a stroke or spinal cord injury. With its unique features designed specifically for hospitals and its proprietary SmartAssist software, EksoNR allows for the early mobilization of patients, enabling increased endurance during rehabilitation sessions through higher step counts and for longer periods. The intent is to allow the patient’s central nervous system to take advantage of a person’s neuroplasticity to maximize a patient’s recovery.

In July 2019, we announced the expansion of our medical exoskeleton portfolio with an upper extremity rehabilitation device called EksoUE. EksoUE’s wearable upper body exoskeleton assists patients with a broad range of upper extremity impairments and aims to provide them with a wider active range of motion and increased endurance for rehabilitation sessions of higher intensity.
 
Our EksoVest is an upper body exoskeleton that elevates and supports a worker's arms to assist them with tasks ranging from chest height to overhead. In 2020, we are focusing on increasing sales of the EksoVest and the support arm, EksoZeroG, by pursuing alternative channels, such as rental agreements with construction equipment and heavy tool providers and working with automotive and related manufacturers to roll out our product(s) globally within their assembly operations. In addition, we believe that there is additional mid-to-long-term potential in the industrial markets, and accordingly, we will continue our development efforts to expand our EksoWorks product offerings.
 
We believe that the commercial opportunity for exoskeleton technology adoption is accelerating as a result of recent advancements in material technologies, electronic and electrical engineering, control technologies, and sensor and software development. Taken individually, many of these advancements have become ubiquitous in peoples’ everyday lives. We believe that we have learned how to integrate these existing technologies and wrap the result around a human being efficiently, elegantly and safely, supported by an industry leading intellectual property portfolio. We further believe that we can do so across a broad spectrum of applications, from persons with lower limb paralysis to able-bodied users.

First Quarter 2020 Highlights

Reported revenue of $1.5 million in the first quarter of 2020, as customers delayed orders due to the COVID-19 global pandemic.
Cash utilization decreased to $1.7 million in the first quarter of 2020, down from $5.2 million in the first quarter of 2019.
Signed new pilot programs with two network operators in March.
Regained Nasdaq listing compliance.

The COVID-19 pandemic has affected inpatient rehabilitation facilities as they temporarily shifted priorities and responses to pandemic-related medical equipment. We are, however, encouraged that the majority of our customers have indicated that they still plan to place orders for our exoskeleton products in the future, which gives us optimism for our longer-term prospects. To align our expenses with the current business environment, we took measures to adjust our cost structure, which included furloughing a portion of our workforce. Despite these unprecedented challenges, we continue to regularly engage with our current and prospective customers through video conferencing, virtual training events and online education demos to offer our support and showcase the value of our Ekso devices. Although market uncertainties related to the pandemic make it difficult for
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us to project the full impact on our business and customers, we believe that we are well-positioned to serve our customers when business conditions begin to normalize.


Critical Accounting Policies and Estimates
 
Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
 
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the condensed consolidated financial statements. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the condensed consolidated financial statements.

Results of Operations
 
The following table presents our results of operations (in thousands, except percentages):
  Three months ended March 31,    
  2020 2019 Change % Change
       
Revenue $ 1,468    $ 3,616    $ (2,148)   (59) %
Cost of Revenue 831    2,017    (1,186)   (59) %
Gross profit 637    1,599    (962)   (60) %
Operating expenses:        
Sales and marketing 2,520    2,809    (289)   (10) %
Research and development 711    1,384    (673)   (49) %
General and administrative 2,187    2,318    (131)   (6) %
Total operating expenses 5,418    6,511    (1,093)   (17) %
Loss from operations