Company Quick10K Filing
Quick10K
Ekso Bionics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.69 68 $47
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-10-22 Enter Agreement, Exhibits
8-K 2019-09-16
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-06-20 Officers, Shareholder Vote
8-K 2019-05-22 Enter Agreement, Exhibits
8-K 2019-05-03 Officers, Other Events, Exhibits
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-03-08 Enter Agreement, Exhibits
8-K 2019-02-28 Earnings, Exhibits
8-K 2019-01-30 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-01-08 Earnings, Exhibits
8-K 2018-12-13 Officers, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-10-30 Officers, Exhibits
8-K 2018-08-21 Enter Agreement, Other Events, Exhibits
8-K 2018-08-13 Officers, Exhibits
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-07-10 Other Events, Exhibits
8-K 2018-06-07 Shareholder Vote
8-K 2018-05-09 Officers, Exhibits
8-K 2018-03-22 Officers, Other Events
8-K 2018-01-22 Officers, Exhibits
8-K 2018-01-09 Earnings, Exhibits
LRCX Lam Research 30,477
SNA Snap-On 8,039
ATU Actuant 1,313
IMAX IMAX 1,248
MTSC MTS Systems 1,028
ACMR ACM Research 254
CODA Coda Octopus Group 107
HPJ Highpower International 70
BTN Ballantyne Strong 47
ARTW Arts Way Manufacturing 12
EKSO 2019-09-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 ekso-93019xex311.htm
EX-31.2 ekso-93019xex312.htm
EX-32.1 ekso-93019xex321.htm
EX-32.2 ekso-93019xex322.htm

Ekso Bionics Earnings 2019-09-30

EKSO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ekso-93019x10q.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________ 
FORM 10-Q 
____________________________________________________________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ 
Commission File Number: 001-37854 
____________________________________________________________________________________________ 
Ekso Bionics Holdings, Inc.

(Exact name of registrant as specified in its charter) 
____________________________________________________________________________________________
Nevada
 
99-0367049
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
1414 Harbour Way South, Suite 1201
Richmond, CA
 
94804
(Address of principal executive offices)
 
(Zip Code)
 
(510) 984-1761
(Registrant’s telephone number, including area code)
____________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Name of each exchange on which registered:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
EKSO
 
Nasdaq Capital Market


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
 
Accelerated filer x
 
 
 
Non-accelerated filer ¨
 
Smaller reporting company  x
 
 
 
 
 
Emerging growth company  ¨ 
 





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  o 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
 
The number of shares of registrant’s common stock outstanding as of October 25, 2019 was 74,952,547.
 



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

Table of Contents
  
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
 
Ekso Bionics Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
 
 
September 30, 2019
 
December 31, 2018
 
(unaudited)
 
(Note 2)
Assets
 

 
 

Current assets:
 

 
 

Cash
$
8,058

 
$
7,655

Accounts receivable, net of allowances of $128 and $128, respectively
5,206

 
3,660

Inventories, net
3,342

 
3,371

Prepaid expenses and other current assets
428

 
281

Total current assets
17,034

 
14,967

Property and equipment, net
1,723

 
2,365

Right-of-use assets
1,174

 

Goodwill
189

 
189

Other assets
172

 
134

Total assets
$
20,292

 
$
17,655

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,362

 
$
3,156

Accrued liabilities
2,589

 
3,541

Deferred revenues, current
1,398

 
1,102

Note payable, current
2,333

 
2,333

Lease liabilities, current
405

 

Total current liabilities
8,087

 
10,132

Deferred revenues
1,846

 
1,495

Note payable
972

 
2,648

Lease liabilities
818

 

Warrant liabilities
2,131

 
585

Other non-current liabilities
17

 
67

Total liabilities
13,871

 
14,927

Commitments and contingencies (Note 14)


 


Stockholders’ equity:
 
 
 
Convertible preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018

 

Common stock, $0.001 par value; 141,429 shares authorized; 74,953 and 62,963 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
75

 
63

Additional paid-in capital
186,629

 
173,903

Accumulated other comprehensive income (loss)
274

 
(92
)
Accumulated deficit
(180,557
)
 
(171,146
)
Total stockholders’ equity
6,421

 
2,728

Total liabilities and stockholders’ equity
$
20,292

 
$
17,655

 

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

4


Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
3,319

 
$
2,550

 
$
10,197

 
$
8,036

Cost of revenue
1,569

 
1,467

 
5,288

 
5,217

Gross profit
1,750

 
1,083

 
4,909

 
2,819

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
2,818

 
3,106

 
8,666

 
10,892

Research and development
1,149

 
1,282

 
4,032

 
4,479

General and administrative
1,593

 
2,785

 
6,030

 
9,350

Change in fair value, contingent consideration
(20
)
 
4

 
(19
)
 
(11
)
Total operating expenses
5,540

 
7,177

 
18,709

 
24,710

 
 
 
 
 
 
 
 
Loss from operations
(3,790
)
 
(6,094
)
 
(13,800
)
 
(21,891
)
 
 
 
 
 
 
 
 
Other income (expense), net:
 
 
 
 
 
 
 
Interest expense
(88
)
 
(145
)
 
(316
)
 
(469
)
Gain (loss) on revaluation of warrant liabilities
4,430

 
(681
)
 
6,045

 
(162
)
Loss on modification of warrant

 

 
(257
)
 

Warrant issuance expense

 

 
(706
)
 

Other income (expense), net
(346
)
 
(63
)
 
(377
)
 
(338
)
Total other income (expense), net
3,996

 
(889
)
 
4,389

 
(969
)
 
 
 
 
 
 
 
 
Net income (loss)
$
206

 
$
(6,983
)
 
$
(9,411
)
 
$
(22,860
)
Other comprehensive income
324

 
44

 
366

 
157

Comprehensive income (loss)
$
530

 
$
(6,939
)
 
$
(9,045
)
 
$
(22,703
)
 
 
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$

 
$
(0.11
)
 
$
(0.13
)
 
$
(0.38
)
Diluted
$

 
$
(0.11
)
 
$
(0.13
)
 
$
(0.38
)
 
 
 
 
 
 
 
 
Weighted average number of shares of common stock outstanding used in computing net income (loss) per share:
 
 
 
 
 
 
 
Basic
74,938

 
61,381

 
70,263

 
60,721

Diluted
74,951

 
61,381

 
70,263

 
60,721

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

5


Ekso Bionics Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
 
Convertible Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive
Income (Loss)
 
Accumulated Deficit
 
Total Stockholders’
 Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018

 
$

 
62,963

 
$
63

 
$
173,903

 
$
(92
)
 
$
(171,146
)
 
$
2,728

Net loss

 

 

 

 

 

 
(6,551
)
 
(6,551
)
Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Equity financing, net

 

 
4,362

 
5

 
7,300

 

 

 
7,305

Equipois sales earn-out

 

 
18

 

 
22

 

 

 
22

Equity incentive plan

 

 
45

 

 
55

 

 

 
55

Matching contribution to 401(k) plan

 

 
141

 

 
191

 

 

 
191

Stock-based compensation expense

 

 

 

 
636

 

 

 
636

Foreign currency translation adjustments

 

 

 

 

 
148

 

 
148

Balance at March 31, 2019

 

 
67,529

 
68

 
182,107

 
56

 
(177,697
)
 
4,534

Net loss

 

 

 

 

 

 
(3,066
)
 
(3,066
)
Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Equity financing, net

 

 
6,667

 
6

 
2,387

 

 

 
2,393

Equity incentive plan

 

 
141

 

 
173

 

 

 
173

In lieu of employee cash bonus

 

 
558

 
1

 
918

 

 

 
919

Stock-based compensation expense

 

 

 

 
557

 

 

 
557

Foreign currency translation adjustments

 

 

 

 

 
(106
)
 

 
(106
)
Balance at June 30, 2019

 

 
74,895

 
75

 
186,142

 
(50
)
 
(180,763
)
 
5,404

Net income

 

 

 

 

 

 
206

 
206

Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity incentive plan

 

 
58

 

 

 

 

 

Stock-based compensation expense

 

 

 

 
487

 

 

 
487

Foreign currency translation adjustments

 

 

 

 

 
324

 

 
324

Balance at September 30, 2019

 
$

 
74,953

 
$
75

 
$
186,629

 
$
274

 
$
(180,557
)
 
$
6,421



6


 
Convertible Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive
Loss
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2017

 
$

 
59,943

 
$
60

 
$
165,825

 
$
(340
)
 
$
(144,154
)
 
$
21,391

Net loss

 

 

 

 

 

 
(7,899
)
 
(7,899
)
Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Equipois sales earn-out

 

 
18

 

 
28

 

 

 
28

Equity incentive plan

 

 
52

 

 
(62
)
 

 

 
(62
)
Matching contribution to 401(k) plan

 

 
221

 

 
508

 

 

 
508

In lieu of cash compensation

 

 
121

 

 
190

 

 

 
190

Stock-based compensation expense

 

 

 

 
892

 

 

 
892

Foreign currency translation adjustments

 

 

 

 

 
(207
)
 

 
(207
)
Balance at March 31, 2018

 

 
60,355

 
60

 
167,381

 
(547
)
 
(152,053
)
 
14,841

Net loss

 

 

 

 

 

 
(7,978
)
 
(7,978
)
Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Equity incentive plan

 

 
454

 
1

 

 

 

 
1

In lieu of cash compensation

 

 
23

 

 
40

 

 

 
40

Stock-based compensation expense

 

 

 

 
402

 

 

 
402

Foreign currency translation adjustments

 

 

 

 

 
320

 

 
320

Balance at June 30, 2018

 

 
60,832

 
61

 
167,823

 
(227
)
 
(160,031
)
 
7,626

Net loss

 

 

 

 

 

 
(6,983
)
 
(6,983
)
Issuance of common stock under:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity financing, net

 

 
1,747

 
2

 
3,959

 

 

 
3,961

Equity incentive plan

 

 
38

 

 
1

 

 

 
1

Stock-based compensation expense

 

 

 

 
938

 

 

 
938

Foreign currency translation adjustments

 

 

 

 

 
44

 

 
44

Balance at September 30, 2018

 
$

 
62,617

 
$
63

 
$
172,721

 
$
(183
)
 
$
(167,014
)
 
$
5,587


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


7


Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Operating activities:
 

 
 

Net loss
$
(9,411
)
 
$
(22,860
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
Depreciation and amortization
519

 
1,174

Provision for excess and obsolete inventories
29

 
161

Changes in allowance for doubtful accounts
63

 
(119
)
Loss on disposal of property and equipment

 
126

(Gain) loss on revaluation of warrant liabilities
(6,045
)
 
162

Finance cost attributable to issuance of warrants
706

 

Stock-based compensation expense
1,680

 
2,232

Amortization of debt discount and accretion of final payment fee
75

 
119

Change in fair value of contingent liabilities
(19
)
 
(13
)
Common stock contribution to 401(k) plan
113

 
156

Loss on modification of warrants
257

 

Loss on foreign currency transactions
384

 
291

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(1,608
)
 
(109
)
Inventories
195

 
(1,254
)
Prepaid expenses, operating lease right-of-use assets, and other assets current and noncurrent
95

 
831

Accounts payable
(1,772
)
 
1,058

Accrued and lease liabilities
(185
)
 
477

Deferred revenues
647

 
557

Net cash used in operating activities
(14,277
)
 
(17,011
)
Investing activities:
 
 
 
Acquisition of property and equipment
(60
)
 
(51
)
Net cash used in investing activities
(60
)
 
(51
)
Financing activities:
 
 
 
Proceeds from issuance of common stock and warrants, net
16,325

 
3,961

Principal payments on note payable
(1,783
)
 
(1,585
)
Proceeds from exercise of stock options
228

 
1

Net cash provided by financing activities
14,770

 
2,377

Effect of exchange rate changes on cash
(30
)
 
(133
)
Net increase (decrease) in cash
403

 
(14,818
)
Cash at beginning of period
7,655

 
27,813

Cash at end of period
$
8,058

 
$
12,995

 
 
 
 
Supplemental disclosure of cash flow activities
 
 
 
Cash paid for interest
$
255

 
$
350

Cash paid for income taxes
8

 

 
 
 
 
 
 
 
 

8


Supplemental disclosure of non-cash activities
 
 
 
Initial recognition of operating lease right-of-use assets
$
1,454

 
$

Initial recognition of operating lease liabilities
1,498

 

Transfer of inventory to (from) property and equipment
(195
)
 
757

Share issuance for common stock contribution to 401(k) plan
191

 
508

Share issuance for employee bonuses
919

 
230

Equipois sales earn-out
22

 
28

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

9


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


1.    Organization
 
Description of Business
 
Ekso Bionics Holdings, Inc. (the “Company”) designs, develops and sells exoskeleton technology to augment human strength, endurance and mobility. The Company’s exoskeleton technology serves multiple markets and can be used both by able-bodied users as well as by persons with physical disabilities. The Company has sold and leased devices that (i) enable individuals with neurological conditions affecting gait (stroke and spinal cord injury) to rehabilitate and to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods. Founded in 2005, the Company is headquartered in the San Francisco Bay area and listed on the Nasdaq Capital Market under the symbol “EKSO”.
 
Liquidity and Going Concern
 
As of September 30, 2019, the Company had an accumulated deficit of $180,557.  Largely as a result of significant research and development activities related to the development of the Company’s advanced technology and commercialization of this technology into its medical device business, the Company has incurred significant operating losses and negative cash flows from operations since inception. In the nine months ended September 30, 2019, the Company used $14,277 of cash in its operations.

On May 22, 2019, the Company entered into an underwriting agreement (“Underwriting Agreement”) with Cantor Fitzgerald & Co. and SunTrust Robinson Humphrey, Inc., (the “Underwriters”) for the underwritten public offering of its common stock and warrants to purchase common stock, pursuant to which on May 24, 2019, the Company sold 6,667 shares of its common stock with accompanying warrants to purchase 6,667 shares of common stock, at a combined price to the public of $1.50 per share of common stock and accompanying warrant, for net proceeds of $9,037. Each warrant has an exercise price of $2.00 per share, subject to adjustment in certain circumstances. Refer to Note 11. Capitalization and Equity Structure.
 
Cash on hand at September 30, 2019 was $8,058, compared to $7,655 at December 31, 2018. As noted in Note 9. Long-Term Debt, borrowings under the Company’s long-term debt agreement have a requirement of minimum cash on hand equivalent to three months of cash burn. As of September 30, 2019, the most recent determination of this restriction, $4,372 of cash must remain as restricted, with such amounts to be re-computed at each month end period. After considering cash restrictions, effective unrestricted cash as of September 30, 2019 is estimated to be $3,686. Based on the current forecast, the Company’s cash on hand will not be sufficient to satisfy the Company’s operations for the next twelve months from the date of issuance of these condensed consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern.

On September 16, 2019, the Company received a written notice (the “Deficiency Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that because the closing bid price for the Company’s common stock listed on the Nasdaq Capital Market was below $1.00 per share for 30 consecutive business days, the Company does not meet the minimum closing bid price requirement for continued listing on the Nasdaq Capital Market. Under Nasdaq Listing Rules, the Company has 180 calendar days from the date of the notification, or until March 16, 2020, to regain compliance with Nasdaq Listing Rules. To regain compliance, the closing bid price of the Company’s common stock on the Nasdaq Capital Market must be at least $1.00 per share for a minimum of ten consecutive business days prior to the expiration of such 180 day compliance period. The Company intends to take all reasonable measures available to regain compliance under the Nasdaq Listing Rules and to maintain the listing of its common stock on the Nasdaq Capital Market. The Company will monitor the closing bid price for its common stock between now and March 16, 2020.
 
Based upon the Company’s current cash resources, the recent rate of using cash for operations and investment, and assuming modest increases in current revenue, the Company believes it has sufficient resources to operate in compliance with its debt covenants into the first quarter of 2020. While the Company will require significant additional financing, the Company’s actual capital requirements may vary significantly and will depend on many factors. The Company plans to continue its investments in its (i) sales initiatives to accelerate adoption of the Ekso robotic exoskeleton in the rehabilitation market, (ii) research, development and commercialization activities with respect to exoskeletons for rehabilitation, and (iii) development and commercialization of able-bodied exoskeletons for industrial use.


10


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

The Company is actively pursuing opportunities to obtain additional financing through public or private equity and/or debt financings and corporate collaborations. Sales of additional equity securities by the Company could result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. In the event that the necessary additional financing is not obtained, the Company may be required to further reduce its discretionary overhead costs substantially, including research and development, general and administrative, and sales and marketing expenses or otherwise curtail operations.
 
2.    Basis of Presentation and Summary of Significant Accounting Policies and Estimates
 
Basis of Presentation
 
The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on February 28, 2019.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the audited consolidated financial statements for the fiscal year ended December 31, 2018, which included an explanatory paragraph expressing substantial doubt about the Company’s ability to continue as a going concern in the report of the Company’s independent registered public accounting firm, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein.

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

The Company’s planned investment in a variable interest entity (“VIE”) in which it exercises significant influence, but does not control and is not the primary beneficiary, is accounted for using the equity method. Refer to Note 7. Investment in Unconsolidated Affiliate for more information.

The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods.
 
Use of Estimates
 
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. For the Company, these estimates include, but are not limited to, revenue recognition, deferred revenue and the deferral of the associated costs, the valuation of warrants and employee stock options, future warranty costs, accounting for leases, useful lives assigned to long-lived assets, valuation of inventory, realizability of deferred tax assets, and contingencies. Actual results could differ from those estimates.

Foreign Currency

The assets and liabilities of foreign subsidiaries and equity investments, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date, and revenue and expense amounts are translated at average rates during the period, with resulting foreign currency translation adjustments recorded in accumulated other comprehensive income (loss) 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 income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive income (loss).


11


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

Investment in Unconsolidated Affiliate

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

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

Variable Interest Entities

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

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

The primary beneficiary is defined as the variable interest holder that is determined to have the controlling financial interest as a result of having both (a) the power to direct the activities of a VIE that most significantly impact the economic performance of the VIE and (b) the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether an entity is a VIE at the inception of its variable interest in the entity and upon the occurrence of certain reconsideration events. The Company routinely reassesses whether it is the primary beneficiary of VIEs in which it holds a variable interest.
 
Inventory
 
Inventories are recorded at the lower of cost or net realizable value. Cost is computed using the standard cost method, which approximates actual cost on a first-in, first-out basis. Materials from vendors are received and recorded as raw material. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress (“WIP”). Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge within the condensed consolidated statements of operations and comprehensive income (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. 


12


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

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update (“ASU”), No. 2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted the standard effective January 1, 2019.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items, such as initial direct costs paid or incentives received.

Lease expense is recognized over the expected lease term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, lease liabilities current and lease liabilities non-current. As a result, the Company no longer recognizes deferred rent on the balance sheet.

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

Revenue Recognition
 
In July 2019, we announced the expansion of our medical exoskeleton portfolio with an upper extremity rehabilitation device called EksoUE. In August 2019, we introduced our next generation lower extremity rehabilitation exoskeleton, EksoNR, which succeeds our EksoGT.

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which when capable of being distinct, are accounted for as separate performance obligations.

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

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

The Company accounts for nonreciprocal government grants by applying the contributions received guidance in ASC Topic 958-605 by analogy. To determine if a grant is non-reciprocal or reciprocal and whether the application of ASC 606 is required, the Company considers whether the transfer of resources is one in which commensurate value is exchanged. If commensurate value is not exchanged for the goods or services provided, the Company assesses whether the grant is conditional or unconditional.  Grants that contain both a barrier and right to return are considered conditional and revenue is deferred until such conditions are satisfied. In January 2019, the Company received a government grant from the Singapore Economic Development Board (“SEDB”) in the amount of approximately $1,500. The receipt of the funds is conditional upon certain operational milestones that must be met and

13


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

maintained through December 31, 2021. Therefore, the Company has not recognized revenue related to the government grant from the SEBD. nor received cash from the SEBD during the nine months ended September 30, 2019. The Company does not expect to recognize revenue until December 31, 2021.

Going Concern
 
The Company assesses its ability to continue as a going concern at every interim and annual period in accordance with ASC 205-40. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
 
Concentration of Credit Risk and Other Risks and Uncertainties
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash accounts in excess of federally insured limits. However, the Company believes it is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held. The Company extends credit to customers, most of which are hospitals or other large nationally recognizable institutions, in the normal course of business. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the condensed consolidated financial statements. The Company does not require collateral from its customers to secure accounts receivable.
 
Accounts receivable are derived from the sale of products shipped to and services performed for customers. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectability and records an allowance for credit losses, as needed. The Company has not experienced any material losses related to accounts receivable as of September 30, 2019 and December 31, 2018.
 
Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency. The Company does not enter into any foreign currency hedging agreements and is susceptible to gains and losses from foreign currency fluctuations. To date, the Company has not experienced significant gains or losses upon settling foreign currency denominated accounts receivable.
 
At September 30, 2019, the Company had one customer with an accounts receivable balance totaling 10% or more of the Company’s total accounts receivable (28%), as compared with one customer at December 31, 2018 (19%).
 
During the three months ended September 30, 2019, the Company had one customer with sales of 10% or more of the Company’s total revenue (12%), as compared with no customers in the three months ended September 30, 2018.

During the nine months ended September 30, 2019, the Company had one customer with sales of 10% or more of the Company’s total revenue (19%), as compared with no customers in the nine months ended September 30, 2018.
 
Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities are required to record an impairment charge based on the excess of the carrying amount over its fair value. This update will be effective for the Company beginning January 1, 2020 and early adoption is permitted. The Company does not expect the impact of adopting ASU 2017-04 to be material on its 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 will be effective for the Company in the first quarter of 2020. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of the amendments in this update will have on its consolidated financial statements and related disclosures.


14


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

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Upon the initial recognition of such assets, which will be based on, among other things, historical information, current conditions, and reasonable supportable forecasts. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The update was initially effective for the Company in the first quarter of 2020. However, in August 2019, the FASB issued a proposed ASU, which defers the effective date for this guidance until the first quarter of 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Standards
 
In February 2016, the FASB issued ASU 2016-02-Leases (ASC 842) and subsequent amendments to the initial guidance under ASU 2017-13, ASU 2018-10 and ASU 2018-11 (collectively, Topic 842) which superseded existing guidance on accounting for leases in ASC 840, Leases (ASC 840). Topic 842 requires the Company to recognize on its balance sheet a lease liability representing the present value of future lease payments and a right-of-use asset representing the lessee’s right to use, or control the use of a specified asset for the lease term for any operating lease with a term greater than one year. This standard became effective for the Company in the first quarter of 2019. The Company used the modified retrospective transition method, under which the Company applied the standard to each lease that had commenced as of the beginning of January 1, 2019. In addition, the Company elected to apply the package of practical expedients permitted under the transition guidance, which among other things, allowed the Company to carry forward the historical lease classification.

Upon adoption of this standard on January 1, 2019, the Company recorded right–of–use assets and corresponding lease liabilities of $1,454 and $1,498, respectively. As of September 30, 2019, the right–of–use assets and corresponding lease liabilities in the Company’s condensed consolidated balance sheets were $1,174 and $1,223, respectively. The adoption of this standard did not have a material impact on the Company’s condensed consolidated statements of operations or cash flows, nor did it have a material impact on the financial covenants set forth in the Company’s long-term debt agreement. The Company has provided detailed disclosures as required by the new standard (refer to Note 10. Lease Obligations).

In August 2018, the SEC published Release No. 33-10532, Disclosure Update and Simplification (“DUSTR”), which adopted amendments to certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. While most of the DUSTR amendments eliminate outdated or duplicative disclosure requirements, the final rule amends the interim financial statement requirements to include a reconciliation of changes in stockholders’ equity (deficit) in the notes or as a separate statement for each period for which a statement of comprehensive income (loss) is required to be filed. The new interim reconciliation of changes in stockholders’ equity (deficit) is included herein as a separate statement.

3.    Accumulated Other Comprehensive Income (Loss)
 
The Company's accumulated other comprehensive income (loss) consists of the accumulated net unrealized gains or losses on foreign currency translation adjustments. The following table sets forth the changes to accumulated comprehensive income (loss), net of tax, by component for the nine months ended September 30, 2019:
 
Foreign Currency Translation
Balance at December 31, 2018
$
(92
)
Current period other comprehensive income
366

Balance at September 30, 2019
$
274

 

15


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

4.    Fair Value Measurements
 
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which are the following:
 
Level 1—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.

The Company’s fair value hierarchies for its financial assets and liabilities, which require fair value measurement, are as follows:
 
 
Total
 
Level 1
 
Level 2
 
Level 3
September 30, 2019
 
 

 
 

 
 

 
 

Liabilities
 
 

 
 

 
 

 
 

Warrant liabilities
 
$
2,131

 
$

 
$

 
$
2,131

Contingent success fee liability
 
$
15

 
$

 
$

 
$
15

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$
585

 
$

 
$

 
$
585

Contingent success fee liability
 
$
34

 
$

 
$

 
$
34

 
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the period ended September 30, 2019, which were measured at fair value on a recurring basis:
 
 
Warrant Liability
 
Contingent Success
Fee Liability
Balance at December 31, 2018
 
$
585

 
$
34

Initial fair value of warrants issued in conjunction with May 2019 financing
 
7,334

 

Gain on revaluation of warrants issued in May 2019 financing and December 2015 financing
 
(6,045
)
 

Loss on modification of December 2015 warrants
 
257

 

Gain on revaluation of contingent liabilities
 

 
(19
)
Balance at September 30, 2019
 
$
2,131

 
$
15

 
Refer to Note 11. Capitalization and Equity Structure – Warrants for additional information regarding the valuation of warrants.
 

16


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

5.    Inventories, net
 
Inventories consisted of the following:
 
September 30,
2019
 
December 31,
2018
Raw materials
$
2,735

 
$
2,310

Work in progress
261

 
331

Finished goods
346

 
730

Inventories, net
$
3,342

 
$
3,371


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 lease of its products, the Company generally recognizes revenue over the lease term commencing upon the completion of customer training. For service agreements, the Company generally invoices customers at the beginning of the coverage period and records revenue related to the billed amounts over time, equivalent to the coverage period of the maintenance and support contract.
 
Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts (Ekso Care) but also includes other offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
 
Deferred revenue consisted of the following:
 
September 30,
2019
 
December 31,
2018
Deferred extended maintenance and support
$
2,826

 
$
2,114

Deferred royalties
290

 
300

Deferred rental income
8

 
51

Customer deposits and advances
73

 
62

Deferred device revenues
47

 
70

Total deferred revenues
3,244

 
2,597

Less current portion
(1,398
)
 
(1,102
)
Deferred revenues, non-current
$
1,846

 
$
1,495


17


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

 
Deferred revenue activity consisted of the following for the nine months ended September 30, 2019:
Beginning balance
$
2,597

Deferral of revenue
2,013

Recognition of deferred revenue
(1,366
)
Ending balance
$
3,244

 
At September 30, 2019, the Company’s deferred revenue was $3,244. Excluding customer deposits, the Company expects to recognize approximately $354 of the deferred revenue during the remainder of 2019, $1,074 in 2020, and $1,743 thereafter.

In addition to deferred revenue, the Company has non-cancellable backlog of $509 related to its contracts for rental units with its customers. These rental contracts are classified as operating leases, typically with 12-month lease terms, and rental income is recognized on a straight-line basis over the lease term.
 
As of September 30, 2019, and December 31, 2018, accounts receivable, net of allowance for doubtful accounts, were $5,206 and $3,660, respectively, and are included in current assets on the Company’s condensed consolidated balance sheets.
 
The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days.
 
Disaggregation of revenue
 
The following table disaggregates the Company’s revenue by major source for the three months ended September 30, 2019:
 
EksoHealth
 
EksoWorks
 
Other
 
Total
Device revenue
$
2,373

 
$
289

 
$

 
$
2,662

Service, support and rentals
567

 

 

 
567

Parts and other
41

 
31

 

 
72

Collaborative arrangements

 

 
18

 
18

 
$
2,981

 
$
320

 
$
18

 
$
3,319


The following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2019:
 
EksoHealth
 
EksoWorks
 
Other
 
Total
Device revenue
$
6,613

 
$
1,365

 
$

 
$
7,978

Service, support and rentals
1,941

 

 

 
1,941

Parts and other
81

 
171

 

 
252

Collaborative arrangements

 

 
26

 
26

 
$
8,635

 
$
1,536

 
$
26

 
$
10,197



18


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

The following table disaggregates the Company’s revenue by major source for the three months ended September 30, 2018:
 
EksoHealth
 
EksoWorks
 
Other
 
Total
Device revenue
$
1,084

 
$
736

 
$

 
$
1,820

Service, support and rentals
644

 
9

 

 
653

Parts and other
16

 
44

 

 
60

Collaborative arrangements

 

 
17

 
17

 
$
1,744

 
$
789

 
$
17

 
$
2,550


The following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2018:
 
EksoHealth
 
EksoWorks
 
Other
 
Total
Device revenue
$
4,691

 
$
1,669

 
$

 
$
6,360

Service, support and rentals
1,425

 
9

 

 
1,434

Parts and other
150

 
64

 

 
214

Collaborative arrangements

 

 
28

 
28

 
$
6,266

 
$
1,742

 
$
28

 
$
8,036


7.    Investment in Unconsolidated Affiliate

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

The Company has the right to receive a 20% ownership interest in the Investee in exchange for the successful transfer of licenses for its manufacturing technology and relevant Chinese patent rights (the “IP”). The Company will also be entitled to receive royalties on the Investee’s medical and industrial product sales in China, including Hong Kong, Malaysia and Singapore. The Company has one year from the date of the Investee’s formation to complete the transfer of the IP. Since the transferred IP was developed internally by the Company, all previous expenditures to develop the technology were recognized as expense in the period incurred and there was no carrying value on the Company’s consolidated balance sheet. The Company expects that it will recognize a gain on the technology license agreement to be entered into related to the IP transfer based on the fair value of the Company’s equity interest in the Investee once control of the IP is transferred.

The Investee is a VIE for which the Company is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly influence the economic performance of the entity. In addition to the Company’s exchange of license rights for the manufacturing technology, the Investee will be capitalized through cash investments of up to approximately $92,000 by the JV Partners over the initial ten-year term of the JV Agreement. The investment in the Investee is accounted for under the equity method of accounting because the Company has significant influence over the Investee through its ownership interest, technology license and manufacturing service agreements and representation on the board of directors. As of September 30, 2019, there was no impact to the Company’s condensed consolidated balance sheet except for the direct transaction costs which have been capitalized and will be included as part of the investment balance when the IP is transferred. Direct costs of $36 are included in other assets in the Company’s condensed consolidated balance sheets as of September 30, 2019. In addition to contributing the licensed IP, the Company’s obligations to the Investee include assisting the Investee to become proficient in using the IP to manufacture products that meet regulatory standards, and providing supervision of appointed directors. The primary risks that the Company is exposed to from its involvement with the VIE include operational risk, foreign currency exposure risk and foreign regulatory risk. As of September 30, 2019, the Company has no other implied or unfunded commitments related to the Investee and its maximum exposure to risk of loss will be limited to the carrying value of the investment.
On April 30, 2019, Ekso US, the Company and the JV Partners entered into an amendment to the JV Agreement (the “JV Amendment”). Among certain other clarifying changes, the JV Amendment reduces the amount of capital contributions required

19


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

to be made by the JV Partners within 90 days of the formation of the China JV from 30% (or RMB 187.2 million) to 10% (or RMB 62.4 million) and requires that the JV Partners contribute RMB 124.8 million of their capital contributions upon notice by the China JV based on the China JV’s then-current operating plan. The remaining RMB 436.8 million capital contribution of the JV Partners will be paid by them within the 10 years after the formation of the China JV as previously contemplated under the JV Agreement.

Equity Investments

Concurrent with the signing of the JV Agreement, ZYVC or its designees agreed to invest an aggregate of $10,000 in equity investments in the Company, taking place in two tranches. On January 30, 2019, the Company executed a Share Purchase Agreement (the “SPA”) under which the Company sold 3,067 shares of its common stock for $5,000 at a purchase price of $1.63 per share. The SPA contains an anti-dilution right for a 60-day period after closing, under which the investors were entitled to receive additional common shares if the Company had issued shares at a price below $1.63 during that period. This provision expired unexercised for all investors in April 2019. The Company recorded $8 in direct issuance costs as a reduction to the gross equity proceeds.

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

8.    Accrued Liabilities
 
Accrued liabilities consisted of the following:
 
September 30,
2019
 
December 31,
2018
Salaries, benefits and related expenses
$
1,816

 
$
2,446

Device warranty
307

 
307

Clinical trials
301

 
227

Severance

 
270

Financing lease liability
30

 
35

Other
135

 
256

Total
$
2,589

 
$
3,541

 
A reconciliation of the changes in the current portion of the device warranty liability for the three and nine months ended September 30, 2019 and September 30, 2018 is as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Balance at beginning of period
$
294

 
$
311

 
$
307

 
$
232

Additions for estimated future expense
113

 
99

 
293

 
312

Incurred costs
(100
)
 
(110
)
 
(293
)
 
(244
)
Balance at end of period
$
307

 
$
300

 
$
307

 
$
300

 
9.    Long-Term Debt
 
In December 2016, the Company entered into a loan agreement and received $7,000 that bears interest on the outstanding daily balance at a floating per annum rate equal to the 30-day U.S. LIBOR plus 5.41%. The loan agreement created a first priority

20


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

security interest with respect to substantially all assets of the Company, including proceeds of intellectual property, but expressly excluding intellectual property itself.
 
The Company was required to pay accrued interest on the current loan on the first day of each month through and including January 1, 2018. Commencing on February 1, 2018, the Company was required to make equal monthly payments of principal, together with accrued and unpaid interest. The principal balance of the current loan amortizes ratably over 36 months, and matures on January 1, 2021, at which time all unpaid principal and accrued and unpaid interest shall be due and payable in full. In addition, a final payment of $245 will be due on the maturity date, of which $218 was accreted as of September 30, 2019 and is included as a component of note payable on the Company’s condensed consolidated balance sheets.
 
In December 2016, and pursuant to the loan agreement, the Company entered into a success fee agreement with the lender under which the Company agreed to pay the lender a $250 success fee upon the first to occur of any of the following events: (a) a sale or other disposition by the Company of all or substantially all of its assets; (b) a merger or consolidation of the Company into or with another person or entity, where the holders of the Company’s outstanding voting equity securities immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity immediately following the consummation of such merger or consolidation; or (c) the closing price per share for the Company’s common stock being $8.00 or more for five successive business days. The estimated fair value of the success fee was determined using the Binomial Lattice Model and was recorded as a discount to the debt obligation. The fair value of the contingent success fee is re-measured each reporting period with any adjustments in fair value being recognized in the condensed consolidated statements of operations and comprehensive income (loss). The success fee is classified as a liability on the condensed consolidated balance sheets. At September 30, 2019, the fair value of the contingent success fee liability was $15.

The loan agreement includes a liquidity covenant requiring that the Company maintain unrestricted cash and cash equivalents in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least three months of “Monthly Cash Burn,” which is the Company’s average monthly net income (loss) for the trailing six-month period plus certain expenses and plus the average monthly principal due and payable on interest-bearing liabilities in the immediately succeeding three-month period. Such amount was determined to be $4,372 as of September 30, 2019, the most current determination, with the amount subject to change on a month-to-month basis. At September 30, 2019, with cash on hand of $8,058, the Company was compliant with this liquidity covenant and all other covenants. 

The final payment fee, debt issuance costs, and the initial fair value of the success fee combined with the stated interest resulted in an effective interest rate of 10.20% for the three months ended September 30, 2019 and 10.37% for the nine months ended September 30, 2019. The final payment fee, initial fair value of the success fee and debt issuance costs are being accreted/amortized to interest expense using the effective interest method over the life of the loan.

The following table presents scheduled principal payments of the Company’s long-term debt and final payment fee as of September 30, 2019:
Period
 
Amount
Remainder of 2019
 
$
583

2020
 
2,333

2021
 
440

Total principal payments
 
3,356

Less accreted portion of final payment fee, net of issuance cost and success fee discounts
 
51

Long-term debt, net
 
$
3,305

 
 
 
Current portion
 
$
2,333

Long-term portion
 
972

Long-term debt, net
 
$
3,305

 

21


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

The following table sets forth interest expense information related to the long-term debt, including interest expense associated with the final payment and initial success fee, for the periods presented:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Contractual interest expense
$
63

 
$
106

 
$
228

 
$
343

Amortization of debt issuance costs
4

 
7

 
16

 
25

Accretion of final payment
11

 
19

 
40

 
64

Amortization of initial success fee
5

 
9

 
19

 
30

 
$
83

 
$
141

 
$
303

 
$
462



10.    Lease Obligations

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

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

Through April 2019, the Company had an unoccupied leased sales office in Freiburg, Germany, which had an original lease term expiring 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. As a result, the Company recorded a credit of $125 for the nine months ended September 30, 2019 to sales and marketing expenses in the condensed consolidated statements of operations and comprehensive income (loss) relating to the remaining obligation of the lease.
 
The Company’s future lease payments as of September 30, 2019 are as follows, which are presented as lease liabilities, current and lease liabilities on the Company’s condensed consolidated balance sheets:
Period
 
Operating Leases
Remainder of 2019
 
$
126

2020
 
513

2021
 
528

2022
 
231

Total lease payments
 
1,398

Less: imputed interest
 
(175
)
Present value of lease liabilities
 
$
1,223

 
 
 
Lease liabilities, current
 
$
405

Lease liabilities, noncurrent
 
818

Total lease liabilities
 
$
1,223

 
 
 
Weighted-average remaining lease term (in years)
 
2.69

Weighted-average discount rate
 
10.5
%
 

22


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

Lease expense under the Company’s operating leases was $134 and $130 for the three months ended September 30, 2019 and 2018, respectively, and $404 and $589 for the nine months ended September 30, 2019 and 2018, respectively.

Practical Expedients

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

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

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

11.    Capitalization and Equity Structure

Summary
 
The Company’s authorized capital stock at September 30, 2019 consisted of 141,429 shares of common stock and 10,000 shares of preferred stock. At September 30, 2019, 74,953 shares of common stock were issued and outstanding and no shares of preferred stock were issued and outstanding.

Common Stock

On August 21, 2018, the Company entered into a Controlled Equity OfferingSM Sales Agreement (“ATM Agreement”) with Cantor Fitzgerald & Co. (the “Agent”) under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent, by methods deemed to be an “at the market offering.” Shares having an aggregate offering price of up to $25,000 may be offered pursuant to a prospectus dated August 21, 2018 (the “ATM Prospectus”) under the Company’s previously filed and currently effective shelf registration statement on Form S-3 (Registration No. 333-218517). For the nine months ended September 30, 2019, the Company sold 1,294 shares of common stock under the ATM Agreement at an average price of $1.85 per share, for aggregate proceeds of $2,313, net of commission and issuance costs. After taking into account sales under the ATM Agreement during prior periods, as of September 30, 2019, approximately $17,734 aggregate offering price of the Company’s common stock remained available for issuance pursuant to the ATM Prospectus.

On January 30, 2019, the Company sold 3,067 shares of its common stock for $5,000 at a purchase price of $1.63 per share under the SPA, in connection with the JV Agreement. Refer to Note 7. Investment in Unconsolidated Affiliate – Equity Investments for additional information.

On May 22, 2019, the Company entered into the Underwriting Agreement with the Underwriters for the underwritten public offering of its common stock and warrants to purchase common stock. Pursuant to the Underwriting Agreement, on May 24, 2019, the Company sold 6,667 shares of its common stock, and accompanying warrants to purchase 6,667 shares of its common stock at a combined price to the public of $1.50 per share of common stock and accompanying warrant, for total gross proceeds of $10,000. Each warrant has an exercise price of $2.00 per share, subject to adjustment in certain circumstances. Of the $10,000 in proceeds, $7,334 was allocated to the warrants based on the fair value method, with the remaining proceeds of $2,666 allocated to the common stock shares. In connection with the financing, the Company incurred approximately $963 in direct financing costs which have been allocated on the fair value basis between the common stock shares and the warrants. Of the $963 in direct financing costs, $706 was allocated to the warrants and expensed immediately in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive income (loss) and $257 was allocated to the common stock shares and recorded as a reduction to additional paid in capital.


23


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

Warrants
 
Warrant shares outstanding as of December 31, 2018 and September 30, 2019 were as follows:  
Source
 
Exercise
Price
 
Term
(Years)
 
December 31,
2018
 
Issued
 
Expired
 
September 30, 2019
2019 Warrants
 
$
2.00

 
5
 

 
6,667

 

 
6,667

Information Agent Warrants
 
$
1.50

 
3
 
200

 

 

 
200

2015 Warrants
 
$
2.75

 
5
 
1,604

 

 

 
1,604

2014 PPO and Merger
 
 
 
 
 
 
 
 
 
 
 


Placement agent warrants
 
$
7.00

 
5
 
426

 

 
(426
)
 

PPO warrants
 
$
14.00

 
5
 
1,078

 

 
(1,078
)
 

Pre-2014 warrants
 
$
9.66

 
9-10
 
88

 

 

 
88

 
 
 
 
 
 
3,396

 
6,667

 
(1,504
)
 
8,559

 
2019 Warrants

In May 2019, pursuant to the Underwriting Agreement the Company issued warrants to purchase 6,667 shares of common stock with an exercise price of $2.00 per share (the “2019 Warrants”), which subject to certain exceptions, may be exercised prior to May 24, 2024. The 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 2019 Warrants, the exercise price of the 2019 Warrants is reduced to the consideration paid for, or the exercise price or conversion price of, as the case may be, the securities issued in such offering. In addition, if the Company effects or enters into any issuance of common stock or options or convertible securities exercisable for or convertible into common stock at a price which varies or may vary with the market price of the shares of the Company's common stock, subject to certain exceptions, a 2019 Warrant holder may, at the time of exercise of the holder’s warrant, elect to exercise the warrant at such variable price. In addition, the 2019 Warrants contain a put-option, cashless exercise provision and could require cash payments in the event of a failure to timely deliver securities or in the event of insufficient authorized shares. While the 2019 Warrants are outstanding, if the Company enters into a Change of Control (as defined in the 2019 Warrants) transaction and triggers the put-option, the Company or any successor entity will, at the option of each 2019 Warrant holder, purchase such warrant from the holder exercising such option by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s warrant on the later date of consummation of the Change of Control transaction or two days after the notice of such request. Because of this put-option provision, the 2019 Warrants are classified as a liability and are marked to market at each reporting date.

The warrant liability related to the 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in a combination of the Black Scholes option pricing model and the Binomial Lattice option pricing model to measure the fair value of the 2019 Warrants:
 
September 30, 2019
 
May 24, 2019
Current share price
$
0.53

 
$
1.49

Conversion price
$
2.00

 
$
2.00

Risk-free interest rate
1.55
%
 
2.12
%
Term (years)
4.7

 
5.0

Volatility of stock
95.3
%
 
98.0
%

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 2019 Warrants fair value is nominal.


24


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

Information Agent Warrants
 
In September 2017, in connection with a rights offering in August 2017, the Company issued warrants to purchase 200 shares of the Company’s common stock with an exercise price of $1.50 per share to an information agent (the “Information Agent Warrants”). The Information Agent Warrants became exercisable immediately upon issuance. These warrants were recorded in stockholders’ equity on the Company’s condensed consolidated balance sheet.
 
2015 Warrants

In December 2015, the Company issued warrants to purchase 2,122 shares with an exercise price of $3.74 per share (the “2015 Warrants”). The 2015 Warrants contain a put-option provision. Under this provision, while the 2015 Warrants are outstanding, if the Company enters into a Fundamental Transaction, defined as a merger, consolidation or similar transaction, the Company or any successor entity shall, at the option of each warrant holder, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, purchase the warrant from the holder exercising such option by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s warrant on the date of the consummation of the Fundamental Transaction. Because of this put-option provision, the 2015 Warrants are classified as a liability and are marked to market at each reporting date. Through December 31, 2018, 518 shares of the 2015 Warrants were exercised. During the nine months ended September 30, 2019, none of the 2015 Warrants were exercised.
 
On March 8, 2019, in connection with an amendment to a securities purchase agreement, which retroactively removed a provision from such securities purchase agreement that prohibited the Company from effecting or entering into an agreement to effect any issuance by the Company of its common stock at a price determined based on the trading price of the Company’s common stock or otherwise at a future determined price, the Company entered into an amendment to the 2015 Warrants to reduce the exercise price of each such warrant from $3.74 per share to $2.75 per share, subject to further adjustments pursuant to the existing terms of such warrant. In the nine months ended September 30, 2019, the Company recorded a $257 loss on the modification of these warrants.
 
The warrant liability related to the 2015 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black Scholes Option Pricing Model to measure the fair value of the 2015 warrants as of September 30, 2019:
Current share price
$
0.53

Conversion price
$
2.75

Risk-free interest rate
1.72%

Term (years)
1.25

Volatility of stock
100.5%


12.    Stock-based Compensation
 
In June 2019, the Company’s stockholders approved an amendment to the Company’s Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”), to increase the number of shares available for grant by 3,500 shares.  As of September 30, 2019, the total shares authorized for grant under the 2014 Plan was 12,614, of which 4,431 were available for future grants.
 

25


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

Stock Options
 
The following table summarizes information about the Company’s stock options outstanding as of September 30, 2019, and activity during the nine months then ended:
 
Stock
Awards
 
Weighted-
Average
Exercise Price
 
Weighted-
Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2018
6,466

 
$
3.05

 
 
 
 
Options granted
674

 
1.45

 
 
 
 
Options exercised
(186
)
 
1.23

 
 
 
 
Options forfeited
(774
)
 
2.03

 
 
 
 
Options cancelled
(230
)
 
4.41

 
 
 
 
Balance as of September 30, 2019
5,950

 
$
3.00

 
7.45
 
$
1

Vested and expected to vest at September 30, 2019
5,950

 
$
3.00

 
7.45
 
$
1

Exercisable as of September 30, 2019
3,158

 
$
4.03

 
6.07
 
$
1

 
As of September 30, 2019, total unrecognized compensation cost related to unvested stock options was $3,885. This amount is expected to be recognized as stock-based compensation expense in the Company’s condensed consolidated statements of operations and comprehensive income over the remaining weighted average vesting period of 2.65 years.
 
The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Dividend yield
N/A (1)
 

 

 

Risk-free interest rate
N/A (1)
 
2.75%-2.99%

 
2.12
%
 
2.70%-2.99%

Expected term (in years)
N/A (1)
 
5-6

 
6

 
5-10

Volatility
N/A (1)
 
106
%
 
102
%
 
104
%
(1) Black-Scholes option pricing model assumptions are not applicable for the three months ended September 30, 2019, as there were no stock options granted during this period.
 
Restricted Stock Units
 
The Company issues restricted stock units (“RSUs”) to employees and non-employee service providers. Each RSU represents the right to receive one share of the Company’s common stock upon vesting and subsequent settlement. The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.
 
RSU activity for the nine months ended September 30, 2019 is summarized below:
 
Number of
Shares
 
Weighted-
Average Grant
Date Fair Value
Unvested as of December 31, 2018
278

 
$
1.83

Granted
560