Ekso Bionics(EKSO) - 2020 Q4 - Annual Report

Part I Item 1. Business Ekso Bionics designs, develops, sells, and rents exoskeleton products for both medical rehabilitation (EksoNR, EksoUE) and industrial applications (EksoVest, EVO, EksoZeroG). The company focuses on leveraging advanced technology and an extensive intellectual property portfolio to address neurological conditions and enhance worker strength and endurance. Key developments in 2020 included FDA clearance for EksoNR in acquired brain injury and the launch of the EVO industrial exoskeleton - Ekso Bionics designs, develops, sells, and rents exoskeleton products for medical and industrial markets, augmenting human strength, endurance, and mobility[14] - For medical applications, key products include EksoNR for stroke, spinal cord injury (SCI), and acquired brain injury (ABI) rehabilitation, and EksoUE for upper extremity impairments[16][18][19][27] - For industrial applications, products include EksoVest, EksoZeroG, and the newly introduced EVO, designed to reduce worker fatigue and injuries in overhead tasks[17][45][46] - In June 2020, EksoNR received 501(k) clearance from the U.S. FDA for use with patients with ABI[16] - The company's intellectual property portfolio includes 61 issued U.S. patents and 4 pending applications, with 203 international patents issued or allowed[54][55][56] - The China Joint Venture was terminated in August 2020 due to national security concerns raised by CFIUS[53] - The company faces intense competition in both medical technology and industrial robotics, with many competitors possessing significantly more resources[70] - As of February 19, 2021, the company had 40 employees (39 full-time, 1 part-time), with 7 in Europe and 2 in Singapore[91] Item 1A. Risk Factors The company faces significant risks including the adverse impact of the COVID-19 pandemic on demand and operations, a limited operating history in a new and unproven market, intense competition, and challenges in obtaining and maintaining regulatory approvals and third-party reimbursement. Financial risks include a history of significant losses, anticipated future losses, and restrictions imposed by loan agreements. Intellectual property risks involve the cost and uncertainty of patent protection and potential litigation. Product liability and warranty claims also pose substantial risks - The COVID-19 pandemic negatively impacted demand for exoskeleton products, leading to decreased sales and operational challenges, including difficulties in in-person demonstrations and potential FDA delays[102] - Booked units decreased by 38% in 2020 (61 units) compared to 2019 (98 units)[177] - The company has a limited operating history (first medical device sold in 2012, first industrial unit in 2016), making future prospects uncertain in a new and unproven market susceptible to rapid technological change[103][107] - The market for the company's products is highly competitive, with success dependent on market acceptance, new product development, regulatory approvals, and intellectual property protection[106] - Sales cycles for EksoNR are long (8-12 months for first device, 6-8 months for subsequent), contributing to potential fluctuations in quarterly operating results[109] Net Losses and Accumulated Deficit (2019-2020) | Metric | 2020 (in millions) | 2019 (in millions) | |:------------------|:-------------------|:-------------------| | Net Losses | $15.8 | $12.1 | | Accumulated Deficit | $199.1 | $183.3 | - The company's loan agreement with Pacific Western Bank imposes restrictive covenants, limiting management's discretion in operations and potentially requiring capital resources for debt repayment[118][119][120] - Failure to obtain or maintain necessary regulatory clearances (e.g., FDA 510(k) or PMA) for medical devices, or delays in such processes, would harm commercial operations[134] - Product liability claims or recalls, potentially caused by device malfunction or misuse, could result in substantial damages, increased insurance rates, and harm to reputation and financial results[149][151] Item 1B. Unresolved Staff Comments The company has no unresolved staff comments to report - No unresolved staff comments[161] Item 2. Properties The company's principal executive offices and manufacturing facility are located in Richmond, California, occupying approximately 45,000 square feet. Additionally, it leases a 1,400 square foot office in Hamburg, Germany, for its European headquarters. The company does not own any real property - Principal executive offices and manufacturing facility: 45,000 sq ft in Richmond, CA[162] - European headquarters: 1,400 sq ft office in Hamburg, Germany[162] - The company does not own any real property[163] Item 3. Legal Proceedings The company is occasionally involved in litigation typical for its industry, including intellectual property and employment issues. Management believes the outcome of these matters will not materially adversely affect its financial results - Involved in typical industry litigation (IP, employment issues)[164] - Management believes outcomes will not materially affect financial results[164] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[165] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Capital Market under the symbol 'EKSO' since August 9, 2016. As of February 19, 2021, there were approximately 185 stockholders of record. The company has never declared or paid cash dividends and does not intend to in the foreseeable future, prioritizing business growth - Common stock traded on Nasdaq Capital Market under 'EKSO' since August 9, 2016[168] - As of February 19, 2021, approximately 185 stockholders of record[169] - No cash dividends declared or paid; future earnings expected to fund business growth[170] Item 6. Selected Financial Data This item is not applicable to the company - Not applicable[172] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company experienced a significant adverse impact from the COVID-19 pandemic in 2020, leading to decreased demand and operational adjustments, including workforce reductions. Despite a 36% revenue decrease, gross margin improved to 57% due to higher average selling prices for EksoNR, increased medical device sales proportion, lower production costs, and the introduction of EVO. The company incurred a net loss of $15.8 million in 2020, an increase from $12.1 million in 2019, primarily due to a $9.4 million negative swing in warrant liabilities revaluation. Management took actions to improve liquidity and believes it has sufficient cash to fund operations for the foreseeable future - COVID-19 pandemic negatively impacted business, leading to a 38% decrease in booked units (61 in 2020 vs. 98 in 2019) and workforce reductions[177][215] - The company launched upgraded EksoPulse platform and the EVO industrial exoskeleton in 2020, and received FDA clearance for EksoNR in ABI patients[189] Key Financial Performance (2019-2020, in thousands) | Metric | 2020 | 2019 | Change ($) | Change (%) | |:------------------------|:--------|:--------|:-----------|:-----------| | Revenue | $8,882 | $13,917 | $(5,035) | (36)% | | Cost of Revenue | $3,812 | $7,153 | $(3,341) | (47)% | | Gross Profit | $5,070 | $6,764 | $(1,694) | (25)% | | Gross Profit % | 57% | 49% | 8% | 16% | | Sales and Marketing | $7,752 | $11,398 | $(3,646) | (32)% | | Research and Development| $2,474 | $4,596 | $(2,122) | (46)% | | General and Administrative| $7,702 | $7,409 | $293 | 4% | | Total Operating Expenses| $18,361 | $23,403 | $(5,042) | (22)% | | Loss from Operations | $(13,291)| $(16,639)| $3,348 | (20)% | | Net Loss | $(15,825)| $(12,132)| $(3,693) | 30% | - Gross margin increased to 57% in 2020 from 49% in 2019, driven by higher average selling prices for EksoNR, increased proportion of medical device sales, lower unit production costs, and higher service margins[210] - Net loss increased by 30% to $15.8 million in 2020, largely due to a $9.4 million negative swing from a gain to a loss on warrant liabilities revaluation[208][218] Cash Flow Summary (2019-2020, in thousands) | Metric | 2020 | 2019 | |:--------------------------------|:--------|:---------| | Cash, beginning of year | $10,872 | $7,655 | | Net cash used in operating activities | $(8,755)| $(15,772)| | Net cash used in investing activities | $0 | $(60) | | Net cash provided by financing activities | $10,704 | $19,039 | | Cash, end of year | $12,862 | $10,872 | - Net cash used in operations decreased by $7.0 million (44%) in 2020, primarily due to reduced operating expenses and improved accounts receivable collections[232] - Net cash provided by financing activities was $10.7 million in 2020, from equity financing ($7.1 million), PPP loan ($1.1 million), and warrant exercises ($3.3 million), partially offset by debt payments[234] - Subsequent to year-end, received an additional $36.4 million net proceeds from a public offering, $1.4 million from warrant exercises, and $0.7 million from ATM sales[226][281] Overview - The discussion highlights the company's operations, financial condition, liquidity, and capital resources for the periods described, based on audited consolidated financial statements[175] - All common share and per share amounts have been retroactively adjusted to reflect a one-for-fifteen reverse stock split effected on March 24, 2020[174] COVID-19 Impact - The COVID-19 pandemic significantly impacted the business, leading to decreased demand for exoskeleton products as rehabilitation facilities shifted priorities and delayed capital expenditures[177] - Booked units decreased by 38% in 2020 (61 units) compared to 2019 (98 units)[177] - The company adapted by engaging customers through virtual conferencing, training, and online demos, and expects an uptick in in-person interactions as the COVID outlook improves[177][179] Business Segments - EksoHealth focuses on medical exoskeletons like EksoNR (for lower extremity impairment rehabilitation, e.g., stroke, TBI, SCI) and EksoUE (for upper extremity impairments)[184][185] - EksoWorks develops and sells exoskeletons and assistive tools for industrial applications, including EksoVest, EVO (new), and EksoZeroG, aimed at reducing worker fatigue and injuries[186][187][188] Operational Highlights - Booked 61 EksoGT and EksoNR units in 2020, including 19 subscription units and 9 converted from rentals[189] Gross Margins (2019-2020) | Year | Gross Margin | |:-----|:-------------| | 2020 | 57% | | 2019 | 49% | - Launched upgraded EksoPulse platform in February 2020 for enhanced rehabilitation data analysis[189] - Received FDA clearance for EksoNR for acquired brain injury patients in June 2020[189] - Launched EVO, an endurance-boosting upper body exoskeleton for industrial use, in August 2020[191] 2020 Financing Activities - Received $1.1 million unsecured loan under the Paycheck Protection Program (PPP) in April 2020[191] - Sold 1,747,704 common shares and warrants for $7.1 million net proceeds in June 2020 public offering[192] - Paid off $1.5 million debt to Western Alliance Bank with proceeds from a new $2.0 million loan from Pacific Western Bank in August 2020[192] - Received $3.3 million from the exercise of 723,426 warrants during 2020[192] - Subsequent to year-end, received $36.4 million net proceeds from a public offering, $1.4 million from warrant exercises, and $0.7 million from ATM sales[192] Critical Accounting Policies, Estimates, and Judgments - Key accounting estimates include revenue recognition (transfer of control, distinct performance obligations), inventory valuation (lower of cost or net realizable value, excess/obsolete write-downs), stock-based compensation (Black-Scholes model, expected term, volatility), and warrant valuation (Black-Scholes/Binomial Lattice models, fair value as liability)[193][194][197][199][200][202][203] - The company assesses its ability to continue as a going concern at every interim and annual period[204] Comparison of 2020 to 2019 Financial Results Consolidated Statements of Operations (2019-2020, in thousands) | Metric | 2020 | 2019 | Change ($) | Change (%) | |:----------------------------------------|:----------|:----------|:-----------|:-----------| | Revenue | $8,882 | $13,917 | $(5,035) | (36)% | | Cost of revenue | $3,812 | $7,153 | $(3,341) | (47)% | | Gross profit | $5,070 | $6,764 | $(1,694) | (25)% | | Gross profit % | 57% | 49% | | | | Sales and marketing | $7,752 | $11,398 | $(3,646) | (32)% | | Research and development | $2,474 | $4,596 | $(2,122) | (46)% | | General and administrative | $7,702 | $7,409 | $293 | 4% | | Impairment of goodwill | $189 | $0 | $189 | NM | | Restructuring | $244 | $0 | $244 | NM | | Total operating expenses | $18,361 | $23,403 | $(5,042) | (22)% | | Loss from operations | $(13,291) | $(16,639) | $3,348 | (20)% | | Interest expense | $(139) | $(384) | $245 | (64)% | | Finance cost associated with warrant issuance | $(329) | $(1,096) | $767 | (70)% | | (Loss) gain on warrant liabilities | $(3,056) | $6,376 | $(9,432) | NM | | Loss on modification of warrants | $0 | $(257) | $257 | NM | | Other income (expense), net | $990 | $(132) | $1,122 | NM | | Total other (expense) income, net | $(2,534) | $4,507 | $(7,041) | (156)% | | Net loss | $(15,825) | $(12,132) | $(3,693) | 30% | Revenue Analysis - Total revenue decreased by $5.0 million (36%) in 2020 compared to 2019[209] - Decrease was driven by a $3.9 million reduction in EksoHealth and a $1.1 million reduction in EksoWorks, primarily due to lower medical device sales volume impacted by COVID-19[209] Gross Profit Analysis - Gross profit decreased by $1.7 million (25%) in 2020, mainly due to decreased device sales volume[210] - Gross margin increased to 57% in 2020 from 49% in 2019, attributed to higher average selling prices for EksoNR, a greater proportion of medical device sales, lower unit production costs, and higher service margins[210] Operating Expenses Analysis - Sales and marketing expenses decreased by $3.6 million (32%) in 2020, due to reduced employee compensation (furloughs, reduction in force), shift to virtual selling, and lower marketing/trade show activities[211] - Research and development expenses decreased by $2.1 million (46%) in 2020, due to lower employee compensation and reduced patent/licensing costs[213] - General and administrative expenses increased by $0.3 million (4%) in 2020, primarily due to higher legal expenses[214] - A goodwill impairment charge of $0.2 million was recorded in 2020, reducing the balance to zero, and a restructuring expense of $0.2 million was recorded due to workforce reduction[214][215] Other (Expense) Income, Net Analysis - Interest expense decreased by $0.2 million (64%) in 2020 due to lower effective interest rates on term loans[217] - A $3.1 million loss on revaluation of warrant liabilities was recorded in 2020, a significant swing from a $6.4 million gain in 2019, primarily driven by changes in stock price[218] - Other income, net was $1.0 million in 2020 (vs. $0.1 million expense in 2019) due to unrealized gains on foreign currency revaluations[221] Financial Condition, Liquidity and Capital Resources - Working capital increased to $13.4 million at December 31, 2020, from $11.0 million at December 31, 2019, due to higher cash from equity financings and warrant exercises, and reduced notes payable[223][224] - As of December 31, 2020, the company had an accumulated deficit of $199.1 million and cash on hand of $12.9 million[225] - Management took several actions in 2020 to alleviate going concern doubts, including workforce reduction, a registered direct offering, refinancing debt, and product development investments[227] - After considering a $2.0 million restricted cash balance due to a liquidity covenant, effective unrestricted cash was $10.9 million as of December 31, 2020[228] - The company believes it has sufficient cash to fund operations beyond one year from the financial statement issuance date, but may require additional financing for future investments[228][229] Cash and Cash Equivalents Cash Flow Summary (2019-2020, in thousands) | Metric | 2020 | 2019 | |:--------------------------------------|:--------|:---------| | Cash, beginning of year | $10,872 | $7,655 | | Net cash used in operating activities | $(8,755)| $(15,772)| | Net cash used in investing activities | $0 | $(60) | | Net cash provided by financing activities | $10,704 | $19,039 | | Effect of exchange rate changes on cash | $41 | $10 | | Cash, end of year | $12,862 | $10,872 | Net Cash Used in Operating Activities - Net cash used in operations decreased by $7.0 million (44%) in 2020, primarily due to reduced operating expenses and improved accounts receivable collections[232] Net Cash Used in Investing Activities - Net cash used in investing activities decreased by $0.1 million (100%) in 2020, primarily due to lower hardware and software purchases[233] Net Cash Provided by Financing Activities - Net cash provided by financing activities was $10.7 million in 2020, from equity financing ($7.1 million), PPP loan ($1.1 million), and warrant exercises ($3.3 million), partially offset by debt payments[234] - Net cash provided by financing activities was $19.0 million in 2019, from equity financings ($9.0 million, $4.2 million, $2.8 million ATM), China JV equity ($5.0 million), and stock option exercises ($0.2 million), offset by debt payments[235] Off-Balance Sheet Arrangements - The company's liquidity is not dependent on off-balance sheet financing arrangements, and none existed as of December 31, 2020[236] Contractual Obligations and Commitments Contractual Obligations as of December 31, 2020 (in thousands) | Obligation | Total | Less than one year | 1-3 Years | 3-5 Years | After 5 Years | |:------------------------|:--------|:-------------------|:----------|:----------|:--------------| | Term loan | $3,356 | $90 | $3,266 | $0 | $0 | | Facility operating leases | $836 | $599 | $237 | $0 | $0 | | Purchase obligations | $396 | $396 | $0 | $0 | $0 | | Total | $4,588| $1,085 | $3,503| $0 | $0 | - License agreements require 1% royalty on net sales of licensed medical devices (excluding U.S. government sales) and 21% of sublicense fees, with a minimum annual royalty of $50,000[239] - An exclusive license for mechanical balance and support arm technologies requires a single-digit royalty on net receipts, subject to a $50,000 annual minimum[240] Recent Accounting Pronouncements - Refers to Note 2 in the consolidated financial statements for discussion of new accounting pronouncements[242] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency risk as a portion of its revenue and receivables are denominated in foreign currencies (Euros, Singapore dollars). Approximately 33% of total revenue in 2020 was foreign currency denominated. A hypothetical 10% increase in the U.S. dollar exchange rate would decrease 2020 revenues by $0.3 million. The company does not currently hedge foreign currency exposures. Interest rate risk is primarily related to its variable-rate term loan, but a hypothetical 10% change in the prime rate would have an immaterial impact on interest expense - Foreign currency risk exists due to revenue and receivables in Euros and Singapore dollars; 33% of 2020 revenue was foreign currency denominated[245] - A hypothetical 10% increase in the U.S. dollar exchange rate would decrease 2020 revenues by $0.3 million[245] - The company does not currently hedge foreign currency exposures[245] - Interest rate risk is primarily from a variable-rate term loan (0.50% above prime or 4.50%, whichever is greater); a 10% change in prime rate would have an immaterial impact[246] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for Ekso Bionics Holdings, Inc. for the years ended December 31, 2020 and 2019, including the balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows. The independent registered public accounting firm issued an unqualified opinion on these statements. Detailed notes provide further information on the company's organization, significant accounting policies, net loss per share, investments, fair value measurements, revenue recognition, property and equipment, accrued liabilities, notes payable, lease obligations, employee benefits, related party transactions, capitalization and equity structure, stock-based compensation, income taxes, commitments and contingencies, segment disclosures, and subsequent events - The independent registered public accounting firm, OUM & CO. LLP, issued an unqualified opinion on the consolidated financial statements for 2020 and 2019[251] - A critical audit matter identified was revenue recognition, specifically the identification of distinct performance obligations, allocation of transaction price, and timing of revenue recognition[256][257] Report of Independent Registered Public Accounting Firm - OUM & CO. LLP provided an unqualified opinion on the consolidated financial statements for the years ended December 31, 2020 and 2019[251] - Revenue recognition was identified as a critical audit matter due to challenges in determining distinct performance obligations, allocating transaction price, and timing of recognition[256][257] Consolidated Balance Sheets Consolidated Balance Sheets (in thousands) | Asset/Liability | December 31, 2020 | December 31, 2019 | |:----------------------------|:------------------|:------------------| | Assets | | | | Cash | $12,862 | $10,872 | | Accounts receivable, net | $3,389 | $5,208 | | Inventories | $1,978 | $2,489 | | Total current assets | $18,420 | $18,807 | | Property and equipment, net | $1,172 | $1,657 | | Goodwill | $0 | $189 | | Total assets | $20,597 | $21,915 | | Liabilities & Equity | | | | Accounts payable | $1,501 | $1,903 | | Accrued liabilities | $1,429 | $1,683 | | Deferred revenues, current | $1,496 | $1,492 | | Note payable, current | $0 | $2,333 | | Total current liabilities | $4,974 | $7,832 | | Notes payable, net | $3,075 | $407 | | Warrant liabilities | $6,037 | $4,307 | | Total liabilities | $16,163 | $15,118 | | Total stockholders' equity | $4,434 | $6,797 | Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) | Metric | 2020 | 2019 | |:----------------------------------------|:----------|:----------| | Revenue | $8,882 | $13,917 | | Cost of revenue | $3,812 | $7,153 | | Gross profit | $5,070 | $6,764 | | 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 | $0 | | Restructuring | $244 | $0 | | Total operating expenses | $18,361 | $23,403 | | Loss from operations | $(13,291) | $(16,639) | | 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 | $0 | $(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 | $(2.21) | $(2.53) | | Weighted average shares outstanding | 7,164 | 4,794 | Consolidated Statements of Stockholders' Equity Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2020 | |:----------------------------------------|:-------------|:-------------|:-------------| | Common Stock Amount | $4 | $6 | $8 | | Additional Paid-in Capital | $173,962 | $190,019 | $204,376 | | Accumulated Other Comprehensive (Loss) Income | $(92) | $50 | $(847) | | Accumulated Deficit | $(171,146) | $(183,278) | $(199,103) | | Total Stockholders' Equity | $2,728 | $6,797 | $4,434 | | Net Loss | $(12,132) | $(15,825) | | | Equity financing, net | $12,444 | $7,082 | | | Exercise of warrants | | $7,310 | | | Stock-based compensation | $2,255 | $2,084 | | | Foreign currency translation adjustments| $142 | $(897) | | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Activity | 2020 | 2019 | |:----------------------------------------|:----------|:----------| | Net cash used in operating activities | $(8,755) | $(15,772) | | Net cash used in investing activities | $0 | $(60) | | 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 | Notes to Consolidated Financial Statements 1. Organization - Ekso Bionics Holdings, Inc. designs, develops, sells, and rents exoskeleton products for medical and industrial markets[277][278] - As of December 31, 2020, the company had an accumulated deficit of $199.1 million and cash on hand of $12.9 million[280] - Subsequent to year-end, received $36.4 million net proceeds from a public offering, $1.4 million from warrant exercises, and $0.7 million from ATM sales[281] - Management's actions in 2020, including workforce reduction and debt refinancing, along with post-year-end cash, provide sufficient liquidity for operations beyond one year[282][283] 2. Summary of Significant Accounting Policies and Estimates - Consolidated financial statements are prepared in accordance with U.S. GAAP, with all significant intercompany transactions eliminated[286][287] - Key estimates include revenue recognition, warrant and stock option valuation, warranty costs, leases, useful lives of assets, inventory valuation, and deferred tax asset realizability[289] - Foreign currency translation adjustments are recorded in accumulated other comprehensive (loss) income[290][291] - Inventories are recorded at the lower of cost or net realizable value, with cost computed using standard cost on a first-in, first-out basis[297] Inventories (in thousands) | Category | December 31, 2020 | December 31, 2019 | |:-----------------|:------------------|:------------------| | Raw materials | $1,724 | $2,208 | | Work in progress | $18 | $29 | | Finished goods | $236 | $252 | | Total | $1,978 | $2,489 | - The company adopted ASC 842 (Leases) effective January 1, 2019, recognizing operating lease liabilities and right-of-use assets on the balance sheet[300][302] - A restructuring plan completed in May 2020 resulted in $244 thousand in expense, primarily for employee severance, and a 35% workforce reduction[303] - Goodwill impairment assessment in 2020 resulted in a $189 thousand charge, reducing the balance to zero, due to declining sales and uncertainty in the ZeroG product line[308][310] - Warrants with potential cash settlement are classified as liabilities and marked to market at each reporting date using Black-Scholes or Binomial Lattice models[312] - Revenue from medical device sales is recognized upon shipment, while Ekso Care contracts and rentals are recognized over the service/lease term[316][317] - Research and development costs are expensed as incurred[319] - Stock-based compensation expense is measured using the Black-Scholes Model for options and closing stock price for RSUs, recognized over the service period[323][325][326] - The company adopted ASU 2017-04 (Goodwill Impairment) and ASU 2018-13 (Fair Value Measurement Disclosures) in 2020, with no material impact[331][332] 3. Net Loss Per Share of Common Stock Net Loss Per Share (in thousands, except per share amounts) | Metric | 2020 | 2019 | |:----------------------------------------|:----------|:----------| | Net loss | $(15,825) | $(12,132) | | Weighted-average shares outstanding | 7,164 | 4,794 | | Basic and diluted net loss per share | $(2.21) | $(2.53) | Anti-Dilutive Common Stock Equivalents (in thousands) | Category | 2020 | |:-----------------------------|:-----| | Options to purchase common stock | 529 | | Restricted stock units | 143 | | Warrants for common stock | 1,325| | Total | 1,997| 4. Investment in Unconsolidated Affiliate - The China JV was terminated in August 2020 following CFIUS's determination that national security concerns could not be mitigated[335] - A $66 thousand loss on investment in unconsolidated affiliate was recorded in 2020 due to the write-off of direct costs related to establishing the China JV[336] 5. Fair Value Measurement - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[337] Fair Value Hierarchy for Liabilities (in thousands) | Liability | December 31, 2020 | December 31, 2019 | |:------------------------------|:------------------|:------------------| | Warrant liabilities | $6,037 | $4,307 | | Contingent success fee liability | $0 | $6 | Changes in Level 3 Financial Liabilities (2020, in thousands) | Metric | Warrant Liability | Contingent Success Fee Liability | |:----------------------------------------|:------------------|:---------------------------------| | Balance at December 31, 2019 | $4,307 | $6 | | Initial fair value of warrants (June 2020) | $2,650 | $0 | | Loss on revaluation of warrants | $3,056 | $0 | | Reclassification to equity upon exercise | $(3,976) | — | | Gain on revaluation of contingent liability | $0 | $(6) | | Balance at December 31, 2020 | $6,037 | $0 | 6. Revenue Recognition - Revenue is recognized when control of promised products or services transfers to customers, based on identified performance obligations and allocated transaction price[341][342] Deferred Revenue (in thousands) | Category | 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 | - The company expects to recognize approximately $1.5 million of deferred revenue in 2021[346] Revenue by Major Source (2020, in thousands) | Source | EksoHealth | EksoWorks | Total | |:------------------------|:-----------|:----------|:--------| | Device revenue | $5,012 | $689 | $5,701 | | Service and support | $1,723 | $0 | $1,723 | | Rentals | $782 | $55 | $837 | | Parts and other | $294 | $72 | $366 | | Collaborative arrangements | $255 | $0 | $255 | | Total | $8,066 | $816 | $8,882| Revenue by Major Source (2019, in thousands) | Source | EksoHealth | EksoWorks | Total | |:------------------------|:-----------|:----------|:--------| | Device revenue | $9,064 | $1,726 | $10,790 |\ | Service and support | $1,647 | $0 | $1,647 | | Rentals | $913 | $0 | $913 | | Parts and other | $259 | $234 | $493 | | Collaborative arrangements | $74 | $0 | $74 | | Total | $11,957| $1,960| $13,917| 7. Property and Equipment, net Property and Equipment, net (in thousands) | Category | Estimated Life (Years) | December 31, 2020 | December 31, 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 | | Total Cost | | $5,829 | $5,883 | | Accumulated depreciation and amortization | | $(4,657) | $(4,226) | | Property and equipment, net | | $1,172 | $1,657 | - Depreciation and amortization expense totaled $620 thousand in 2020 and $690 thousand in 2019[352] 8. Accrued Liabilities Accrued Liabilities (in thousands) | Category | December 31, 2020 | December 31, 2019 | |:--------------------------------|:------------------|:------------------| | Salaries, benefits and related expenses | $1,194 | $1,098 | | Device warranty | $188 | $285 | | Other | $47 | $300 | | Total | $1,429 | $1,683 | Warranty Liability Activity (in thousands) | Metric | 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 | 9. Notes payable, net - In August 2020, the company entered a new $2.0 million secured term loan with Pacific Western Bank (PWB), bearing interest at 0.50% above prime or 4.50%, whichever is greater, maturing August 2023[360][362] - Proceeds from the PWB loan were used to pay off the $1.5 million indebtedness to Western Alliance Bank (WAB)[361] - The PWB loan includes a liquidity covenant requiring minimum unrestricted cash equal to the outstanding principal balance ($2.0 million as of Dec 31, 2020)[364] PWB Term Loan Principal Payments as of December 31, 2020 (in thousands) | Period | Amount | |:-------|:-------| | 2021-2022 | $0 | | 2023 | $2,000 |\ | Total| $2,000| - Received a $1.1 million unsecured loan under the Paycheck Protection Program (PPP) in April 2020, with a 1.00% interest rate, maturing two years from disbursement[367] - The PPP loan may be forgiven if used for eligible expenses, and the company expects to begin principal and interest payments in 2022[367] PPP Loan Principal Payments as of December 31, 2020 (in thousands, if not forgiven) | Period | Amount | |:-------|:-------| | 2021 | $0 | | 2022 | $1,086 |\ | Total| $1,086| 10. Lease Obligations - The company maintains a five-year operating lease for its Richmond, CA headquarters (expires May 2022) and a five-year operating lease for its Hamburg, Germany office (expires July 2022)[370][371] Future Lease Payments as of December 31, 2020 (in thousands) | Period | Operating Leases | |:-------|:-----------------| | 2021 | $599 | | 2022 | $237 | | Total| $836 | | Less: imputed interest | $(55) | | Present value of lease liabilities | $781 | | Lease liabilities, current | $548 | | Lease liabilities, noncurrent | $233 | - Weighted-average remaining lease term is 1.44 years, with a weighted-average discount rate of 10.5%[372] 11. Employee Benefit Plan - The company administers a 401(k) retirement plan and makes matching contributions in common stock, equal to 50% of employee contributions (up to statutory limit)[376] - 401(k) contribution expense was $169 thousand in 2020 and $142 thousand in 2019[376] 12. Related Party Transactions - In 2019, Angel Pond Capital LLC (affiliated with a director) provided $30 thousand in consulting services for Asia Pacific strategic positioning[377] - In 2020, the company sold EksoVest raw material inventory and tooling to the China JV for $45 thousand[378] 13. Capitalization and Equity Structure - A 1-for-15 reverse stock split was effected on March 24, 2020, to regain compliance with Nasdaq's minimum bid price requirement[379][380] - As of December 31, 2020, authorized capital included 141,429 shares of common stock and 10,000 shares of preferred stock; 8,349 common shares were outstanding[381] - In June 2020, the company sold 1,748 thousand common shares and warrants to purchase 874 thousand shares (June 2020 Investor Warrants) for gross proceeds of $7,890 thousand[384] - June 2020 Investor Warrants have an exercise price of $5.18 per share and expire December 10, 2025; they are classified as a liability due to a put option provision[384][396] - In October 2020, the company entered an At The Market Offering Agreement (ATM) to sell up to $7.5 million of common stock, but sold no shares under it in 2020[387][390] Warrant Shares Outstanding (in thousands) | Source | Exercise Price | Term (Years) | Dec 31, 2019 | Issued | Expired | Exercised | Dec 31, 2020 | |:-------------------------------|:---------------|:-------------|:-------------|:-------|:--------|:----------|:-------------| | June 2020 Investor Warrants | $5.18 | 5.5 | — | 874 | — | (477) | 397 | | June 2020 Placement Agent Warrants | $5.64 | 5 | — | 122 | — | — | 122 | | December 2019 Warrants | $8.10 | 5 | 556 | — | — | — | 556 | | December 2019 Placement Agent Warrants | $8.44 | 5 | 52 | — | — | — | 52 | | May 2019 Warrants | $3.52 | 5 | 444 | — | — | (246) | 198 | | 2017 Information Agent Warrants | $22.50 | 3 | 13 | — | (13) | — | — | | 2015 Warrants | $41.25 | 5 | 107 | — | (107) | — | — | | Pre-2014 warrants | $144.90 | 9-10 | 6 | — | (6) | — | — | | Total | | | 1,178 | 996| (126)| (723) | 1,325 | 14. Stock-based Compensation 2014 Equity Incentive Plan Authorized Shares (in thousands) | Metric | Shares | |:----------------------------------------|:-------| | Original share pool | 137 | | 2015 increase | 111 | | June 2017 increase | 67 | | December 2017 increase | 293 | | 2019 increase | 233 | | March 2020 increase | 333 | | December 2020 increase | 800 | | Total shares authorized for grant as of Dec 31, 2020 | 1,974| - As of December 31, 2020, 1,113 thousand shares were available for future grants under the 2014 Plan[418][420] Stock Option Activity (2020, in thousands, except price and years) | Metric | Options Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |:----------------------------------------|:--------------------|:--------------------------------|:----------------------------------------------------| | Outstanding at beginning of year | 494 | $36.64 | | | Granted | 90 | $5.65 | | | Forfeited | (26) | $26.59 | | | Expired | (29) | $41.25 | | | Outstanding at end of year | 529 | $31.62 | 7.35 | | Exercisable at year end | 342 | $40.63 | 6.71 | - Total unrecognized compensation cost for unvested stock options was $2,203 thousand as of December 31, 2020, to be recognized over 2.0 years[426] Restricted Stock Unit (RSU) Activity (2020, in thousands, except price) | Metric | 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 | - Total unrecognized compensation expense for unvested RSUs was $741 thousand as of December 31, 2020, to be recognized over 2.20 years[431] Stock-based Compensation Expense (in thousands) | Category | 2020 | 2019 | |:------------------------------|:--------|:--------|\ | Sales and marketing | $476 | $653 | | Research and development | $293 | $241 | | General and administrative | $1,641 | $1,361 | | Total | $2,410| $2,255| 15. Income Taxes Pre-Tax Loss by Component (in thousands) | Component | 2020 | 2019 | |:----------------|:----------|:----------| | Domestic | $(14,954) | $(10,321) |\ | Foreign | $(871) | $(1,811) | | Total Loss before income taxes | $(15,825)| $(12,132)| - No current or deferred federal and state income tax expense/benefit in 2020 and 2019 due to net operating losses and a full valuation allowance[437][438] Deferred Tax Assets and Liabilities (in thousands) | Category | 2020 | 2019 | |:------------------------------------|:----------|:----------| | Deferred tax assets: | | | | Net operating loss carryforwards | $43,241 | $40,683 | | Research and development tax credits | $1,837 | $1,817 | | Stock compensation expense | $2,547 | $2,197 | | Deferred tax liabilities: | | | | Lease liabilities | $(88) | $(214) | | Less: Valuation allowance | $(48,673) | $(45,481) |\ | Net deferred tax asset (liability)| $0 | $0 | - As of December 31, 2020, federal net operating loss carryforwards were $164.3 million (some expiring in 2027, some indefinite but subject to 80% taxable income limitation)[443] - State net operating loss carryforwards were $107.0 million (expiring in 2028) and foreign net operating loss carryforwards were $9.7 million (no expiration)[444] 16. Commitments and Contingencies - The company has license agreements requiring 1% royalty on net sales of licensed medical devices (excluding U.S. government sales) and 21% of sublicense consideration[448][450] - An exclusive license for mechanical balance and support arm technologies requires a single-digit royalty on net receipts, with a $50 thousand annual minimum[451] - Purchase obligations for inventory and manufacturing services totaled $396 thousand as of December 31, 2020, expected to be paid within one year[452] Contractual Obligations as of December 31, 2020 (in thousands) | Obligation | Total | Less than one year | 1-3 Years | 3-5 Years | |:------------------------|:--------|:-------------------|:----------|:----------| | Term loans | $3,356 | $90 | $3,266 | $0 | | Facility operating lease | $836 | $599 | $237 | $0 | | Total | $4,192| $689 | $3,503| $0 | 17. Segment Disclosures - The company operates in two reportable segments: EksoHealth (medical exoskeletons) and EksoWorks (industrial exoskeletons), managed separately due to distinct markets[457] Segment Reporting Information (in thousands) | Segment | 2020 Revenue | 2020 Cost of Revenue | 2020 Gross Profit | 2019 Revenue | 2019 Cost of Revenue | 2019 Gross Profit | |:----------------|:-------------|:---------------------|:------------------|:-------------|:---------------------|:------------------| | EksoHealth | $8,066 | $3,219 | $4,847 | $11,957 | $5,404 | $6,553 | | EksoWorks | $816 | $593 | $223 | $1,960 | $1,749 | $211 | | Total | $8,882 | $3,812 | $5,070 | $13,917 | $7,153 | $6,764 | Geographic Revenue (in thousands) | Region | 2020 | 2019 | |:--------------|:----------|:----------| | United States | $5,945 | $9,071 | | All Other | $2,937 | $4,846 | | Total | $8,882| $13,917| 18. Subsequent Events - In February 2021, the company sold 3,902 thousand common shares for gross proceeds of $40.0 million in a public offering, with estimated net proceeds of $36.4 million[461] - Issued 5-year warrants (2021 Warrants) to purchase common stock at an exercise price of $12.8125 per share, equal to 7.0% of shares sold in the February 2021 Offering[461] - Through February 25, 2021, received $1.4 million from warrant exercises and $0.7 million from ATM sales[462] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure to report - Not applicable[464] Item 9A. Controls and Procedures Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of December 31, 2020. The internal control over financial reporting was also assessed as effective based on the COSO framework. The report does not include an attestation report from the registered public accounting firm - Disclosure controls and procedures were effective as of December 31, 2020[466] - Management assessed internal control over financial reporting as effective based on the COSO framework[469] - No attestation report from the registered public accounting firm is included[470] Item 9B. Other Information There is no other information to report under this item - None[472] Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Annual Meeting of Shareholders Proxy Statement - Information incorporated by reference from the 2021 Proxy Statement[474] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2021 Annual Meeting of Shareholders Proxy Statement - Information incorporated by reference from the 2021 Proxy Statement[475] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's 2021 Annual Meeting of Shareholders Proxy Statement - Information incorporated by reference from the 2021 Proxy Statement[476] Item 13. Certain Relationships and Related Transactions and Director Independence Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's 2021 Annual Meeting of Shareholders Proxy Statement - Information incorporated by reference from the 2021 Proxy Statement[477] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2021 Annual Meeting of Shareholders Proxy Statement - Information incorporated by reference from the 2021 Proxy Statement[478] Part IV Item 15. Exhibits, Financial Statements and Financial Statement Schedules This section lists the financial statement documents included in Item 8 of the Form 10-K, such as the reports of independent registered public accounting firm, consolidated balance sheets, statements of operations, stockholders' equity, cash flows, and notes to financial statements. It also provides an index of exhibits filed with the annual report - Includes reports of independent registered public accounting firm, consolidated financial statements (balance sheets, statements of operations, stockholders' equity, cash flows), and notes to consolidated financial statements[480] - All schedules are omitted as they are not applicable or the required information is presented in the financial statements or notes[480] - An Exhibit Index details various agreements, certificates, warrants, and other documents filed with the report[481][483] Item 16. 10-K Summary The company has elected not to include summary information in this Form 10-K - The company has elected not to include summary information[495] [Signatures](index=92&type=sec