EKSO BIONICS HOLDINGS INC

Previous wording

This Quarterly Report contains forward-looking statements. These forward-looking statements include statements other than statements of historical facts contained or incorporated by reference in this Quarterly Report, including statements regarding (i) the plans and objectives of management for future operations, including those relating to the design, development and commercialization of exoskeleton products for humans, (ii) the manufacturing of our products and strengthening our supply chain, and potential opportunities for strategic partnerships, (iii) beliefs regarding the regulatory path for our products, including potential approvals required and timing of approvals, (iv) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, (v) our beliefs regarding the potential for commercial opportunities, including for exoskeleton technology and our exoskeleton products, and for strategic partnerships, (vi) our beliefs regarding potential clinical and other health benefits of our medical devices, (vii) the impact and effects of the COVID-19 pandemic and other risk factors on our business, results of operations or prospects, and (viii) the assumptions underlying or relating to any statement described in points (i), through (vii) above. The words “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and similar expressions (including the negative of any of the foregoing) are intended to identify forward-looking statements.

Current wording

This Quarterly Report contains forward-looking statements. These forward-looking statements include statements other than statements of historical facts contained or incorporated by reference in this Quarterly Report, including statements regarding (i) the plans and objectives of management for future operations, including those relating to the design, development and commercialization of exoskeleton products for humans, (ii) the manufacturing of our products and strengthening of our supply chain, and potential opportunities for strategic partnerships, (iii) beliefs regarding the regulatory path for our products, including potential approvals required and timing of approvals, (iv) statements regarding the financial and operational impacts on our business following the completion of the integration of our acquisition from Parker Hannifin Corporation of certain assets related to Parker Hannifin Corporation's human motion control business, and software applications, support services and cloud environments related to such business in December 2022 (the "HMC Acquisition"), (v) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, (vi) our beliefs regarding the potential for commercial opportunities, including for exoskeleton technology and our exoskeleton products, and for strategic partnerships, (vii) our beliefs regarding potential clinical and other health benefits of our medical devices, (viii) the actions we will take in seeking reimbursement from Centers for Medicare and Medicaid Services ("CMS") and the success of such actions, (ix) the timing and amounts of potential CMS reimbursement, (x) our ability to obtain CE certificates registered by Ekso Bionics, Inc. for our Ekso Indego Therapy and Ekso Indego Personal devices, (xi) the impact and effects of global health events and other risk factors on our business, results of operations or prospects, and (xii) the assumptions underlying or relating to any statement described in points (i) through (xi) above. The words “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and similar expressions (including the negative of any of the foregoing) are intended to identify forward-looking statements.

Previous wording

Our Personal Health business line is focused on marketing and sales of our Ekso Indego Personal product to individual users. These individual users are currently served by the Veterans Administration, which provides our products to qualified veterans for individual use, individuals who are covered under worker’s compensation insurance, and private individuals who pay out of pocket. In April 2024, CMS approved a final payment level of $91,031.93 for Medicare reimbursement of the Ekso Indego Personal, which took effect of April 1, 2024. We believe that our Personal Health business line has the potential for a higher growth rate than our Enterprise Health business line.

Current wording

Our Personal Health business line is focused on marketing and sales of our Ekso Indego Personal product to individual users. These individual users are currently served by the Veterans Administration, which provides our products to qualified veterans for individual use, individuals who are covered under worker’s compensation insurance, and private individuals who pay out of pocket. In April 2024, CMS approved a final payment level of $91,031.93 for Medicare reimbursement of the Ekso Indego Personal, which took effect of April 1, 2024. We intend to seek insurance coverage beyond CMS and to seek additional indications of use for our products. We believe that our Personal Health business line has the potential for a higher growth rate than our Enterprise Health business line.

Previous wording

We use the Black-Scholes option-pricing model to value our warrant liabilities at each reporting period, which requires the input of highly subjective assumptions, most notably the estimated volatility of our common stock over the expected term. We use our historical common stock volatility to estimate expected volatility over the warrant terms. Management must also make uncertain estimates regarding the likelihood and timing of certain future events for application of the Lattice Model for the valuation of certain warrants. Changes in these assumptions could have potential material impacts on the estimated fair value of warrant liabilities. During the three months ended March 31, 2024, management made changes to its estimates regarding the likelihood of future events. We do not believe the revision resulted in a material impact to the estimated fair value of warrant liabilities measured using the Lattice Model.

Current wording

We use the Black-Scholes option-pricing model to value our warrant liabilities at each reporting period, which requires the input of highly subjective assumptions, most notably the estimated volatility of our common stock over the expected term. We use our historical common stock volatility to estimate expected volatility over the warrant terms. Management must also make uncertain estimates regarding the likelihood and timing of certain future events for application of the Lattice Model for the valuation of certain warrants. Changes in these assumptions could have potential material impacts on the estimated fair value of warrant liabilities. During the three months ended June 30, 2024, management made no changes to its estimates regarding the likelihood of future events.

Previous wording

Sales of devices generally include an initial warranty for parts and services for one year in the Americas, two years in Europe, the Middle East, Africa (EMEA), and one or two years in the Asia Pacific (APAC) region. A liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. Specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. At the end of each reporting period, we estimate our future warranty costs related to products sold during the period. This liability represents our best estimate of the costs we will incur to fulfill warranty obligations for products sold during the period. At least annually, we review and update our estimates based on actual warranty claims experience.

Current wording

Sales of devices generally include an initial warranty for parts and services for one year in the Americas, two years in EMEA, and one to three years in the APAC region. A liability for the estimated cost of product warranty is established at the time revenue is recognized based on the historical experience of known product failure rates and expected material and labor costs to provide warranty services. Specific additional warranty accruals may be made if unforeseen technical problems arise. Alternatively, if estimates are determined to be greater than the actual amounts necessary, a portion of the liability may be reversed in future periods. At the end of each reporting period, we estimate our future warranty costs related to products sold during the period. This liability represents our best estimate of the costs we will incur to fulfill warranty obligations for products sold during the period. At least annually, we review and update our estimates based on actual warranty claims experience.

Previous wording

Gross profit remained flat for the three months ended March 31, 2024 compared to the same period of 2023, driven by a decrease in sales in the EksoHealth segment offset by cost savings on supply chain and service.

Current wording

Gross profit increased $0.4 million for the three months ended June 30, 2024 compared to the same period of 2023, driven by an increase in sales in the EksoHealth and EksoWorks segments, cost savings on supply chain and a reduction in service costs.

Previous wording

Gross margin increased to 52% for the three months ended March 31, 2024, compared to a gross margin of 49% for the same period of 2023. The overall increase in gross margin was primarily due to lower EksoHealth device and service costs.

Current wording

Gross margin increased to 53% for the three months ended June 30, 2024, compared to a gross margin of 48% for the same period of 2023. The overall increase in gross margin was primarily due to an increase in the average selling price for the EksoNR on an aggregate basis across all regions and lower EksoHealth device and service costs.

Previous wording

Gain on revaluation of warrant liabilities was $0.3 million for the three months ended March 31, 2024 as compared with a de minimis loss on revaluation of warrant liabilities for the three months ended March 31, 2023, and was associated with the revaluation of warrants issued in 2019, 2020 and 2021. Gains and losses on revaluation of warrants are primarily driven by changes in our stock price, time to maturity, and the risk-free interest rate.

Current wording

Gain on revaluation of warrant liabilities was $0.1 million for the three months ended June 30, 2024 as compared to a gain on revaluation of warrant liabilities of $0.2 million for the three months ended June 30, 2023, and was associated with the revaluation of warrants issued in 2019, 2020 and 2021. Gains and losses on revaluation of warrants are primarily driven by changes in our stock price, time to maturity and the risk-free interest rate.

Previous wording

Revenue decreased $0.4 million, or 9%, for the three months ended March 31, 2024, compared to the same period of 2023. This decrease was comprised of a $0.4 million decrease in EksoHealth revenue offset by a $0.1 million increase in EksoWorks.

Current wording

Revenue decreased $0.1 million, or 1%, for the six months ended June 30, 2024, compared to the same period of 2023. This decrease was comprised of a $0.3 million decrease in EksoHealth revenue offset by a $0.2 million increase in EksoWorks.

Previous wording

The decrease in EksoHealth revenue was primarily driven by a decrease in the volume of EksoNR, partially offset by a higher volume of Indego device sales. The increase in EksoWorks revenue was primarily driven by an increase in the volume of EVO sales.

Current wording

The decrease in EksoHealth revenue was primarily due to a decrease in the volume of EksoNR device sales and partially offset by an increase in the volume of Indego device sales, an increase in the volume of EksoNR and Indego service revenue, and partially due to lower volume of EksoNR subscriptions revenue. The increase in EksoWorks revenue was primarily driven by an increase in the volume of EVO sales.

Previous wording

Sales and marketing expenses decreased $0.3 million, or 13%, for the three months ended March 31, 2024, compared to the same period of 2023. The decrease was primarily due to lower headcount.

Current wording

Sales and marketing expenses decreased $0.8 million, or 17%, for the six months ended June 30, 2024, compared to the same period of 2023. The decrease was primarily due to lower headcount and consultant costs.

Previous wording

General and administrative expenses decreased $1.0 million, or 30%, for the three months ended March 31, 2024, compared to the same period of 2023, primarily due to a decrease in legal activity, lower headcount, and the absence of costs associated with the acquisition and integration of HMC in the comparable quarter.

Current wording

General and administrative expenses decreased $1.7 million, or 29%, for the six months ended June 30, 2024, compared to the same period of 2023, primarily due to the absence of costs associated with the acquisition and integration of HMC in the comparable quarter and lower discretionary payroll, consultant and legal costs.

Previous wording

Interest expense, net decreased 49% for the three months ended March 31, 2024 compared to the same period of 2023. This decrease is primarily related to higher interest income from cash deposits.

Current wording

Interest expense, net decreased 24% for the six months ended June 30, 2024 compared to the same period of 2023. This decrease is primarily related to higher interest income from cash deposits.

Previous wording

Loss on modification of warrants of $0.1 million for the three months ended March 31, 2024 was due to the reduction of the exercise price of the May 2019 Warrants from $3.52 per share to $1.55 per share, in connection with the January 2024 Offering. The was no comparable amount for the three months ended March 31, 2023.

Current wording

Loss on modification of warrants of $0.1 million for the six months ended June 30, 2024 was due to the reduction of the exercise price of the May 2019 Warrants from $3.52 per share to $1.55 per share, in connection with the January 2024 Offering. There was no comparable amount for the six months ended June 30, 2023.

Previous wording

Unrealized loss on foreign exchange for the three months ended March 31, 2024 was $0.3 million compared to unrealized gain on foreign exchange of $0.2 million for the same period of 2023. These unrealized gains and losses are primarily the result of foreign currency revaluations of our inter-company monetary assets and liabilities.

Current wording

Unrealized loss on foreign exchange for the six months ended June 30, 2024 was $0.4 million compared to unrealized gain on foreign exchange of $0.2 million for the same period of 2023. These unrealized gains and losses are primarily the result of foreign currency revaluations of our inter-company monetary assets and liabilities.

Previous wording

As described in Note 9 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report under the caption Notes Payable, net, borrowings under our secured term loan agreement with Pacific Western Bank have a requirement of minimum cash on hand equivalent to the current outstanding principal balance, which is due in full August 2026. As of March 31, 2024, $2.0 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of March 31, 2024 was approximately $6.8 million.

Current wording

As of June 30, 2024, of our $5.9 million of cash, $5.2 million was held domestically while $0.7 million was held by our foreign subsidiaries. Cash consisted of bank deposits with third-party financial institutions. As described in Note 9 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report under the caption Notes Payable, net, borrowings under our secured term loan agreement with Pacific Western Bank have a requirement of minimum cash on hand equivalent to the current outstanding principal balance, which is due in full August 2026. As of June 30, 2024, $2.0 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as of June 30, 2024 was approximately $3.9 million.

Previous wording

On March 31, 2024, we had working capital of $13.2 million, compared to working capital of $12.1 million as of December 31, 2023. The increase in working capital was primarily due to a decrease in accrued liabilities. Our cash as of March 31, 2024, consisted of bank deposits with third party financial institutions.

Current wording

On June 30, 2024, we had working capital of $11.0 million, compared to working capital of $12.1 million as of December 31, 2023. The decrease in working capital was primarily due to a lower cash balance from cash used in operations.

Previous wording

As of March 31, 2024, of our $8.8 million of cash, $8.1 million was held domestically while $0.7 million was held by our foreign subsidiaries. On January 16, 2024, we sold an aggregate of 3.0 million shares of common stock in a registered direct offering at a price of $1.55 per share, which generated net proceeds of approximately $3.9 million after deducting placement agent fees and our estimated offering expenses. Cash consisted of bank deposits with third-party financial institutions.

Current wording

On January 16, 2024, we sold an aggregate of 3.0 million shares of common stock in a registered direct offering (the "January 2024 Offering") at a price of $1.55 per share, which generated net proceeds of approximately $3.9 million after deducting placement agent fees and our estimated offering expenses.

Previous wording

In October 2020, we entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC (the "Agent"), under which we may issue and sell shares of our common stock, from time to time, to or through the Agent. Offers and sales of shares of common stock by us through the Agent may be made by any method deemed to be an “at the market offering” as defined under SEC Rule 415 or in privately negotiated transactions, subject to certain conditions. Such shares may be offered pursuant to the registration statement on Form S-3 (File No. 333-272607) (the “Registration Statement”), which was declared effective by the SEC on June 20, 2023, and a related prospectus supplement filed with the SEC on July 28, 2028 (the “ATM Prospectus”). Pursuant to the Registration Statement and the ATM Prospectus, shares having an aggregate offering price of up to $5.0 million may be offered and sold, subject to certain SEC rules limiting the amount of shares of the Company’s common stock that we may sell under the Registration Statement. In June 2023, we entered into an amendment to the ATM Agreement that removed the requirement that shares of our common stock may not be sold for a price lower than $6.75 per share. During the three months ended March 31, 2024, we sold 29,883 shares of common stock under the ATM Agreement at an average price of $1.45, for aggregate proceeds of $38,853, net of commission and issuance costs. As of March 31, 2024, we had $4.2 million available for future offerings under the prospectus filed with respect to the ATM Agreement.

Current wording

In October 2020, we entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC (the "Agent"), under which we may issue and sell shares of our common stock, from time to time, to or through the Agent. Offers and sales of shares of common stock by us through the Agent may be made by any method deemed to be an “at the market offering” as defined under SEC Rule 415 or in privately negotiated transactions, subject to certain conditions. Such shares may be offered pursuant to the registration statement on Form S-3 (File No. 333-272607) (the “Registration Statement”), which was declared effective by the SEC on June 20, 2023, and a related prospectus supplement filed with the SEC on July 28, 2023 (the “ATM Prospectus”). Pursuant to the Registration Statement and the ATM Prospectus, shares having an aggregate offering price of up to $5.0 million may be offered and sold, subject to certain SEC rules limiting the amount of shares of the Company’s common stock that we may sell under the Registration Statement. In June 2023, we entered into an amendment to the ATM Agreement that removed the requirement that shares of our common stock may not be sold for a price lower than $6.75 per share. During the three months ended June 30, 2024, we sold 75,166 shares of common stock under the ATM Agreement at an average price of $1.42, for aggregate proceeds of $46,190, net of commission and issuance costs. During the six months ended June 30, 2024, we sold 105,049 shares of common stock under the ATM Agreement at an average price of $1.43, for aggregate proceeds of $85,073, net of commission and issuance costs. As of June 30, 2024, we had $4.1 million available for future offerings under the prospectus filed with respect to the ATM Agreement.

Previous wording

Net cash used in operating activities decreased by $0.7 million for the three months ended March 31, 2024, compared to the same period of 2023 primarily due to the absence of payments related to the HMC Acquisition and integration of HMC.

Current wording

Net cash used in operating activities decreased by $1 million, or 14%, for the six months ended June 30, 2024, compared to the same period of 2023 primarily due to the absence of payments related to the acquisition and integration of HMC and cost savings on supply chain, reduction in service costs and efficiencies in operating activities.

Previous wording

Net cash provided by financing activities of $3.7 million for the three months ended March 31, 2024 was primarily related to proceeds from the January 2024 Offering. The net proceeds of the January 2024 Offering were approximately $3.9 million after deducting placement agent fees and estimated offering expenses paid by the Company.

Current wording

Net cash provided by financing activities of $3.4 million for the six months ended June 30, 2024 was related to net proceeds of $3.9 million from the January 2024 Offering after deducting placement agent fees and offering expenses, proceeds of $0.1 million from shares of common stock sold under the ATM Agreement, partially offset by $0.6 million of principal payments towards the Promissory Note.

Previous wording

We expect that our operating cash requirements in the near term will continue to exceed cash provided by operations with the additional headcount and product development activities assumed in the HMC Acquisition and service of our promissory note with Parker Hannifin. As described in Note 1. Organization: Liquidity and Going Concern of the notes to our condensed consolidated financial statements, management believes that substantial doubt exists about our ability to meet cash requirements twelve months from the issuance of such financial statements, and such substantial doubt is not alleviated by our plans.

Current wording

We expect that our operating cash requirements in the near term will continue to exceed cash provided by operations with the product development activities assumed in the HMC Acquisition, service of our Promissory Note with Parker Hannifin, and with the significant research and development activities related to the development of the Company's advanced technology and commercialization of such technology into its medical device business. As described in Note 1.* Organization: Liquidity and Going Concern*of the notes to our condensed consolidated financial statements, management believes that substantial doubt exists about our ability to meet cash requirements twelve months from the issuance of such financial statements, and such substantial doubt is not alleviated by our plans.

Previous wording

The Company does not expect, nor do our historical operating results suggest, that cash flows generated from operations will be sufficient to meet our material cash requirements in the long term. Management expects that the Company's historical reliance on external financing, from both equity and debt financings, will continue to provide the capital necessary to meet its material cash requirements in the long term. Management has not yet determined the form such additional financing may take, but management expects that the most likely forms include one or more of the following: (i) underwritten offerings of shares of our common stock or other offerings of equity and/or equity-linked securities, (ii) sales of shares of our common stock under an "at the market" offering program, (iii) incurring indebtedness with one or more financial institutions, and (iv) the factoring of trade receivables.

Current wording

The Company does not expect, nor do our historical operating results suggest, that cash flows generated from operations will be sufficient to meet our material cash requirements in the long term. Management expects that the Company's historical reliance on external financing, from both equity and debt financings, will continue to provide the capital necessary to meet its material cash requirements in the long term. Management has not yet determined the form such additional financing may take, but management expects that the most likely forms include one or more of the following: (i) underwritten offerings of shares of our common stock or other offerings of equity and/or equity-linked securities, including the potential offering contemplated by our recently filed registration statement on Form S-1, (ii) sales of shares of our common stock under an "at the market" offering program, (iii) incurring indebtedness with one or more financial institutions, and (iv) the factoring of trade receivables.