Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Annual Report. See also "Cautionary Note Regarding Forward-Looking Statements."
On March 24, 2020, we effected a one-for-fifteen reverse stock split, or the Reverse Stock Split, reducing the number of our common shares outstanding on that date from 87.4 million shares to approximately 5.8 million shares. Additionally, the exercise price and number of all outstanding options and warrants, and the number of shares reserved for future issuance pursuant to our equity compensation plan were all adjusted proportionately. All such amounts presented herein have been adjusted retroactively to reflect these changes. The number of the Company’s authorized shares were not proportionately reduced in the Reverse Stock Split and remain at 141,428,571 shares.
Overview
The following discussion highlights the results of our operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of our financial condition and results of operations presented herein. The following discussion and analysis is based on our audited consolidated financial statements contained in this Annual Report on Form 10-K, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response to this pandemic, public health officials and governments across the world have recommended and mandated actions to curb the spread of the SARS-COV-2 virus, the pathogen that causes COVID-19. The COVID-19 pandemic and the related responses to the pandemic have caused a significant adverse impact on the global economy, including disruptions to supply chains, sharp increases in unemployment and overall economic uncertainty.
This pandemic has negatively impacted our business, including our employees, suppliers, customers and other business partners, resulting in our terminating 23 employees in 2020. We have seen demand for our exoskeleton products decrease in the current business environment, as many inpatient rehabilitation facilities temporarily shift priorities and delay capital expenditures, resulting in 61 units booked (non-cancellable customer orders) in 2020 compared to 98 in 2019, a decrease of 38%. We have seen that the clinical need has not diminished as more data is coming out about the increase prevalence of strokes during this pandemic. As such, we continue to 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 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.
We continue to instruct the majority of our employees to work from home, restrict non-critical business travel and have enhanced the use of personal protective equipment in our facilities.
We are hopeful that COVID cases and hospitalizations will continue to decrease, and now that our clinical team is fully vaccinated and are active onsite at rehab centers, we expect to see an uptick in live in-person interactions going forward. In fact, we are now close to the number of onsite demos in the first quarter of 2021 compared to the previous three quarters combined. While we are cautiously optimistic about the current COVID outlook, the successful completion of our first virtual training sessions leave us well-positioned to address existing pipeline opportunities, mitigating the effects of future COVID-related lock downs or travel restrictions.
Management continues to actively monitor the global situation and its effects on our financial position and operations.
Business
We design, develop, sell, and rent exoskeleton products that augment human strength, endurance and mobility. Our exoskeleton technology serves multiple markets and can be utilized both by able-bodied persons and persons with physical disabilities. We have sold or leased devices that (i) enable individuals with neurological conditions affecting gait (acquired brain injury and spinal cord injury) to rehabilitate, and in some cases, to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods.
We believe that the commercial opportunity for exoskeleton technology adoption is accelerating as a result of recent advancements in material technologies, electronic and electrical engineering, control technologies, and sensor and software development. Taken individually, many of these advancements have become ubiquitous in peoples’ everyday lives. We believe that we have learned how to integrate these existing technologies and wrap the result around a human being efficiently, elegantly and safely, supported by an industry leading intellectual property portfolio. We further believe that we can do so across a broad spectrum of applications, from persons with lower limb paralysis to able-bodied users.
EksoHealth
EksoHealth is our business unit focused on developing, marketing, and selling exoskeletons for medical applications. Our leading product in EksoHealth, the EksoNR, is a robotic exoskeleton used to provide physical therapy for patients with lower extremity impairment. EksoNR, which in 2019 superseded our EksoGT product in this segment, includes unique features designed specifically to assist physical therapists and other clinicians to teach patients to walk again after suffering a neurological impairment. Typical conditions that can be treated with the assistance of EksoNR include acquired brain injuries, such as stroke and traumatic brain injuries, as well as spinal cord injuries and others. The benefits of using EksoNR for rehabilitation can include earlier mobilization of patients, longer and more intense rehab sessions, and better quality of sessions compared to alternative therapies. The product is most typically used in a clinical setting, with the most common among those being inpatient rehab facilities and stroke centers.
EksoUE is a wearable upper body exoskeleton that is also used as a tool during rehabilitation. EksoUE is designed to 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.
EksoWorks
EksoWorks is our business unit focused on developing, marketing, and selling exoskeletons and other assistive tools for industrial applications. The target users for these devices are generally able-bodied, and as such the goal of these products is to reduce fatigue for workers. The benefits of fatigue reduction can include reduced rates of injuries, higher productivity, higher worker morale, and lower turnover. Currently, we sell these products primarily directly to companies that deploy them for use in their operations.
Within EksoWorks we have two main categories of products. Our wearable exoskeleton products include EksoVest and the new EVO, both of which support the weight of a worker’s arms and tools, reducing the fatigue associated with working at or above shoulder height for extended periods. These products are currently targeted at end markets in Manufacturing, Aerospace, Construction, and Food Processing.
EksoZeroG is a tool holder that can mount on aerial lift platform or scaffolding. This effectively reduces the weight of heavy tools as felt by the operator. EksoZeroG has been sold primarily through rental companies into the construction market.
Operational Highlights
•In 2020, we booked a total of 61 EksoGT and EksoNR units, 19 of which were subscription units and 9 of which were previously rented units that were converted to sales.
•We recorded annual gross margins of approximately 57% in 2020, compared to 49% in 2019.
•In February 2020, we announced the worldwide launch of our upgraded EksoPulse platform, an innovative cloud-based information technology platform that measures and analyzes progress using the EksoNR robotic exoskeleton. The improved analytics system provides an easy-to-use dashboard to chart activity in rehabilitation sessions, enhancing the clinician, institutional, and patient experience of the most clinically used exoskeleton.
•In June 2020, we received FDA clearance to market our EksoNR robotic exoskeleton for use with acquired brain injury patients
•Also in June 2020, we were named “Best Healthcare Robotics Company” in 2020 MedTech Breakthrough Awards Program
•In August 2020, we launched EVO, an endurance-boosting assistive upper body exoskeleton designed for industrial use.
2020 Financing Activities
•In April 2020, we received proceeds of a $1.1 million unsecured loan under the Paycheck Protection Program, or the PPP.
•In June 2020, we sold 1,747,704 shares of our common stock and warrants to purchase up to 873,852 shares of our common stock, or June 2020 Investor Warrants, at a combined public offering price of $4.51 per share for proceeds, net of expenses and underwriting discount and commission, of $7.1 million.
•In August 2020, we paid off the entire amount of $1.5 million of the Company's indebtedness to Western Alliance Bank with proceeds from a new loan of $2.0 million from Pacific Western Bank. The terms of the new loan agreement include monthly interest-only payments over the next three years.
•During the year ended December 31, 2020, we received $3.3 million in proceeds from the exercise of 723,426 warrants.
•Subsequent to year end, we received estimated net proceeds of $36.4 million from an underwritten public offering, $1.4 million from warrant exercises, and $0.7 million from sales under our "at the market offering" program. Refer to Note. 18 in the notes to our consolidated financial statements under the caption Subsequent Events.
Critical Accounting Policies, Estimates, and Judgments
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations.
Our EksoHealth segment revenue is primarily generated through the sale and rental of our EksoNR and associated software (SmartAssist and VariableAssist), EksoUE, sale of accessories, and support and maintenance contracts (Ekso Care). Revenue from EksoHealth sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility for sales of our EksoNR, software, and accessories. Ekso Care support and maintenance contracts extend coverage beyond our standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. We receive payment at the inception of the contract and recognize revenue over the term of the agreement. Revenue from medical device rentals is recognized over the lease term, typically over 12 months.
Our EksoWorks segment revenue is generated by the sales of our EksoVest, EksoZeroG and EVO. Revenue from EksoWorks device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from our facility.
Inventory valuation
Inventories are recorded at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress, or WIP. Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. We periodically evaluate the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge to the consolidated statements of operations and comprehensive loss. Our estimate of write-downs for excess and obsolete inventory is based on a detailed analysis of on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of an inventory reserve.
Stock-based Compensation
We measure stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes option-pricing model, or the Black-Scholes Model, and recognize the fair value on a straight-line basis over the requisite service periods of the awards.
Our determination of the fair value of stock options on the date of grant using the Black-Scholes Model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. We adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, we estimate the expected term of options granted by taking the average of the vesting term and the contractual term of the option.
We have, from time to time, modified the terms of stock options granted to our employees. We account for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value based measure of the modified award on the date of modification over the fair value of the original award immediately before the modification.
Warrant Valuation
We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash.
Where there is a possibility that we may have to settle warrants in cash, we estimate the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Black-Scholes option-pricing model (the “Black-Scholes Model”) and the Binomial Lattice model (the “Lattice Model”). The Black-Scholes Model requires inputs, such as the expected volatility, expected term, exercise price, risk-free interest rate, and the value of the underlying security. The Lattice Model provides for assumptions regarding expected volatility, expected term, exercise price, risk-free interest rates, the value of the underlying security, and the probability of and likely timing of a specific event within the period to maturity. These values are subject to a significant degree of judgment on our part. Our common stock price represents a significant input that affects the valuation of our warrants.
Going Concern
We assess our ability to continue as a going concern at every interim and annual period in accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements – Going Concern. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern.
Comparison of the year ended December 31, 2020 to the year ended December 31, 2019 (dollars in thousands):
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Years ended December 31,
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2020
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2019
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Change
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% Change
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Revenue
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$
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8,882
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$
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13,917
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$
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(5,035)
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(36)
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%
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Cost of revenue
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3,812
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7,153
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(3,341)
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(47)
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%
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Gross profit
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5,070
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6,764
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(1,694)
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(25)
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%
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Gross profit %
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57
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%
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49
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%
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Operating expenses:
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Sales and marketing
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7,752
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11,398
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(3,646)
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(32)
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%
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Research and development
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2,474
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4,596
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(2,122)
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(46)
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%
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General and administrative
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7,702
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7,409
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293
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4
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%
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Impairment of goodwill
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189
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—
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189
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nm(1)
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Restructuring
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244
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—
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244
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nm(1)
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Total operating expenses
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18,361
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23,403
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(5,042)
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(22)
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%
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Loss from operations
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(13,291)
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(16,639)
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3,348
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(20)
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%
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Other (expense) income, net:
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Interest expense
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(139)
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(384)
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245
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(64)
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%
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Finance cost associated with warrant issuance
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(329)
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(1,096)
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767
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(70)
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%
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(Loss) gain on warrant liabilities
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(3,056)
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6,376
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(9,432)
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nm(1)
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Loss on modification of warrants
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—
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(257)
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257
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nm(1)
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Other income (expense), net
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990
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(132)
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1,122
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nm(1)
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Total other (expense) income, net
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(2,534)
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4,507
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(7,041)
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(156)
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%
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Net loss
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$
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(15,825)
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$
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(12,132)
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$
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(3,693)
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30
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%
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(1) Not meaningful
Revenue
Revenue decreased $5.0 million, or 36%, for the year ended December 31, 2020, compared to the same period of 2019. This decrease was comprised of a $3.9 million decrease in EksoHealth and a $1.1 million decrease in EksoWorks primarily due to a decrease in volume of medical device sales driven by the impact of the COVID-19 pandemic, as our customers shifted their priorities to prepare for and manage their business during the pandemic.
Gross Profit
Gross profit decreased $1.7 million, or 25%, for the year ended December 31, 2020, compared to the same period of 2019, primarily attributable to a decreased volume of device sales. Gross margin was approximately 57% for the year ended December 31, 2020, compared to a gross margin of 49% for the same period in 2019. Gross margins increased primarily due to higher average selling prices for EksoNR, an increased proportion of medical device sales in overall revenue composition, lower unit production costs, the introduction of EVO, and higher service margins.
Operating Expenses
Sales and marketing expenses decreased $3.6 million, or 32%, for the year ended December 31, 2020, compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a furlough and a reduction in force in March and May 2020, respectively, lower selling expense as we shifted to video conferencing, virtual training events and online education demonstrations, lower general marketing and trade show activities, and the absence of clinical trials expense due to the completion of our main clinical trial in the first quarter of 2019.
Research and development expenses decreased $2.1 million, or 46%, for the year ended December 31, 2020, compared to the same period of 2019, primarily due to a decrease in employee compensation expenses as a result of a furlough and a reduction in force in March and May 2020, respectively, and a decrease in patent and licensing costs.
General and administrative expenses increased $0.3 million, or 4%, for the year ended December 31, 2020, compared to the same period of 2019, primarily due to an increase in legal expense.
Goodwill impairment charge of $0.2 million was recorded in the year ended December 31, 2020, reducing the goodwill balance to zero. No goodwill impairment charge was recorded in 2019.
Restructuring expense of $0.2 million was recorded in the year ended December 31, 2020, and related to the completion of a restructuring plan in May of 2020. We streamlined our operations and reduced our workforce by approximately 35% to lower operating expenses and reduce cash burn. The restructuring expense consisted of employee severance payments.
The reduction in operating expenses reflects the continuation of the company-wide initiatives we implemented last year, the restructuring completed in May 2020, as well as improving overall operational efficiencies. Our focus remains on optimizing the cost structure of our organization.
Other (Expense) Income, Net
Interest expense decreased $0.2 million, or 64% for the year ended December 31, 2020, compared to the same period of 2019, primarily due to lower effective interest rates on our term loans.
Loss on revaluation of warrant liabilities of $3.1 million for the year ended December 31, 2020, was associated with the revaluation of warrants issued in 2015, 2019 and 2020. Gain on revaluation of warrant liabilities of $6.4 million for the year ended December 31, 2019, related to warrants issued in 2015 and 2019. Gains and losses on revaluation of warrants are primarily driven by changes in our stock price.
Loss on modification of warrants of $0.3 million for the year ended December 31, 2019, was due to the reduction of the exercise price of the 2015 Warrants from $56.10 per share to $41.25 per share, in connection with an amendment of the 2015 Warrant 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. There was no comparable amount during the same period in 2020.
Warrant issuance expense of $0.3 million for the year ended December 31, 2020 was recorded in connection with our private placement offerings of warrants to purchase common stock concurrently with a registered direct offering of our common stock in June 2020. We incurred $1.1 million in direct financing costs, which were allocated on a relative fair value basis between the common stock and warrant issuances, of which $0.3 million was allocated to warrants and expensed immediately. Warrant issuance expense of $1.1 million for the year ended December 31, 2019 was recorded in connection with our May 2019 and December 2019 financings. We incurred $1.7 million in direct financing costs, which were allocated on a relative fair value basis between the common stock and warrant issuances, of which $1.1 million was allocated to warrants and expensed immediately.
Other income, net was $1.0 million for the year ended December 31, 2020, compared to other expense, net of $0.1 million the same period of 2019, due to unrealized gains and losses on foreign currency revaluations of our inter-company monetary assets and liabilities.
Financial Condition, Liquidity and Capital Resources
Since our inception, we have devoted substantially all of our efforts toward the development of exoskeletons for the medical and industrial markets, toward the commercialization of medical exoskeletons to rehabilitation centers and toward raising capital. We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt.
Liquidity and Capital Resources
At December 31, 2020, we had working capital of $13.4 million, compared to working capital of $11.0 million at December 31, 2019. The increase in working capital is primarily due to higher cash balance from equity financings, warrants exercises, and
the reduction of notes payable, current as a result of retiring our WAB Term Loan. Our cash and cash equivalents as of December 31, 2020 consisted of bank deposits with third party financial institutions. As of December 31, 2020, of our $12.9 million of cash, $12.3 million was held domestically while $0.6 million was held by foreign subsidiaries.
As of December 31, 2020, we had an accumulated deficit of $199.1 million and cash on hand of $12.9 million. Largely as a result of significant research and development activities related to our advanced technology and commercialization of such technology into our medical device business, we have incurred significant operating losses and negative cash flows from operations since inception. We have incurred net losses of $15.8 million and $12.1 million for the years ended December 31, 2020 and 2019, respectively. In the year ended December 31, 2020, we received net proceeds of $7.1 million from a registered direct offering and $3.3 million from warrant exercises, and used $8.8 million of cash in our operations.
Subsequent to year-end through February 25, 2021, we received estimated net proceeds of $36.4 million from an underwritten public offering, $1.4 million from warrant exercises, and $0.7 million from sales under our "at the market offering" program. Refer to Note. 18 in the notes to our consolidated financial statements under the caption Subsequent Events.
In 2020, management took several actions to alleviate the substantial doubt about the our ability to continue as a going concern that existed as of the date of issuance of the December 31, 2019 consolidated financial statements, including, but not limited to, the following:
•streamlined our operations and reduced our workforce by approximately 35% to lower operating expenses and reduce cash burn;
•conducted a registered direct offering of 1,747,704 shares of our common stock for net proceeds of $7.1 million;
•paid off the entire amount of $1.5 million of our indebtedness to Western Alliance Bank with proceeds from a new loan of $2.0 million from Pacific Western Bank. The terms of the new loan agreement include monthly interest-only payments over the next three years.
•invested in the development and reliability of our products;
•restructured our commercial organization and strategy which has been gaining traction;
•received FDA clearance for ABI to market our product to a larger patient population increasing the value proposition to our customers.
As described in Note 9 in the notes to our consolidated financial statements under the caption Notes Payable, net, borrowings under our new secured term loan agreement with Pacific Western Bank have a requirement of minimum cash on hand equivalent to the current outstanding principal balance. As of December 31, 2020, $2.0 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of December 31, 2020 is estimated to be $10.9 million. With this unrestricted cash balance and the impact of management's actions described above, and additional cash received after year-end, we believe that we currently have sufficient cash to fund our operations beyond the look forward period of one year from the issuance of these consolidated financial statements.
Our actual capital requirements may vary significantly and will depend on many factors. We plan to continue our investments in our (i) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use. Consequently, we may require significant additional financing in the future, which we intend to raise through corporate collaborations, public or private equity offerings, debt financings, or warrant solicitations. Sales of additional equity securities by us could result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, we may be required to further reduce our discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated (in thousands):
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Years ended December 31,
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2020
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2019
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Cash, beginning of year
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$
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10,872
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|
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$
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7,655
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Net cash used in operating activities
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(8,755)
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|
|
(15,772)
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Net cash used in investing activities
|
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—
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|
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(60)
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|
Net cash provided by financing activities
|
|
10,704
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|
|
19,039
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Effect of exchange rate changes on cash
|
|
41
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|
|
10
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|
Cash, end of year
|
|
$
|
12,862
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|
|
$
|
10,872
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|
Net Cash Used in Operating Activities
Net cash used in operations decreased $7.0 million, or 44%, for the year ended December 31, 2020, compared to the same period of 2019, primarily due to the reduction in operating expenses by improving overall operational efficiencies, including but not limited to, the reduction of employee headcount. In addition, increased collection efforts resulted in higher ratio of accounts receivable collections to sales.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased $0.1 million, or 100%, during the year ended December 31, 2020, compared to the same period of 2019, primarily due to lower hardware and software purchases due to lower headcount.
Net Cash Provided by Financing Activities
Net cash provided by financing activities of $10.7 million for the year ended December 31, 2020 was from the sale of our common stock for net proceeds of $7.1 million in connection with the equity financing in June 2020, proceeds of $1.1 million from our PPP loan, and proceeds of $3.3 million from the exercise of June 2020 Warrants and May 2019 Warrants, partially offset by aggregate principal payments of $1.3 million against our term loan and the $1.5 million payoff of our loan with Western Alliance Bank.
Net cash provided by financing activities of $19.0 million for the year ended December 31, 2019 was from the sale of common stock and warrants for net proceeds of $9.0 million in connection with the equity financing in May 2019, net proceeds of $4.2 million with the equity financing in December 2019, net proceeds of $2.8 million from our “at the market offering” program, net proceeds of $5.0 million from equity investors associated with the JV Agreement, and proceeds of $0.2 million from the exercise of stock options, partially offset by aggregate principal payments of $2.4 million against our term loan.
Off-Balance Sheet Arrangements
Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of December 31, 2020, we had no such arrangements. There has been no material change in our contractual obligations other than in the ordinary course of business since our fiscal year ended December 31, 2020.
Contractual Obligations and Commitments
The following table summarizes our outstanding contractual obligations, including interest payments, as of December 31, 2020 and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
|
Total
|
|
Less than one year
|
|
1-3 Years
|
|
3-5 Years
|
|
After 5 Years
|
Term loan
|
|
$
|
3,356
|
|
|
$
|
90
|
|
|
$
|
3,266
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Facility operating leases
|
|
836
|
|
|
599
|
|
|
237
|
|
|
—
|
|
|
—
|
|
Purchase obligations
|
|
396
|
|
|
396
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
4,588
|
|
|
$
|
1,085
|
|
|
$
|
3,503
|
|
|
$
|
—
|
|
|
$
|
—
|
|
In addition to the table above, which reflects only fixed payment obligations, we have two license agreements to maintain exclusive rights to certain patents. Under these license agreements, we are required to pay 1% of net sales of products sold to entities other than the U.S. government. In the event of a sublicense, we will owe 21% of license fees and must pass through 1% of the sub-licensee’s net sales of products sold to entities other than the U.S. government. The license agreements also stipulate minimum annual royalties of $50,000 per year.
In connection with our acquisition of Equipois in December 2015, we assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants us an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, we will be required to pay a single-digit royalty on net receipts, subject to a $50,000 annual minimum royalty requirement.
We purchase components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling $0.4 million as of December 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.
Recent Accounting Pronouncements
See Note 2 in the notes to our consolidated financial statements under the caption Recent Accounting Pronouncements for a discussion of new accounting pronouncements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
The following financial statements are filed as part of this Annual Report on Form 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Ekso Bionics Holdings, Inc.
Richmond, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Ekso Bionics Holdings, Inc. as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
Description of the Matter
As described in Note 2 to the consolidated financial statements, the Company’s contracts with customers sometimes contain multiple performance obligations, which are accounted for separately if they are distinct. In such cases, the transaction price is then allocated to the distinct performance obligations on a relative standalone selling price basis and revenue is recognized when the distinct performance obligation is satisfied. For example, device revenue is recognized at the point in time that the customer takes control of the device, generally upon shipment, and subscription and service revenues are recognized over time as the services are performed.
Auditing the Company’s revenue recognition was challenging, specifically related to the identification and determination of the distinct performance obligations, the allocation of the transaction price to the identified performance obligations and the timing of revenue recognition. For example, certain arrangements required judgment to determine the distinct performance obligations,
how the transaction price is allocated to the identified performance obligations, and the appropriate timing of revenue recognition.
How We Addressed the Matter in Our Audit
We obtained an understanding and evaluated the design of the Company’s process and controls to determine the distinct performance obligations, allocation of the transaction price to the identified performance obligations and the timing of revenue recognition.
Among the procedures we performed to test the determination of the distinct performance obligations, allocations of the transaction price to the identified performance obligations and the timing of revenue recognition, we read executed contracts and purchase orders to understand the rights and obligations conveyed in the contractual arrangement, evaluated management’s assessment of the performance obligations and whether they were distinct, determined the reasonableness of the standalone selling price used by management in the allocation of the transaction price to the performance obligations, and tested the timing of revenue recognition for a sample of individual sales transactions. We evaluated the accuracy of the Company’s accounting conclusions, specifically related to the identification and determination of distinct performance obligations, allocation of the transaction price to the identified performance obligations, and the timing of revenue recognition.
San Francisco, California
February 25, 2021
We have served as the Company's auditor since 2010.
Ekso Bionics Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash
|
$
|
12,862
|
|
|
$
|
10,872
|
|
Accounts receivable, net of allowances of $42 and $121, respectively
|
3,389
|
|
|
5,208
|
|
Inventories
|
1,978
|
|
|
2,489
|
|
Prepaid expenses and other current assets
|
191
|
|
|
238
|
|
Total current assets
|
18,420
|
|
|
18,807
|
|
Property and equipment, net
|
1,172
|
|
|
1,657
|
|
Right-of-use assets
|
685
|
|
|
1,084
|
|
Goodwill
|
—
|
|
|
189
|
|
Other assets
|
320
|
|
|
178
|
|
Total assets
|
$
|
20,597
|
|
|
$
|
21,915
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
1,501
|
|
|
$
|
1,903
|
|
Accrued liabilities
|
1,429
|
|
|
1,683
|
|
Deferred revenues, current
|
1,496
|
|
|
1,492
|
|
Note payable, current
|
—
|
|
|
2,333
|
|
Lease liabilities, current
|
548
|
|
|
421
|
|
Total current liabilities
|
4,974
|
|
|
7,832
|
|
Deferred revenues
|
1,806
|
|
|
1,789
|
|
Notes payable, net
|
3,075
|
|
|
407
|
|
Lease liabilities
|
233
|
|
|
711
|
|
Warrant liabilities
|
6,037
|
|
|
4,307
|
|
Other non-current liabilities
|
38
|
|
|
72
|
|
Total liabilities
|
16,163
|
|
|
15,118
|
|
Commitments and contingencies (Note 16)
|
|
|
|
Stockholders' equity:
|
|
|
|
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued and outstanding at December 31, 2020 and 2019
|
—
|
|
|
—
|
|
Common stock, $0.001 par value; 141,429 shares authorized; 8,349 and 5,795 shares issued and outstanding at December 31, 2020 and 2019, respectively
|
8
|
|
|
6
|
|
Additional paid-in capital
|
204,376
|
|
|
190,019
|
|
Accumulated other comprehensive (loss) income
|
(847)
|
|
|
50
|
|
Accumulated deficit
|
(199,103)
|
|
|
(183,278)
|
|
Total stockholders' equity
|
4,434
|
|
|
6,797
|
|
Total liabilities and stockholders' equity
|
$
|
20,597
|
|
|
$
|
21,915
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
Revenue
|
$
|
8,882
|
|
|
$
|
13,917
|
|
|
|
Cost of revenue
|
3,812
|
|
|
7,153
|
|
|
|
Gross profit
|
5,070
|
|
|
6,764
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Sales and marketing
|
7,752
|
|
|
11,398
|
|
|
|
Research and development
|
2,474
|
|
|
4,596
|
|
|
|
General and administrative
|
7,702
|
|
|
7,409
|
|
|
|
Impairment of goodwill
|
189
|
|
|
—
|
|
|
|
Restructuring
|
244
|
|
|
—
|
|
|
|
Total operating expenses
|
18,361
|
|
|
23,403
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
(13,291)
|
|
|
(16,639)
|
|
|
|
|
|
|
|
|
|
Other (expense) income, net:
|
|
|
|
|
|
Interest expense
|
(139)
|
|
|
(384)
|
|
|
|
Finance cost associated with warrant issuance
|
(329)
|
|
|
(1,096)
|
|
|
|
(Loss) gain on warrant liabilities
|
(3,056)
|
|
|
6,376
|
|
|
|
Loss on modification of warrants
|
—
|
|
|
(257)
|
|
|
|
Other income (expense), net
|
990
|
|
|
(132)
|
|
|
|
Total other (expense) income, net
|
(2,534)
|
|
|
4,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(15,825)
|
|
|
(12,132)
|
|
|
|
Foreign currency translation adjustments
|
(897)
|
|
|
142
|
|
|
|
Comprehensive loss
|
$
|
(16,722)
|
|
|
$
|
(11,990)
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share applicable to common shareholders
|
$
|
(2.21)
|
|
|
$
|
(2.53)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding, basic and diluted
|
7,164
|
|
|
4,794
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance at December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
4,198
|
|
|
$
|
4
|
|
|
$
|
173,962
|
|
|
$
|
(92)
|
|
|
$
|
(171,146)
|
|
|
$
|
2,728
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,132)
|
|
|
(12,132)
|
|
Issuance of common stock under:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity financing, net
|
—
|
|
|
—
|
|
|
1,534
|
|
|
2
|
|
|
12,442
|
|
|
—
|
|
|
—
|
|
|
12,444
|
|
Equipois sales earn-out
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
Equity incentive plan
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
228
|
|
|
—
|
|
|
—
|
|
|
228
|
|
Matching contribution to 401(k) plan
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
191
|
|
In lieu of employee cash bonus
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
919
|
|
|
—
|
|
|
—
|
|
|
919
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,255
|
|
|
—
|
|
|
—
|
|
|
2,255
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
142
|
|
Balance at December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
5,795
|
|
|
$
|
6
|
|
|
$
|
190,019
|
|
|
$
|
50
|
|
|
$
|
(183,278)
|
|
|
$
|
6,797
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,825)
|
|
|
(15,825)
|
|
Issuance of common stock under:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity financing, net
|
—
|
|
|
—
|
|
|
1,748
|
|
|
2
|
|
|
7,080
|
|
|
—
|
|
|
—
|
|
|
7,082
|
|
Equity incentive plan
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercise of warrants
|
—
|
|
|
—
|
|
|
723
|
|
|
—
|
|
|
7,310
|
|
|
—
|
|
|
—
|
|
|
7,310
|
|
Matching contribution to 401(k) plan
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
155
|
|
In lieu of cash compensation
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
50
|
|
Shares issued as a result of rounding due to reverse-stock split
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance of warrants
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,322)
|
|
|
—
|
|
|
—
|
|
|
(2,322)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,084
|
|
|
—
|
|
|
—
|
|
|
2,084
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(897)
|
|
|
—
|
|
|
(897)
|
|
Balance at December 31, 2020
|
—
|
|
|
$
|
—
|
|
|
8,349
|
|
|
$
|
8
|
|
|
$
|
204,376
|
|
|
$
|
(847)
|
|
|
$
|
(199,103)
|
|
|
$
|
4,434
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Consolidated Statement of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2020
|
|
2019
|
Operating activities
|
|
|
|
Net loss
|
$
|
(15,825)
|
|
|
$
|
(12,132)
|
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
Depreciation and amortization
|
620
|
|
|
690
|
|
Changes in allowance for doubtful accounts
|
65
|
|
|
52
|
|
Impairment of goodwill
|
189
|
|
|
—
|
|
Amortization of debt discount, change in contingent liability and accretion of final payment fee
|
28
|
|
|
64
|
|
Gain on modification of operating lease liabilities
|
(38)
|
|
|
—
|
|
Loss on investment of unconsolidated affiliate
|
66
|
|
|
—
|
|
Common stock contribution to 401(k) plan
|
169
|
|
|
142
|
|
Stock-based compensation expense
|
2,410
|
|
|
2,255
|
|
Finance cost attributable to issuance of warrants
|
329
|
|
|
1,096
|
|
Loss (gain) on revaluation of warrant liabilities
|
3,056
|
|
|
(6,376)
|
|
Loss on modification of warrants
|
—
|
|
|
257
|
|
Unrealized (gain) loss on foreign currency transactions
|
(947)
|
|
|
133
|
|
Changes in operating assets and liabilities:
|
|
|
|
Accounts receivable
|
1,754
|
|
|
(1,599)
|
|
Inventories
|
379
|
|
|
959
|
|
Prepaid expense, operating lease right-of-use assets, and other assets, current and noncurrent
|
247
|
|
|
369
|
|
Accounts payable
|
(402)
|
|
|
(1,231)
|
|
Accrued and lease liabilities
|
(876)
|
|
|
(1,135)
|
|
Deferred revenues
|
21
|
|
|
684
|
|
Net cash used in operating activities
|
(8,755)
|
|
|
(15,772)
|
|
Investing activities
|
|
|
|
Acquisition of property and equipment
|
—
|
|
|
(60)
|
|
Net cash used in investing activities
|
—
|
|
|
(60)
|
|
Financing activities
|
|
|
|
Proceeds from issuance of common stock and warrants, net
|
7,082
|
|
|
21,188
|
|
Principal payments on notes payable
|
(1,278)
|
|
|
(2,377)
|
|
Payment of remaining balance on long-term debt
|
(1,512)
|
|
|
—
|
|
Proceeds from exercise of stock options
|
—
|
|
|
228
|
|
Proceeds from exercise of common stock warrants
|
3,334
|
|
|
—
|
|
Proceeds from issuance of long-term debt, net of financing costs
|
3,078
|
|
|
—
|
|
Net cash provided by financing activities
|
10,704
|
|
|
19,039
|
|
Effect of exchange rate changes on cash
|
41
|
|
|
10
|
|
Net increase in cash
|
1,990
|
|
|
3,217
|
|
Cash at beginning of the year
|
10,872
|
|
|
7,655
|
|
Cash at end of the year
|
$
|
12,862
|
|
|
$
|
10,872
|
|
|
|
|
|
Supplemental disclosure of cash flow activities
|
|
|
|
Cash paid for interest
|
$
|
109
|
|
|
$
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
$
|
6
|
|
|
$
|
23
|
|
|
|
|
|
Supplemental disclosure of non-cash activities
|
|
|
|
Reclassification of warrant liability to equity upon exercise of warrants
|
$
|
3,976
|
|
|
$
|
—
|
|
Share issuance for common stock contribution to 401(k) plan
|
$
|
155
|
|
|
$
|
191
|
|
Transfer of inventory to (from) property and equipment
|
$
|
132
|
|
|
$
|
(77)
|
|
Share issuance in lieu of cash compensation
|
$
|
50
|
|
|
$
|
919
|
|
Initial recognition of operating right-of-use assets
|
$
|
—
|
|
|
$
|
1,454
|
|
Initial recognition of operating lease liabilities
|
$
|
—
|
|
|
$
|
1,498
|
|
Share issuance for vesting of restricted stock
|
$
|
—
|
|
|
$
|
63
|
|
Change in deferred rent associated with ASC 842
|
$
|
—
|
|
|
$
|
44
|
|
Equipois sales earn-out
|
$
|
—
|
|
|
$
|
22
|
|
See accompanying notes to consolidated financial statements
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
1. Organization
Description of Business
Ekso Bionics Holdings, Inc. (the "Company"), designs, develops, sells, and rents exoskeleton products to augment human strength, endurance and mobility.
The Company’s exoskeleton technology serves multiple markets and can be utilized both by able-bodied users and persons with physical disabilities. The Company has sold and rented devices that (i) enable individuals with neurological conditions affecting gait (acquired brain injury and spinal cord injury) to rehabilitate and to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods.
Founded in 2005, the Company is headquartered in the San Francisco Bay area and listed on the Nasdaq Capital Market under the symbol “EKSO”.
Unless otherwise indicated, all dollar and share amounts included in these notes to the consolidated financial statements are in thousands.
Liquidity and Going Concern
As of December 31, 2020, the Company had an accumulated deficit of $199,103. 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 year ended December 31, 2020, the Company received net proceeds of $7,082 from a registered direct offering and of $3,334 from warrant exercises, and used $8,755 of cash in its operations. Cash on hand at December 31, 2020 was $12,862.
Subsequent to year-end through February 25, 2021 the Company received estimated net proceeds of $36,404 from an underwritten public offering, $1,416 from warrant exercises, and $664 from ATM sales. Refer to Note. 18, Subsequent Events.
In 2020, management took several actions to alleviate the substantial doubt about the Company’s ability to continue as a going concern that existed as of the date of issuance of the December 31, 2019 consolidated financial statements, including, but not limited to, the following:
•streamlined the Company's operations and reduced its workforce by approximately 35% to lower operating expenses and reduce cash burn;
•conducted a registered direct offering for net proceeds of $7,082;
•paid off the entire amount of $1,512 of the Company's indebtedness to Western Alliance Bank with proceeds from a new loan of $2,000 from Pacific Western Bank. The terms of the new loan agreement include monthly interest-only payments until August 2023.
•invested in the development and reliability of its products;
•restructured the Company's commercial organization and strategy which has been gaining traction; and
•received clearance from the U.S. Food and Drug Administration ("FDA") for Acquired Brain Injury ("ABI") to market the Company's product to a larger patient population increasing the value proposition to its customers.
As described in Note 9, Notes payable, net, borrowings under the Company’s new secured term loan agreement with Pacific Western Bank have a liquidity covenant requiring minimum cash on hand equivalent to the current outstanding principal balance. As of December 31, 2020, $2,000 of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of December 31, 2020 is approximately $10,862. With this unrestricted cash balance, the impact of management's actions described above, and additional cash received after year-end, the Company believes that it currently has sufficient cash to fund its operations beyond the look forward period of one year from the issuance of these consolidated financial statements.
The Company’s actual capital requirements may vary significantly and will depend on many factors. The Company plans to continue its investments in its (i) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use. Consequently, the Company may require significant additional financing in the future, which the Company intends to raise through corporate collaborations, public or private equity offerings, debt financings, or warrant solicitations. Sales of additional equity securities by the Company could result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, the Company may be required to further reduce its discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
2. Summary of Significant Accounting Policies and Estimates
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States or U.S. GAAP. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature.
All significant intercompany transactions and balances have been eliminated in consolidation.
Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.
All common share and per share amounts have been adjusted to reflect the one-for-fifteen reverse stock split completed on March 24, 2020. See Note 13, Capitalization and Equity Structure – Reverse Stock Split.
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 (loss) 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 consolidated statements of operations and comprehensive loss.
Accumulated Other Comprehensive (Loss) Income
The Company's accumulated other comprehensive (loss) income consists of the accumulated net unrealized gains or losses on foreign currency translation adjustments. The change in accumulated other comprehensive (loss) income presented on the consolidated balance sheets for the year ended December 31, 2020, is reflected in the table below net of tax:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
Accumulated Other Comprehensive (Loss) Income
|
Balance at December 31, 2019
|
$
|
50
|
|
Net unrealized loss on foreign currency translation
|
(897)
|
|
Balance at December 31, 2020
|
$
|
(847)
|
|
Cash
The Company places its cash in the custody of, financial institutions with high credit ratings. The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents or investments in money market funds as of December 31, 2020 and 2019.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains cash accounts in excess of federally insured limits. However, the Company believes it is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held. The Company extends credit to customers in the normal course of business and performs ongoing credit evaluations of its customers. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the consolidated financial statements. The Company does not require collateral from its customers to secure accounts receivable.
Accounts receivable are derived from the sale of products shipped and services performed for customers primarily located in the U.S., Europe, Asia, and Australia. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectability and provides an allowance for potential credit losses. The Company has not experienced material losses related to accounts receivable during the years ended December 31, 2020 and 2019. Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S. dollar. The Company does not enter into any foreign currency hedging agreements and is susceptible to gains and losses from foreign currency fluctuations. To date, the Company has not experienced significant gains or losses upon settling contracts denominated in a foreign currency.
At December 31, 2020, the Company had two customers with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable (13% and 10%, respectively), as compared with one customer at December 31, 2019 (11%).
The Company had no customers with sales of 10% or more of the Company’s total revenue for the year ended December 31, 2020, as compared with one for the year ended December 31, 2019 (15%). Refer to Note 17. Segment Disclosures for more information.
Inventories
Inventories are recorded at the lower of cost or net realizable value. Cost is computed using the standard cost method, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress ("WIP"). Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge within the consolidated statements of operations and comprehensive loss. The Company's estimate of write-downs for excess and obsolete inventory is based on a detailed analysis which includes on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of inventory.
Inventories consisted of the following:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Raw materials
|
$
|
1,724
|
|
|
$
|
2,208
|
|
Work in progress
|
18
|
|
|
29
|
|
Finished goods
|
236
|
|
|
252
|
|
Inventories
|
$
|
1,978
|
|
|
$
|
2,489
|
|
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.
Restructuring
In May of 2020, the Company streamlined its operations and reduced its workforce by approximately 35% to lower operating expenses and reduce cash burn. The restructuring plan was completed by the end of the second quarter of 2020.
The Company recorded restructuring expense of $244 for the year ended December 31, 2020 comprised of termination benefit costs. As of December 31, 2020, there was no accrued restructuring cost remaining on the Company’s consolidated balance sheets.
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally ranging from three to ten years. Leasehold improvements are amortized over the shorter of the estimated useful life or the related term of the lease. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized.
Impairment of Long-Lived Assets
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from the Company’s use or eventual disposition. If estimates of future undiscounted net cash flows are insufficient to recover the carrying value of the assets, the Company will record an impairment loss in the amount by which the carrying value of the assets exceeds the fair value. If the assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the Company will depreciate or amortize the net book value of the assets over the newly determined remaining useful lives. None of the Company’s property and equipment or intangible assets were impaired as of December 31, 2020 and 2019. No impairment loss has been recognized in the years ended December 31, 2020 and 2019.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Goodwill
The Company records goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. The Company performs an annual impairment assessment, or more frequently if indicators of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of goodwill. The Company performs impairment tests using a fair value approach when necessary.
The Company previously maintained a goodwill balance as a result of a prior acquisition of intangible assets from Equipois, LLC in December 2015 consisting of mechanical balance and support arms technologies, including the rights to the ZeroG product.
As a result of declining sales and gross margin, combined with the overall uncertainty about the future of the ZeroG product line, the Company performed an impairment assessment of goodwill utilizing the simplified method, which resulted in an impairment of goodwill of $189 reducing the goodwill balance to zero. In estimating the fair value, the Company utilized a discounted cash flow model, which is dependent on a number of assumptions, including forecasted revenues and profit margins. The following table sets forth the changes to goodwill for the year ended December 31, 2020:
|
|
|
|
|
|
|
Goodwill
|
Balance at December 31, 2019
|
$
|
189
|
|
Impairment of goodwill
|
(189)
|
|
Balance at Balance at December 31, 2020
|
$
|
—
|
|
Warrant Valuation
The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that it may need to settle the warrants in cash.
Where there is a possibility that the Company may have to settle warrants in cash, it estimates the fair value of the issued warrants as a liability at each reporting date and record changes in the estimated fair value as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. The fair values of these warrants have been determined using the Black-Scholes option-pricing model (the “Black-Scholes Model”) and the Binomial Lattice model (the “Lattice Model”). The Black-Scholes Model requires inputs, such as the expected volatility, expected term, exercise price, risk-free interest rate, and the value of the underlying security. The Lattice Model provides for assumptions regarding expected volatility, expected term, exercise price, risk-free interest rates, the value of the underlying security, and the probability of and likely timing of a specific event within the period to maturity. These values are subject to a significant degree of the Company’s judgment. The Company’s common stock price represents a significant input that affects the valuation of the warrants.
Going Concern
The Company assesses its ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40, Presentation of Financial Statements – Going Concern. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Revenue Recognition
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.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and rental of the EksoNR and EksoGT, associated software (SmartAssist and VariableAssist), the sale and rental of the EksoUE, the sale of accessories, and the sale of support and maintenance contracts (Ekso Care). Revenue from medical device product sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility for sales of the EksoNR or EksoGT, software and accessories. Ekso Care support and maintenance contracts extend coverage beyond the Company’s standard warranty agreements. The separately priced Ekso Care contracts range from 12 to 48 months. The Company receives payment at the inception of the contract and recognizes revenue over the term of the agreement. Revenue from medical device rentals is recognized over the rental term, typically 12 months.
The Company’s industrial device segment (EksoWorks) revenue is generated through the sale and rental of the upper body exoskeletons (EksoVest and the recently introduced EVOTM) and the support arm (EksoZeroG). Revenue from industrial device sales is recognized at the point in time when control of the product transfers to the customer. Transfer of control generally occurs upon shipment from the Company’s facility. Revenue from industrial device rentals is recognized over the rental term, typically 12 months.
Government Grants
The Company accounts for nonreciprocal government grants by applying the contributions received in accordance with guidance in ASC Topic 958-605. To determine if a grant is non-reciprocal or reciprocal and whether the application of ASC 606 is required, the Company considers whether the transfer of resources is one in which commensurate value is exchanged. If commensurate value is not exchanged for the goods or services provided, the Company assesses whether the grant is conditional or unconditional. Grants that contain both a barrier and right to return are considered conditional and revenue is deferred until such conditions are satisfied. In January 2019, the Company received a government grant from the Singapore Economic Development Board (“SEDB”) in the amount of approximately $1,500. The receipt of the funds is conditional upon certain operational milestones that must be met and maintained through December 31, 2021. Therefore, the Company has not recognized revenue related to the government grant from the SEBD nor received cash from the SEBD. The Company expects to recognize revenue related to this grant in 2021.
Research and Development
Research and development costs consist of costs incurred for internal research and development activities. These costs primarily include salaries and other personnel-related expenses, contractor fees, legal fees associated with developing and maintaining intellectual property, prototype materials, facility costs, supplies, and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. Such costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, income tax expense or benefit is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. The Company accounts for any income tax contingencies in accordance with accounting guidance for income taxes. The measurement of current and deferred tax assets and liabilities is based on provisions of currently enacted tax laws. The effects of any future changes in tax laws or rates have not been considered.
For the preparation of the Company's consolidated financial statements included herein, the Company estimates its income taxes and tax contingencies in each of the tax jurisdictions in which it operates prior to the completion and filing of its tax returns. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in net deferred tax assets and liabilities. The Company must then assess the likelihood that the deferred tax assets will be realizable, and to the extent they believe that realizability is not likely, the Company must establish a valuation allowance. In assessing the need for any additional valuation allowance, the Company considers all the evidence available to it, both positive and negative, including historical levels of income, legislative developments, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Stock-based Compensation
The Company measures stock-based compensation expense for certain stock-based awards made to employees and directors based on the estimated fair value of the award on the date of grant using the Black-Scholes Model and recognizes the fair value on a straight-line basis over the requisite service periods of the awards.
The Company’s determination of the fair value of stock options on the date of grant using the Black-Scholes Model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s stock price, volatility over the term of the awards, and actual and projected employee stock option exercise behaviors (expected term). Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term, the Company adopted the simplified method of estimating the expected term pursuant to SEC Staff Accounting Bulletin Topic 14. On this basis, the Company estimated the expected term of options granted by taking the average of the vesting term and the contractual term of the option.
The valuation of restricted stock units (“RSUs”) is determined at the date of grant using the Company’s closing stock price.
The Company records compensation expense for service-based awards on a straight-line basis over the requisite service period, which is generally the vesting period of the award, or to the date on which retirement eligibility is achieved, if shorter. For awards with performance-based conditions, at the point that it becomes probable that the performance conditions will be met, the Company records a cumulative catch-up of the expense from the grant date to the current date, and then amortizes the remainder of the expense over the remaining service period. Management evaluates when the achievement of a performance-based condition is probable based on the expected satisfaction of the performance conditions as of the reporting date. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.
The Company has, from time to time, modified the terms of its stock options to employees. The Company accounts for the incremental increase in the fair value over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value of the modified award on the date of modification over the fair value of the original award immediately before the modification.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-10, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The update will be effective for the Company in the first quarter of 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is effective for the Company beginning in the first quarter of 2022 and must be applied using either a modified or full retrospective approach. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Accounting Pronouncements Adopted in 2020
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the computation of the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record a goodwill impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted the new guidance as of January 1, 2020, which reduced the complexity surrounding the evaluation of goodwill for impairment. The adoption of this guidance did not have a material impact on the Company's 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. Net Loss Per Share of Common Stock
Basic net loss per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted average number of shares of common stock, adjusted to include conversion of certain stock options and warrants for common stock and release of common stock in connection with restricted stock units during the period, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2020
|
|
2019
|
Numerator:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(15,825)
|
|
|
$
|
(12,132)
|
|
|
|
|
|
Adjusted net loss used for dilution calculation
|
$
|
(15,825)
|
|
|
$
|
(12,132)
|
|
|
|
|
|
Denominator
|
|
|
|
Weighted-average number of shares outstanding
|
7,164
|
|
|
4,794
|
|
|
|
|
|
Dilutive weighted-average number of shares outstanding
|
7,164
|
|
|
4,794
|
|
|
|
|
|
Net loss per share
|
|
|
|
Basic
|
$
|
(2.21)
|
|
|
$
|
(2.53)
|
|
Diluted
|
$
|
(2.21)
|
|
|
$
|
(2.53)
|
|
The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2020
|
|
2019
|
Options to purchase common stock
|
529
|
|
|
494
|
|
Restricted stock units
|
143
|
|
|
89
|
|
Warrants for common stock
|
1,325
|
|
|
1,178
|
|
Total common stock equivalents
|
1,997
|
|
|
1,761
|
|
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
4. Investment in Unconsolidated Affiliate
In May 2020, the Company, Zhejiang Youchuang Venture Capital Investment Co., Ltd and another partner (collectively, the “JV Partners”) received notice from the Committee on Foreign Investment in the United States (“CFIUS”) in connection with its review of the Company’s and the JV Partners’ investment in Exoskeleton Intelligent Robotics Co. Limited (the “China JV”). The notice stated that CFIUS’s prior national security concerns regarding the China JV could not be mitigated. In connection with such determination, on July 13, 2020, the Company and the JV Partners entered into a National Security Agreement (“NSA”), which, among other things, requires the termination of the Company’s agreements and role with the China JV. The Company intends to work cooperatively with the JV Partners and CFIUS to implement the terms of the NSA. On August 12, 2020, the Company and the JV Partners agreed to terminate the agreements underlying the China JV. As of December 31, 2020, all agreements related to the China JV had been terminated.
In accordance with the above, during the year ended December 31, 2020, the Company recorded a $66 loss on investment in unconsolidated affiliate in the consolidated statements of operations and comprehensive loss related to the write-off of previously recorded direct costs related to establishing the China JV.
5. Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which are the following:
•Level 1—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
•Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.
The Company’s fair value hierarchies for its financial assets and liabilities which require fair value measurement on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
December 31, 2020
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Warrant liabilities
|
$
|
6,037
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,037
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Warrant liabilities
|
$
|
4,307
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,307
|
|
Contingent success fee liability
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
During the years ended December 31, 2020 and 2019, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The following table sets forth a summary of the changes in the fair value of Company’s Level 3 financial liabilities during the year ended December 31, 2020, which were measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
Liability
|
|
Contingent
Success Fee
Liability
|
Balance at December 31, 2019
|
$
|
4,307
|
|
|
$
|
6
|
|
Initial fair value of warrants in connection with June 2020 financing
|
2,650
|
|
|
0
|
Loss on revaluation of warrants issued in June 2020, December 2019, May 2019 financing, and December 2015 equity financings
|
3,056
|
|
|
0
|
Reclassification of warrant liability to equity upon exercise of warrants
|
(3,976)
|
|
|
—
|
|
Gain on revaluation of contingent liability
|
—
|
|
|
(6)
|
|
Balance at December 31, 2020
|
$
|
6,037
|
|
|
$
|
—
|
|
See Note 13 in the notes to consolidated financial statements under the caption Capitalization and Equity Structure – Warrants for a description of the warrants accounted for as a liability, including the method and inputs used to estimate their fair value.
6. Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations. Revenue recognition is evaluated based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.
For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are determined based on observable prices at which the Company separately sells its products or services. If a standalone selling price is not directly observable, the Company estimates the selling price based on market conditions and entity-specific factors including features and functionality of the product and/or services, the geography of the Company’s customers, type of the Company’s markets. Any discounts or other reductions to the transaction price are allocated proportionately to all performance obligations within the multiple-element arrangement.
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers and receipt of payment. For the sale of its products, the Company generally recognizes revenue at a point in time through the ship-and-bill performance obligations. For the rental of its products, the Company generally recognizes revenue over the rental term commencing upon the completion of customer training. For service agreements, the Company generally invoices customers at the beginning of the coverage period and records revenue related to the billed amounts over time, equivalent to the coverage period of the maintenance and support contract.
Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts (Ekso Care), but also includes other offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Deferred revenue consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Deferred extended maintenance and support
|
$
|
2,902
|
|
|
$
|
2,837
|
|
Deferred royalties
|
282
|
|
|
290
|
|
Deferred device, rental revenues and advances
|
118
|
|
|
154
|
|
Total deferred revenues
|
3,302
|
|
|
3,281
|
|
Less current portion
|
(1,496)
|
|
|
(1,492)
|
|
Deferred revenues, non-current
|
$
|
1,806
|
|
|
$
|
1,789
|
|
Deferred revenue activity consisted of the following for the year ended December 31, 2020:
|
|
|
|
|
|
Beginning balance
|
$
|
3,281
|
|
Deferral of revenue
|
1,922
|
|
Recognition of deferred revenue
|
(1,901)
|
|
Ending balance
|
$
|
3,302
|
|
At December 31, 2020, the Company’s deferred revenue was $3,302. The Company expects to recognize approximately $1,496 of the deferred revenue during 2021, $908 in 2022, and $898 thereafter.
In addition to deferred revenue, the Company has non-cancellable backlog of $515 related to its contracts for rental units with its customers. These rental contracts typically have 12-month lease terms and rental income is recognized on a straight-line basis over the lease term.
As of December 31, 2020 and 2019, accounts receivable, net of allowance for doubtful accounts, were $3,389 and $5,208, respectively, and are included in current assets on the Company’s consolidated balance sheets. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days.
Disaggregation of revenue
The following table disaggregates the Company’s revenue by major source for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EksoHealth
|
|
EksoWorks
|
|
Total
|
Device revenue
|
$
|
5,012
|
|
|
$
|
689
|
|
|
$
|
5,701
|
|
Service and support
|
1,723
|
|
|
—
|
|
|
1,723
|
|
Rentals
|
782
|
|
|
55
|
|
|
837
|
|
Parts and other
|
294
|
|
|
72
|
|
|
366
|
|
Collaborative arrangements
|
255
|
|
|
—
|
|
|
255
|
|
|
$
|
8,066
|
|
|
$
|
816
|
|
|
$
|
8,882
|
|
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The following table disaggregates the Company’s revenue by major source for the year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EksoHealth
|
|
EksoWorks
|
|
Total
|
Device revenue
|
$
|
9,064
|
|
|
$
|
1,726
|
|
|
$
|
10,790
|
|
Service and support
|
1,647
|
|
|
—
|
|
|
1,647
|
|
Rentals
|
913
|
|
|
—
|
|
|
913
|
|
Parts and other
|
259
|
|
|
234
|
|
|
493
|
|
Collaborative arrangements
|
74
|
|
|
—
|
|
|
74
|
|
|
$
|
11,957
|
|
|
$
|
1,960
|
|
|
$
|
13,917
|
|
7. Property and Equipment, net
Property and equipment, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
December 31,
|
|
Life (Years)
|
|
2020
|
|
2019
|
Company-owned fleet
|
3-4
|
|
$
|
3,326
|
|
|
$
|
3,385
|
|
Computer software
|
3-5
|
|
851
|
|
|
851
|
|
Leasehold improvement
|
5-10
|
|
631
|
|
|
631
|
|
Furniture, office and leased equipment
|
3-7
|
|
557
|
|
|
554
|
|
Machinery and equipment
|
3-7
|
|
291
|
|
|
289
|
|
Tools, molds, dies and jigs
|
5
|
|
96
|
|
|
96
|
|
Computers and peripherals
|
3-5
|
|
77
|
|
|
77
|
|
|
|
|
5,829
|
|
|
5,883
|
|
Accumulated depreciation and amortization
|
|
|
(4,657)
|
|
|
(4,226)
|
|
Property and equipment, net
|
|
|
$
|
1,172
|
|
|
$
|
1,657
|
|
Depreciation and amortization expense of property and equipment, net totaled $620 and $690 for the years ended December 31, 2020 and 2019, respectively.
8. Accrued Liabilities
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Salaries, benefits and related expenses
|
$
|
1,194
|
|
|
$
|
1,098
|
|
Device warranty
|
188
|
|
|
285
|
|
Other
|
47
|
|
|
300
|
|
Total
|
$
|
1,429
|
|
|
$
|
1,683
|
|
Warranty
Sales of devices generally include an initial warranty for parts and services for one year in the Americas, two years in Europe, the Middle East, Africa, and one or two years in the Asia Pacific region. A liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. Specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. Warranty costs are reflected in the consolidated statements of operations and comprehensive loss as a component of costs of revenue. The current portion of the warranty liability is classified as a
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
component of accrued liabilities, while the long-term portion of the warranty liability is classified as a component of other non-current liabilities in the consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty
|
|
2020
|
|
2019
|
Balance at beginning of the period
|
$
|
350
|
|
|
$
|
319
|
|
Additions for estimated future expense
|
219
|
|
|
416
|
|
Incurred costs
|
(343)
|
|
|
(385)
|
|
Balance at end of the period
|
$
|
226
|
|
|
$
|
350
|
|
|
|
|
|
Current portion
|
188
|
|
|
285
|
|
Long-term portion
|
38
|
|
|
65
|
|
Total
|
$
|
226
|
|
|
$
|
350
|
|
9. Notes payable, net
WAB and PWB Term Loans
WAB Term Loan
In December 2016, the Company entered into a loan agreement with Western Alliance Bank ("WAB loan") and received a loan in the principal amount of $7,000 that bore interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The Company was required to pay accrued interest on the WAB loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company was required to make equal monthly payments of principal, together with accrued and unpaid interest maturing on January 1, 2021. On April 29, 2020 the Company entered into a second amendment to the December 2016 WAB loan agreement to defer principal payments for three months beginning in May 2020, with adjustments when the principal payments resumed on August 1, 2020. During the three-month deferral period the Company was required to make interest only payments.
The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate for the WAB loan of 8.49% for the year ended December 31, 2020. The final payment fee, initial fair value of the success fee, and debt issuance costs were accreted/amortized to interest expense using the effective interest method over the life of the loan.
PWB Term Loan
In August 2020, the Company entered into a new loan agreement (the "PWB Loan Agreement") with a different lender, Pacific Western Bank, and received a loan in the principal amount of $2,000 (the "PWB Term Loan") that bears interest on the outstanding daily balance at a rate equal to the greater of: (a) 0.50% above the variable rate of interest announced by the lender as its “prime rate” then in effect; or (b) 4.50%. The PWB Loan Agreement created a first priority security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
The proceeds of the PWB Term Loan were used to pay off the entire amount of the Company's indebtedness on the WAB loan which amounted to $1,512. Pursuant to the PWB Loan Agreement, the remainder of the PWB Term Loan proceeds may be used for general corporate purposes which totaled $480, net of debt discounts and issuance costs.
The Company is required to pay accrued interest on the current loan on the 13th day of each month through and including August 13, 2023. The principal balance of the PWB Term Loan matures on August 13, 2023, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. The interest rate of the PWB Term Loan is subject to increase in the event of late payments and after occurrence of and during the continuation of an event of default. Upon maturity, all unpaid principal and accrued and unpaid interest shall be due and payable in full. The Company may elect to prepay the PWB Term Loan at any time, in whole or in part, without penalty or premium.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The PWB Loan Agreement contains a liquidity covenant, which requires that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least the outstanding balance of the PWB Term Loan, which was $2,000 as of December 31, 2020. On December 31, 2020, with cash on hand of $12,862, the Company was compliant with this liquidity covenant and all other covenants.
The debt issuance costs and debt discounts combined with the stated interest resulted in an effective interest rate of 4.64% for the year ended December 31, 2020. The debt issuance costs will be 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 as of December 31, 2020:
|
|
|
|
|
|
Period
|
Amount
|
2021 - 2022
|
$
|
—
|
|
2023
|
2,000
|
|
Total principal payments
|
2,000
|
|
Less final payment fee, discount and issuance cost
|
11
|
|
Note payable, net
|
$
|
1,989
|
|
|
|
Current portion
|
$
|
—
|
|
Long-term portion
|
1,989
|
|
Note payable, net
|
$
|
1,989
|
|
Paycheck Protection Program Loan
On April 20, 2020, the Company received an unsecured loan in the principal amount of $1,086 under the Paycheck Protection Program (the “PPP”) administered by the U.S. Small Business Administration, or the SBA, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), or the PPP loan. The PPP loan provides for an interest rate of 1.00% per year, and matures two years after the date of initial disbursement. The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020, or the PPP Flexibility Act, which was enacted on June 5, 2020. Based on management's interpretation of the the PPP Flexibility Act, the Company expects to begin making principal and interest payments on the PPP loan beginning in 2022. The overall timing of payments with respect to the amounts of principal and interest due could change based on the ultimate determination of what may or may not be forgiven. The PPP loan 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 and the PPP Flexibility Act, the Company may apply for and be granted forgiveness for all or a portion of loan granted under the PPP loan, with such forgiveness to be determined, subject to limitations (including where employees of the Company have been terminated and not re-hired by a certain date), 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 regulations and guidelines adopted by the SBA. While the Company currently believes that the majority of the use of the PPP loan proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that the Company will obtain partial forgiveness of the loan. Terms of the loan may change subject to future enactments relating to the PPP.
The follow table presents the scheduled principal payments of the Company's PPP loan note payable as of December 31, 2020, shown if the loan is not forgiven:
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
|
|
|
|
|
|
Period
|
Amount
|
2021
|
$
|
—
|
|
2022
|
1,086
|
|
Total principal payments
|
$
|
1,086
|
|
|
|
Current portion
|
$
|
—
|
|
Long-term portion
|
1,086
|
|
Note payable, net
|
$
|
1,086
|
|
10. Lease Obligations
The Company maintains a five-year operating lease agreement for its headquarters and manufacturing facility in Richmond, California, or the Richmond Lease, which expires in May 2022, with no further options to extend or terminate. The lease includes non-lease components (i.e. common area maintenance costs) that are paid separately from rent based on actual costs incurred. In June 2020, the Company entered into an amendment to the Richmond Lease to make a one-time payment of $300 to cover its remaining lease obligations for the remainder of 2020, resulting in a $48 abatement and a lease payment deferral of $79 to be paid in equal monthly installments in 2021.
The Company's five-year operating lease agreement for its European operations office in Hamburg, Germany expires in July 2022. It has an option to extend for another five-year term.
Through April 2019, the Company had an unoccupied leased sales office in Freiburg, Germany, which had a lease term that expired in December 2020. In April 2019, the Company entered an agreement with the lessor of the Freiburg office releasing the Company from future lease payments after April 30, 2019.
The Company’s future lease payments as of December 31, 2020 are as follows, which are presented as lease liabilities on the Company’s consolidated balance sheets:
|
|
|
|
|
|
|
|
|
Period
|
|
Operating
Leases
|
2021
|
|
$
|
599
|
|
2022
|
|
237
|
|
|
|
|
|
|
|
|
|
|
Total lease payments
|
|
836
|
|
Less: imputed interest
|
|
(55)
|
|
Present value of lease liabilities
|
|
$
|
781
|
|
|
|
|
Lease liabilities, current
|
|
$
|
548
|
|
Lease liabilities, noncurrent
|
|
233
|
|
Total lease liabilities
|
|
$
|
781
|
|
|
|
|
Weighted-average remaining term (in years)
|
|
1.44
|
Weighted-average discount rate
|
|
10.5
|
%
|
Lease expense under the Company’s operating leases was $537 and $551, for the years ended December 31, 2020 and 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.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
As part of the transition to ASC 842, the Company elected to use the modified retrospective transition method with the new standard being applied as of the January 1, 2019 adoption date. Additionally, the Company has elected, as of the adoption date, not to reassess whether expired or existing contracts contain leases under the new definition of a lease; the lease classification for expired or existing leases; or whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
11. Employee Benefit Plan
The Company administers a 401(k) retirement plan, or the 401(k) Plan, in which all employees are eligible to participate. Each eligible employee may elect to contribute to the 401(k) Plan. The Company has made matching contributions in the form of shares of the Company's common stock to the 401(k) Plan in an amount equal to 50% of employee contributions (up to the statutory limit), subsequent to year-end. The expense related to the contribution was $169 and $142 for the years ended December 31, 2020 and 2019, respectively.
12. Related Party Transactions
One of the Company’s directors, Dr. Ted Wang, is the founder, general partner and Chief Investment Officer of Puissance Capital Management LP, or Puissance Capital, which is an affiliate of Puissance Cross-Border Opportunities II LLC, one of the Company’s largest stockholders until November 2020. Prior to Dr. Wang’s appointment to the Board in connection with the Rights Offering in September 2017, the Company entered into a one-year consulting agreement with Angel Pond Capital LLC, or Angel Pond, an entity solely owned and managed by Dr. Wang and affiliated with Puissance Capital. Angel Pond provides consulting services to the Company with respect to strategic positioning in the Asia Pacific region, including introduction to potential strategic partners and the development of strategic partnerships for the sale and manufacture of the Company’s products in that market. During the year ended December 31, 2019, Angel Pond provided consulting services amounting to $30 during, which was expensed in the consolidated statement of operations and comprehensive loss.
During the year ended December 31, 2020, the Company sold EksoVest raw material inventory and tooling to the China JV for
$45.
13. 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 (the "Reverse Stock Split"). 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, restricted stock units, common stock underlying stock options and warrants.
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 did not meet the minimum closing bid price requirement for continued listing on the Nasdaq Capital Market. The reverse stock split was effected 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.
Summary
The Company’s authorized capital stock at December 31, 2020 consisted of 141,429 shares of common stock and 10,000 shares of preferred stock. The authorized capital was not reduced in connection with the Reverse Stock Split. At December 31, 2020, there were 8,349 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.
Common Stock
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Board of Directors may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting for the election of directors. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and validly issued, fully paid, and non-assessable.
June 2020 Common Stock and Warrants to Purchase Common Stock Offering
In June 2020, the Company entered into a securities purchase agreement, or the June 2020 Purchase Agreement, with certain purchasers. Pursuant to the June 2020 Purchase Agreement, the Company sold in a registered direct offering, or the June 2020 Offering, an aggregate of 1,748 shares of its common stock. Pursuant to such agreement, the Company also sold, in a concurrent private placement offering, warrants to purchase 874 shares of its common stock, or the June 2020 Investor Warrants. The gross proceeds of the June 2020 Offering and the concurrent private placement offering were $7,890, the June 2020 Gross Proceeds. Each June 2020 Investor Warrant has an exercise price of $5.18 per share, subject to adjustment in certain circumstances, and is exercisable immediately and will expire five and one-half years from issuance, or on December 10, 2025.
As compensation for services provided by the placement agent for the June 2020 Offering, or the Placement Agent, the Company paid a cash fee equal to 7.0% of the June 2020 Gross Proceeds ($552) and a management fee equal to 1.0% of the June 2020 Gross Proceeds ($79), and issued, in a concurrent private placement offering, warrants to purchase shares of the Company's common stock, or the June 2020 Placement Agent Warrants, in an amount equal to up to 7.0% of the aggregate number of shares of common stock sold in the June 2020 Offering, or 122 shares in the aggregate, in substantially the same form as the June 2020 Investor Warrants, except that the June 2020 Placement Agent Warrants will expire five years from the effective date of the June 2020 Offering, or on June 7, 2025, and have an exercise price per share equal to $5.64. In connection with the June 2020 Offering, the Company also incurred $98 in other expenses of the Placement Agent paid for or reimbursed by the Company.
Of the $7,890 in proceeds, $2,650 was allocated to the June 2020 Investor Warrants and June 2020 Placement Agent Warrants, or, collectively, the June 2020 Warrants, based on the fair value method, with the remaining proceeds of $5,240 allocated to the common stock shares sold in the June 2020 Offering. In connection with the June 2020 Offering and concurrent private placement offerings, the Company incurred approximately $1,117 in direct financing costs, including a fair value of $309 of June 2020 Placement Agent Warrants. Financing costs of $808, excluding the fair value of the June 2020 Placement Agents Warrants, were allocated on the fair value basis between the common stock shares sold in the June 2020 Offering and the June 2020 Warrants, as follows: $329 was allocated to the June 2020 Warrants and expensed immediately in other income (expense), net in the accompanying consolidated statements of operations and comprehensive income (loss) and $479 was allocated to the common stock shares sold in the June 2020 Offering and recorded as a reduction to additional paid in capital. The direct financing cost of $309 associated with the June 2020 Placement Agent warrants was also allocated to the common stock shares sold in the June 2020 Offering and recorded as a reduction to additional paid in capital.
At the Market Offering
In October 2020, the Company entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC (the "Agent"), under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent. Offers and sales of shares of common stock by the Company through the Agent may be made by any method deemed to be an “at the market offering” as defined under SEC Rule 415 or in privately negotiated transactions, subject to certain conditions. Such shares may be offered pursuant to the registration statement on Form S-3 (File No. 333-239203) (the “Registration Statement”), which was declared effective by the SEC on June 26, 2020, and a related prospectus supplement filed with the SEC on October 9, 2020 (the “ATM Prospectus”). Pursuant to the Registration Statement and the ATM Prospectus, shares having an aggregate offering price of up to $7,500 may be offered and sold, subject to certain SEC rules limiting the amount of shares of the Company’s common stock that may be sold by the Company under the Registration Statement. Under the ATM Agreement, shares of the Company's common stock may not be sold for a price lower than $6.75 per share.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
In August 2018, the Company entered into a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. (the "Cantor Agreement"). Prior to entering into the ATM Agreement, the Company terminated the Cantor Agreement in September 2020.
The Company did not sell any shares of common stock under the Cantor Agreement or the ATM Agreement during the year ended December 31, 2020.
Preferred Stock
The Company may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by its Board of Directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors.
Warrants
Warrant shares outstanding as of December 31, 2019 and December 31, 2020 were as follows:
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Source
|
Exercise
Price
|
|
Term
(Years)
|
|
December 31, 2019
|
|
Issued
|
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Expired
|
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Exercised
|
|
December 31, 2020
|
June 2020 Investor Warrants
|
$
|
5.18
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|
|
5.5
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—
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874
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|
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—
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(477)
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397
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June 2020 Placement Agent Warrants
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$
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5.64
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5
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—
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122
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—
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—
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122
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December 2019 Warrants
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$
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8.10
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5
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556
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—
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—
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—
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556
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December 2019 Placement Agent Warrants
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$
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8.44
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5
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52
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—
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—
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—
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52
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May 2019 Warrants
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$
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3.52
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5
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444
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—
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—
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(246)
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198
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2017 Information Agent Warrants
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$
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22.50
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3
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13
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—
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(13)
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—
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—
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2015 Warrants
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$
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41.25
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5
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107
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—
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(107)
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—
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—
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Pre-2014 warrants
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$
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144.90
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9-10
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6
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—
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(6)
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—
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—
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1,178
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996
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(126)
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(723)
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1,325
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|
June 2020 Investor Warrants
In June 2020, the Company issued the June 2020 Investor Warrants, exercisable for up to 874 shares of the Company’s common stock at an exercise price of $5.18 per share. The June 2020 Warrants were issued as exercisable immediately, and will expire five and one-half years from the date of issuance, or on December 10, 2025.
In addition, the June 2020 Investor Warrants contain a cashless exercise provision, whereby, if, at the time a holder exercises its June 2020 Investor Warrants, a registration statement registering the issuance or the resale of the shares of common stock underlying the June 2020 Investor Warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate exercise price, the holder may elect to instead receive, upon such exercise (either in whole or in part), the net number of shares of the Company’s common stock determined according to a formula set forth in the June 2020 Investor Warrant. The June 2020 Investor Warrants will be automatically exercised on a cashless basis on their expiration date.
The June 2020 Investor Warrants could also require payment of liquidated damages by the Company in the form of cash payments in the event of a failure by the Company to timely deliver shares of common stock upon exercise of such warrants. During the year ended December 31, 2020, 477 shares of the June 2020 Warrants were exercised.
The June 2020 Investor Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the June 2020 Investor Warrants, as defined in the June 2020 Investor Warrants, the holders of the June 2020 Investor Warrants will be entitled to receive upon exercise of the June 2020 Investor Warrants the kind and amount
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
of securities, cash or other property that the holders would have received had they exercised the June 2020 Investor Warrants immediately prior to such fundamental transaction. Alternatively, the Company or any successor entity will, at the option of a holder of a June 2020 Investor Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s June 2020 Investor 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 June 2020 Investor Warrant. Because of this put-option provision, the June 2020 Investor Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the June 2020 Investor Warrants is measured at fair value upon issuance and 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 June 2020 Investor Warrants:
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December 31, 2020
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June 10, 2020
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Current share price
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$
|
6.13
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$
|
3.81
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Conversion price
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$
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5.18
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$
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5.18
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Risk-free interest rate
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0.35
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%
|
0.39
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%
|
Expected term (years)
|
4.94
|
5.5
|
Volatility of stock
|
105.3
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%
|
96.4
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%
|
June 2020 Placement Agent Warrants
In June 2020, the Company issued the June 2020 Placement Agent Warrants, exercisable for up to 122 shares of the Company’s common stock, to the placement agent for such offering. The June 2020 Placement Agent Warrants have substantially the same form as the June 2020 Investor Warrants, including the put option described above, except that they have an exercise price per share equal to $5.64, subject to adjustment in certain circumstances, and will expire on June 7, 2025.
Because of the put-option provision in the June 2020 Placement Agent Warrants, these warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the June 2020 Placement Agent 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 June 2020 Placement Agent Warrants:
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|
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|
December 31, 2020
|
June 10, 2020
|
Current share price
|
$
|
6.13
|
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$
|
3.81
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|
Conversion price
|
$
|
5.64
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$
|
5.64
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|
Risk-free interest rate
|
0.31
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%
|
0.33
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%
|
Expected term (years)
|
4.44
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5
|
Volatility of stock
|
106.8
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%
|
96.3
|
%
|
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 are currently exercisable have an exercise price of $8.10 per share, and will expire five years from the date they initially became exercisable, or on June 21, 2025.
The December 2019 Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the December 2019 Warrants, the Company or any successor entity will, at the option of a holder of a December 2019 Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s December 2019 Warrant by paying to such holder an amount of cash equal to the Black-
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Scholes value of the remaining unexercised portion of such holder’s December 2019 Warrant within five trading days after the notice of exercise by the holder of the put option. Because of this put-option provision, the December 2019 Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the December 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the December 2019 Warrants:
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December 31, 2020
|
December 31, 2019
|
Current share price
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$
|
6.13
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$
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5.86
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Conversion price
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$
|
8.10
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$
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8.10
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|
Risk-free interest rate
|
0.31
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%
|
1.73
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%
|
Expected term (years)
|
4.47
|
5.47
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Volatility of stock
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107.9
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%
|
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.
The warrant liability related to the December 2019 Placement Agent 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 Placement Agent Warrants:
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|
|
|
|
|
|
|
December 31, 2020
|
December 31, 2019
|
Current share price
|
$
|
6.13
|
|
$
|
5.86
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|
Conversion price
|
$
|
8.44
|
|
$
|
8.44
|
|
Risk-free interest rate
|
0.26
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%
|
1.69
|
%
|
Expected term (years)
|
3.97
|
4.97
|
Volatility of stock
|
109.4
|
%
|
93.1
|
%
|
Management has assessed that the likelihood of a Change of Control (as defined in the December 2019 Placement Agent Warrants), 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 warrants (the "May 2019 Warrants") to purchase 444 shares of common stock. The May 2019 Warrants are currently exercisable and have a current exercise price of $3.52 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. Pursuant to this provision, in connection with the June 2020 Offering, the exercise price of the May 2019 Warrants was reduced to $3.52 per share, being the amount that is equal to the lower of (x) the consideration paid for the securities issued in the June 2020 Offering, or $4.51 per share, (y) the lowest exercise price of the June 2020 Warrants, or $5.18, and (z) the lowest one-day volume-weighted average price of the Company’s Common Stock on the Nasdaq Capital Market as measured each day during
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
the five trading day period starting on June 8, 2020, rounded to the nearest share, or $3.52. During the year ended December 31, 2020, 246 shares of the May 2019 warrants were exercised.
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.
The May 2019 Warrants include a put option, whereby while the May 2019 Warrants are outstanding, if the Company enters into a Change of Control, as defined in the May 2019 Warrants, the Company or any successor entity will, at the option of a 2019 Warrant holder exercise within 90 days after the public disclosure of the Change of Control transaction, purchase such holder’s May 2019 Warrants by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such warrants on the later date of consummation of the Change of Control transaction or two trading days after the notice of such request. Because of this put option provision, the May 2019 Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the May 2019 Warrants is measured at fair value at each reporting and exercise 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:
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
December 31, 2019
|
Current share price
|
$
|
6.13
|
|
$
|
5.86
|
|
Conversion price
|
$
|
3.52
|
|
$
|
5.70
|
|
Risk-free interest rate
|
0.21
|
%
|
1.67
|
%
|
Expected term (years)
|
3.40
|
4.40
|
Volatility of stock
|
107.2
|
%
|
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 Agents Warrants") to purchase 13 shares of the Company’s common stock to an information agent. The 2017 Information Agent Warrants had an exercise price of $22.50 per share and became exercisable immediately upon issuance and remained exercisable until September 13, 2020. These warrants were recorded in stockholders’ equity on the Company’s consolidated balance sheet. These warrants expired during the year ended December 31, 2020.
2015 Warrants
In December 2015, the Company issued warrants (the "2015 Warrants") to purchase 141 shares which are currently exercisable with a current exercise price of $41.25 per share. The 2015 Warrants contained a put-option provision. Under this provision, while the 2015 Warrants were outstanding, if the Company entered into a Fundamental Transaction, as defined in the 2015 Warrants, the Company or any successor entity shall, at the option of each warrant holder, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the Black-Scholes Model value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction. Because of this put-option provision, the 2015 Warrants were 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 year ended December 31, 2020, none of the 2015 Warrants were exercised. In the year ended December 31, 2019, the Company recorded a $257 loss on the modification of these warrants related to an amendment which reduced the exercise price of the warrants. These warrants expired during the year ended December 31, 2020.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Pre-2014 Merger Warrants
Warrants to purchase preferred stock of Ekso Bionics Inc. outstanding prior to the Merger were converted into warrants to purchase 6 shares of common stock of the Company in connection with the Merger (the "Merger Warrants"). As a result of the May 2019 Offering, which was a firm commitment underwritten public offering, the Merger Warrants expired, in accordance with their terms.
14. Stock-based Compensation
2014 Equity Incentive Plan
In 2014, prior to the Merger, the Board of Directors and a majority of the stockholders adopted the 2014 Equity Incentive Plan, or the 2014 Plan, allowing for the issuance of 137 shares of common stock. The 2014 Plan has since been amended and restated with approval by the stockholders to increase the maximum number of shares issuable, as shown in the table below:
|
|
|
|
|
|
Original share pool
|
137
|
|
2015 increase
|
111
|
|
June 2017 increase
|
67
|
|
December 2017 increase (ratified in June 2018)
|
293
|
|
2019 increase
|
233
|
|
March 2020 increase
|
333
|
|
December 2020 increase
|
800
|
|
Total share authorized for grant as of December 31, 2020
|
1,974
|
|
As of December 31, 2020, the total shares authorized for grant under the 2014 Plan was 1,974, of which 1,113 were available for future grants.
Under the terms of the 2014 Plan, the Board of Directors may award stock options, restricted stock, restricted stock units, stock appreciation rights and dividend equivalent rights having either a fixed or variable price related to the fair market value of the shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions or any other security with the value derived from the value of the shares.
Shares available for future grant under the 2014 Plan was as follows:
|
|
|
|
|
|
|
Shares Available For Grant
|
Available as of December 31, 2019
|
119
|
|
Granted
|
(225)
|
|
Forfeited
|
57
|
|
Expired
|
29
|
|
Share pool increase
|
1,133
|
|
Available as of December 31, 2020
|
1,113
|
|
Stock Options
The Board of Directors may grant stock options under the 2014 Plan at a price of not less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The maximum term of an incentive stock option granted to participants may not exceed ten years. Subject to the limitations discussed above, the Board of Directors determines the term and exercise or purchase price of other awards granted under the 2014 Plan. The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2014 Plan vest upon the passage of time, generally four years, or upon the attainment of certain performance criteria established by the Board of Directors. The Company may grant options to purchase common stock to non-employees for advisory and consulting services. Upon exercise of a stock option, the Company issues new shares of common stock.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
A summary of the stock option activity during the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
Outstanding at beginning of year
|
494
|
|
|
$
|
36.64
|
|
|
|
|
|
Granted
|
90
|
|
|
$
|
5.65
|
|
|
|
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Forfeited
|
(26)
|
|
|
$
|
26.59
|
|
|
|
|
|
Expired
|
(29)
|
|
|
$
|
41.25
|
|
|
|
|
|
Outstanding at end of year
|
529
|
|
|
$
|
31.62
|
|
|
7.35
|
|
$
|
42
|
|
Vested and expected to vest
|
529
|
|
|
$
|
31.62
|
|
|
7.35
|
|
$
|
42
|
|
Exercisable at year end
|
342
|
|
|
$
|
40.63
|
|
|
6.71
|
|
$
|
24
|
|
In 2020, the Company received $0 in cash from exercised stock options. The intrinsic value of the options exercised totaled $0 and $233, for the years ended December 31, 2020 and 2019, respectively.
The weighted-average grant date fair value of stock options granted for the years ended December 31, 2020 and 2019 was $4.42 and $10.20, respectively. The total grant date fair value of stock option vested during the years ended December 31, 2020 and 2019 was $1,900 and $2,602, respectively.
As of December 31, 2020, total unrecognized compensation cost related to unvested stock options was $2,203. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of 2.0 years.
The following table summarizes information about stock options outstanding as of December 31, 2020:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of
Exercise
Prices
|
|
Number of
Shares
|
|
Weighted-Average
Remaining
Contractual Life
(Years)
|
|
Weighted
Average
Price
|
|
Number of
Shares
|
|
Weighted
Average
Price
|
$5.55 - $9.15
|
|
205
|
|
|
8.9
|
|
$
|
7.63
|
|
|
87
|
|
|
$
|
6.94
|
|
$16.95 - $26.85
|
|
101
|
|
|
7.7
|
|
$
|
22.33
|
|
|
66
|
|
|
$
|
22.48
|
|
$27.30 - $56.70
|
|
163
|
|
|
6.6
|
|
$
|
34.89
|
|
|
128
|
|
|
$
|
35.64
|
|
$60.00 - $229.95
|
|
60
|
|
|
4.2
|
|
$
|
119.04
|
|
|
60
|
|
|
$
|
119.04
|
|
|
|
529
|
|
|
7.4
|
|
$
|
31.62
|
|
|
342
|
|
|
$
|
40.63
|
|
The Company recognizes compensation expense using the straight-line method over the requisite service period. The share fair value of each stock option was determined on the date of grant using the Black-Scholes Model under the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
Dividend yield
|
—
|
|
—
|
Risk-free interest rate
|
1.44% - 1.65%
|
|
1.67% - 2.5%
|
Expected term (in years)
|
5.27 - 6.08
|
|
6.08
|
Volatility
|
100%-102%
|
|
100%-103%
|
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
Restricted Stock Units
The Company issues RSUs to employees and non-employee service providers. Each RSU represents the right to receive one share of the Company’s common stock upon vesting and subsequent settlement. The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.
RSU activity for the year ended December 31, 2020 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Grant-
Date Fair Value
|
Unvested as of January 1, 2020
|
89
|
|
|
$
|
10.77
|
|
Granted
|
135
|
|
|
$
|
4.45
|
|
Vested
|
(50)
|
|
|
$
|
6.24
|
|
Forfeited
|
(31)
|
|
|
$
|
10.96
|
|
Unvested as of December 31, 2020
|
143
|
|
|
$
|
6.31
|
|
The total grant-date fair value of RSUs that vested during the year ended December 31, 2020 was $251. As of December 31, 2020, $741 of total unrecognized compensation expense related to unvested RSUs was expected to be recognized over a weighted average period of 2.20 years.
Compensation Expense
Stock-based compensation is included in the consolidated statements of operations and comprehensive loss in general and administrative, research and development, or sales and marketing expenses, depending upon the nature of services provided. Stock-based compensation expense related to stock options and RSUs granted to employees and non-employees was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
Sales and marketing
|
$
|
476
|
|
|
$
|
653
|
|
Research and development
|
293
|
|
|
241
|
|
General and administrative
|
1,641
|
|
|
1,361
|
|
|
$
|
2,410
|
|
|
$
|
2,255
|
|
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, or ESPP. Under the ESPP, the Company has 500 shares of common stock reserved for issuance, subject to adjustment in the event of a stock split, stock dividend, combination or reclassification or similar event. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 25% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods. At the end of each offering period, employees can purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. As of December 31, 2020, the Company had not initiated employee enrollment to the plan.
15. Income Taxes
The domestic and foreign components of pre-tax loss for the years ended December 31, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
Domestic
|
$
|
(14,954)
|
|
|
$
|
(10,321)
|
|
Foreign
|
(871)
|
|
|
(1,811)
|
|
Loss before income taxes
|
$
|
(15,825)
|
|
|
$
|
(12,132)
|
|
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
The Company had no current or deferred federal and state income tax expense or benefit for the years ended December 31, 2020 and 2019 because the Company generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized. The Company’s non-U.S. tax obligation is primarily for business activities conducted through Germany and Singapore for which taxes were included in other expense, net for the years ended December 31, 2020 and 2019 and determined to be immaterial and accordingly, such amounts were excluded from the following tables.
Income tax expense (benefit) for the years ended December 31, 2020 and 2019 differed from the amounts computed by applying the statutory federal income tax rate of 21% to pretax loss as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
Federal tax at statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
State tax, net of federal tax effect
|
—
|
|
|
—
|
|
R&D credit
|
—
|
|
|
1.0
|
|
Change in valuation allowance
|
(16.6)
|
|
|
(27.2)
|
|
Unrealized gain on warrant
|
(4.5)
|
|
|
8.7
|
|
Foreign exchange
|
0.6
|
|
|
0.9
|
|
Other
|
(0.5)
|
|
|
(4.4)
|
|
Total tax expense (benefit)
|
—
|
%
|
|
—
|
%
|
The tax effects of temporary differences and related deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
Depreciation and other
|
$
|
235
|
|
|
$
|
263
|
|
Net operating loss carryforwards
|
43,241
|
|
|
40,683
|
|
Research and development tax credits
|
1,837
|
|
|
1,817
|
|
Accruals and reserves
|
380
|
|
|
289
|
|
Deferred revenue
|
401
|
|
|
220
|
|
Stock compensation expense
|
2,547
|
|
|
2,197
|
|
Lease assets
|
110
|
|
|
224
|
|
Other
|
37
|
|
|
45
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Lease liabilities
|
(88)
|
|
|
(214)
|
|
Prepaid expenses
|
(27)
|
|
|
(43)
|
|
Less: Valuation allowance
|
(48,673)
|
|
|
(45,481)
|
|
Net deferred tax asset (liability)
|
$
|
—
|
|
|
$
|
—
|
|
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance was established and no deferred tax assets were shown in the accompanying consolidated balance sheets. The valuation allowance increased by $3,192 and $3,899 in the years ended December 31, 2020 and December 31, 2019, respectively.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
For tax years beginning after December 31, 2018, the Global Intangible Low-taxed Income ("GILTI") took effect. Due to the aggregated losses of the foreign subsidiaries, there was no GILTI inclusion for the years ended December 31, 2020 and December 31, 2019.
On March 27, 2020 the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). On December 21, 2020, The U.S. Congress passed the Consolidation Appropriations Act, 2021 (the CAA Act). We have evaluated the provisions of the CARES Act and CCA Act and determined that it did not result in a significant impact on our tax provision.
On June 29, 2020 California Assembly Bill 85 (AB 85) was signed into law, which suspends the use of California net operating losses and limits the use of California research tax credits for tax years beginning in 2020 and before 2023. The suspension of net operating losses and the restriction of research tax credits did not result in a significant impact on the value of our deferred tax assets.
As of December 31, 2020 the Company had federal net operating loss carryforwards of $164,296. The federal net operating loss carryforwards of $120,792 generated before January 1, 2018 will begin to expire in 2027, and $43,503 will carryforward indefinitely but are subject to the 80% taxable income limitation. The Company also had federal research and development tax credit carryforwards of $1,943 that will expire beginning in 2031, if not utilized.
As of December 31, 2020, the Company had state net operating loss carryforwards of $106,955, which will begin to expire in 2028. The Company also had state research and development tax credit carryforwards of $641, which have no expiration.
As of December 31, 2020, the Company had foreign net operating loss carryforwards of $9,655. The foreign net operating loss carryforwards do not expire.
Utilization of the Company’s net operating losses and credit carryforwards may be subject to annual limitations in the event of a Section 382 ownership change. Such future limitations could result in the expiration of net operating losses and credit carryforwards before utilization as a result of such an ownership change.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
637
|
|
Increase of unrecognized tax benefits taken in prior years
|
1
|
|
Increase of unrecognized tax benefits related to current year
|
7
|
|
Balance as of December 31, 2020
|
$
|
645
|
|
If the Company is able to recognize these uncertain tax positions, the unrecognized tax benefits would not impact the effective tax rate if the Company applies a full valuation allowance against the deferred tax assets, as provided in the Company’s current policy.
The Company had not incurred any material tax interest or penalties as of December 31, 2020. The Company does not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions. The Company is subject to taxation in the United States and various state jurisdictions, Germany, and Singapore. There are no ongoing examinations by taxing authorities at this time. The Company’s tax years 2007 through 2020 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits. The Company’s 2016 to 2020 tax years will remain open for examination by the German tax authority for four years from the end of the year in which the applicable return was filed. The Company’s 2018 to 2020 tax years will remain open for examination by the Singapore tax authority for four years from the date of the applicable assessment.
16. Commitments and Contingencies
Commitments
Material Contracts
The Company has two license agreements with the Regents of the University of California to maintain exclusive rights to patents. The Company is required to pay 1% of net sales of licensed medical devices sold to entities other than the U.S.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
government. In addition, the Company is required to pay 21% of consideration collected from any sub-licensee for the grant of the sub-license.
In connection with acquisition of Equipois, LLC ("Equipois"), the Company assumed the rights and obligations of Equipois under a license agreement with the developer of certain intellectual property related to mechanical balance and support arm technologies, which grants the Company an exclusive license with respect to the technology and patent rights for certain fields of use. Pursuant to the terms of the license agreement, the Company is required to pay the developer a single-digit royalty on net receipts, subject to a $50 annual minimum royalty requirement.
Purchase Obligations
The Company purchases components from a variety of suppliers and uses contract manufacturers to provide manufacturing services for its products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling $396 as of December 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.
Other Contractual Obligations
The following table summarizes the Company's outstanding contractual obligations, including interest payments, as of December 31, 2020 and the effect those obligations are expected to have on its liquidity and cash flows in future periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
Total
|
|
Less than
one year
|
|
1-3 Years
|
|
3-5 Years
|
Term loans
|
$
|
3,356
|
|
|
$
|
90
|
|
|
$
|
3,266
|
|
|
$
|
—
|
|
Facility operating lease
|
836
|
|
|
599
|
|
|
237
|
|
|
—
|
|
Total
|
$
|
4,192
|
|
|
$
|
689
|
|
|
$
|
3,503
|
|
|
$
|
—
|
|
Contingencies
In the normal course of business, the Company is subject to various legal matters. In the opinion of management, the resolution of such matters will not have a material adverse effect on the Company’s consolidated financial statements.
Ekso Bionics Holdings, Inc.
Notes to Consolidated Financial Statements
(In thousands, except per share amounts)
17. Segment Disclosures
The Company has two reportable segments: EksoHealth and EksoWorks. The EksoHealth segment designs, engineers, manufactures, sells and rents exoskeletons for applications in the medical markets. The EksoWorks segment designs, engineers, manufactures, sells, and rents 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
|
Year ended December 31, 2020
|
|
|
|
|
|
Revenue
|
$
|
8,066
|
|
|
$
|
816
|
|
|
$
|
8,882
|
|
Cost of revenue
|
3,219
|
|
|
593
|
|
|
3,812
|
|
Gross profit
|
$
|
4,847
|
|
|
$
|
223
|
|
|
$
|
5,070
|
|
|
|
|
|
|
|
Year ended December 31, 2019
|
|
|
|
|
|
Revenue
|
$
|
11,957
|
|
|
$
|
1,960
|
|
|
$
|
13,917
|
|
Cost of revenue
|
5,404
|
|
|
1,749
|
|
|
7,153
|
|
Gross profit
|
$
|
6,553
|
|
|
$
|
211
|
|
|
$
|
6,764
|
|
Revenues from one customer of the Company’s EksoHealth segment represented approximately $2,138 of the Company’s consolidated revenues for the year ended December 31, 2019.
Geographic revenue information based on location of customer is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
2020
|
|
2019
|
United States
|
$
|
5,945
|
|
|
$
|
9,071
|
|
All Other
|
2,937
|
|
|
4,846
|
|
|
$
|
8,882
|
|
|
$
|
13,917
|
|
18. Subsequent Events
In February 2021, the Company entered into an amended and restated underwriting agreement (the "Underwriting Agreement") with H.C. Wainwright & Co., LLC ("Wainwright"), to sell 3,902 shares of the Company's common stock for public price per share of $10.25 per share, for gross proceeds of $40,000 (the "February 2021 Offering"). The Company estimates that the net proceeds from the February 2021 Offering will be approximately $36,404 after deducting underwriting discounts and commissions and estimated offering expenses. Pursuant to the Underwriting Agreement, the Company issued to certain designees of Wainwright 5-year warrants (the “2021 Warrants”) to purchase shares of Common Stock in an amount equal to 7.0% of the aggregate number of shares sold in the February 2021 Offering at an exercise price of $12.8125 per share.
During the first quarter of 2021 through February 25, 2021, the Company received proceeds of $1,416 from the exercise of 275 warrants and sold 78 shares of the Company's common stock under the ATM Agreement at an average price per share of $10.72 for proceeds of $664, net of commission and issuance costs. As of February 25, 2021, the Company has $6,668 available for future offerings under the prospectus filed with respect to the ATM Agreement.