ChronoScale Holdings Corp 10-Q, filed Apr 29, 2024
ChronoScale Holdings Corp (CHRN)
About this 10-Q
ChronoScale Holdings Corp filed this 10-Q on April 29, 2024, covering the quarter ended March 31, 2024.
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.76M
- down 8.9% from $4.12M a year earlier
- Net loss
- $3.43M
- compared with a net loss of $4.39M a year earlier
- Diluted EPS
- -$0.20
- compared with -$0.33 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
Ekso Bionics Holdings, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Name of each exchange on which registered:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| | ☒ | Smaller reporting company | | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of registrant’s common stock outstanding as of April 26, 2024 was
Quarterly Report on Form 10-Q
Table of Contents
Condensed Consolidated Balance Sheets
(In thousands, except par value)
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (Note 2) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and restricted cash | $ | $ | ||||||
| Accounts receivable, net of allowances of $ and $, respectively | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Deferred revenues, current | ||||||||
| Note payable, current | ||||||||
| Lease liabilities, current | ||||||||
| Total current liabilities | ||||||||
| Deferred revenues | ||||||||
| Notes payable, net | ||||||||
| Lease liabilities | ||||||||
| Warrant liabilities | ||||||||
| Other non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Stockholders’ equity: | ||||||||
| Convertible preferred stock, $ par value; shares authorized; issued and outstanding at March 31, 2024 and December 31, 2023 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended |
||||||||
| March 31, |
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| 2024 |
2023 |
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| Revenue |
$ | $ | ||||||
| Cost of revenue |
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| Gross profit |
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| Operating expenses: |
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| Sales and marketing |
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| Research and development |
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| General and administrative |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
) | ||||
| Other (expense) income, net: |
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| Interest expense, net |
( |
) | ( |
) | ||||
| Loss on modification of warrant |
( |
) | ||||||
| Gain (loss) on revaluation of warrant liabilities |
( |
) | ||||||
| Unrealized (loss) gain on foreign exchange |
( |
) | ||||||
| Other income (expense), net |
( |
) | ||||||
| Total other (expense) income, net |
( |
) | ||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Other comprehensive income (loss) |
( |
) | ||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
| Net loss per share applicable to common shareholders, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Weighted average number of shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| Accumulated |
||||||||||||||||||||||||||||||||
| Other |
Total |
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| Convertible Preferred Stock |
Common Stock |
Additional |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Paid-in Capital |
(Loss) Income |
Deficit |
Equity |
|||||||||||||||||||||||||
| Balance as of December 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock under: |
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| Equity financing, net |
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| Matching contribution to 401(k) plan |
||||||||||||||||||||||||||||||||
| Equity incentive plan |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments |
— | — | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
Ekso Bionics Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| Accumulated |
||||||||||||||||||||||||||||||||
| Other |
Total |
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| Convertible Preferred Stock |
Common Stock |
Additional |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Paid-in Capital |
(Loss) Income |
Deficit |
Equity |
|||||||||||||||||||||||||
| Balance as of December 31, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Issuance of common stock under: |
||||||||||||||||||||||||||||||||
| Equity incentive plan |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
| Depreciation and amortization |
||||||||
| Changes in provision for credit losses on accounts receivable |
( |
) | ||||||
| (Gain) loss on revaluation of warrant liabilities |
( |
) | ||||||
| Stock-based compensation expense |
||||||||
| Loss on modification of warrant |
||||||||
| Common stock contribution to 401(k) plan |
||||||||
| Unrealized loss (gain) on foreign currency transactions |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets, current and noncurrent |
( |
) | ||||||
| Accounts payable |
( |
) | ||||||
| Accrued, lease and other liabilities, current and noncurrent |
( |
) | ( |
) | ||||
| Deferred revenues |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Investing activities: |
||||||||
| Acquisition of property and equipment |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Financing activities: |
||||||||
| Principal payments under note payable |
( |
) | ||||||
| Proceeds from issuance of common stock, net |
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| Net cash provided by financing activities |
||||||||
| Effect of exchange rate changes on cash |
( |
) | ||||||
| Net increase (decrease) in cash |
( |
) | ||||||
| Cash and restricted cash at beginning of period |
||||||||
| Cash and restricted cash at end of period |
$ | $ | ||||||
| Supplemental disclosure of cash flow activities |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Supplemental disclosure of non-cash activities |
||||||||
| Transfer of inventory to (from) property and equipment |
$ | $ | ( |
) | ||||
| Share issuance for common stock contribution to 401(k) plan |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
Description of Business
Ekso Bionics Holdings, Inc. (the “Company”) designs, develops, and markets wearable powered and non-powered exoskeleton products to augment human strength, endurance and mobility. The Company’s exoskeleton technology is primarily focused on aiding in the recovery and improved quality of life of individuals who have suffered from a variety of neurological conditions and allows for neurorehabilitation ranging from hospital to home, and also has technology that can be utilized by able-bodied users in the workplace. The Company has marketed devices that (i) enable individuals with neurological conditions affecting gait, including acquired brain injury ("ABI") and multiple sclerosis ("MS"), and spinal cord injury ("SCI") to rehabilitate and to stand and walk in neurorehabilitation settings and, for patients with a SCI, for home and community use, (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 March 31, 2024, the Company had an accumulated deficit of $
As described in Note 9. Notes Payable, net, borrowings under the Company’s secured term loan agreement with Pacific Western Bank have a liquidity covenant requiring minimum cash on hand equivalent to the current outstanding principal balance. As of March 31, 2024, $
Our expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support our planned operations raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that the condensed consolidated financial statements are issued. Management intends to raise funds through one or more financings. However, due to several factors, including those outside management’s control, there can be no assurance that the Company will be able to complete such financings on acceptable terms or in amounts sufficient to continue operating the business under the operating plan. If we are unable to complete sufficient additional financings, management’s plans include delaying or abandoning certain product development projects, cost reduction efforts for our products, and refocused sales efforts to accelerate revenue growth above historical results. We have concluded the likelihood that our plan to successfully reduce expenses to align with our available cash, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated financial statements.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
2. Basis of Presentation and Summary of Significant Accounting Policies and Estimates
Basis of Presentation and Consolidation
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, 2023, which was filed with the SEC on March 4, 2024.
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, 2023, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein.
The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any future periods.
The condensed consolidated financial statements include the financial statements of Ekso Bionics Holdings, Inc. and its subsidiaries. All significant transactions and balances between Ekso Bionics Holdings, Inc. and its subsidiaries have been eliminated in consolidation.
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, assets acquired and liabilities assumed in business combinations, revenue recognition, deferred revenue, the valuation of warrants and employee equity awards, future warranty costs, accounting for leases, useful lives assigned to long-lived assets, valuation of inventory, realizability of deferred tax assets, and contingencies. Actual results could differ from those estimates.
Foreign Currency
The assets and liabilities of foreign subsidiaries and equity investments, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date, and revenue and expense amounts are translated at average rates during the period, with resulting foreign currency translation adjustments recorded in accumulated other comprehensive income as a component of stockholders’ equity. Gains and losses from the re-measurement of balances denominated in currencies other than the entities' functional currencies, are recorded in other expense, net in the accompanying condensed consolidated statements of operations and comprehensive loss.
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 materials. Once the raw materials are incorporated in the fabrication of the product, the related value of the component is recorded as work in progress ("WIP"). Direct and indirect labor and applicable overhead costs are also allocated and recorded to WIP inventory. Finished goods are comprised of completed products that are ready for customer shipment. The Company periodically evaluates the carrying value of inventory on hand for potential excess amounts over sales and forecasted demand. Excess and obsolete inventories identified, if any, are recorded as an inventory impairment charge within the condensed consolidated statements of operations and comprehensive loss. The Company's estimate of write-downs for excess and obsolete inventory is based on a detailed analysis which includes on-hand inventory and purchase commitments in excess of forecasted demand. Subsequent disposals of inventories are recorded as a reduction of inventory.
Leases
The Company records its leases in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 842, Leases. 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.
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
The Company records its revenue in accordance with ASC 606, Revenue from Contracts with Customers. 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, judgment is made to estimate the selling price based on market conditions and entity-specific factors including cost plus analyses, features and functionality of the product and/or services, the geography of the Company’s customers, and type of customer. Any discounts or other reductions to the transaction price are allocated proportionately to all performance obligations within the multiple-element arrangement. The Company periodically validates the stand-alone selling price for performance obligations by evaluating whether changes in the key assumptions used to determine the stand-alone selling prices will have a significant effect on the allocation of transaction price between multiple performance obligations.
The Company exercised judgement to determine that a product return reserve was not required as historical returns activity have not been material.
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 has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. The Company extends credit to customers 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 and services performed for customers primarily located in the U.S., Europe, Asia, and Australia. Invoices are aged based on contractual terms with the customer. The Company reviews accounts receivable for collectability and provides an allowance for potential credit losses. The allowance for potential credit losses on trade receivables reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance based on known troubled accounts, historical experience, and other currently available evidence. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. The Company has not experienced material losses related to accounts receivable as of March 31, 2024 and December 31, 2023.
Many of the sales contracts with customers outside of the U.S. are settled in a foreign currency other than the U.S. dollar. The Company does not enter into any foreign currency hedging agreements and is susceptible to gains and losses from foreign currency fluctuations. To date, the Company has not experienced significant gains or losses upon collecting receivables denominated in a foreign currency.
The Company had
During the three months ended March 31, 2024, the Company had
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update, or ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU looks to provide improvements to the segment disclosure by providing users with more decision-useful information about reportable segments in a public entity. The main provisions require a company to disclose, on an annual and interim basis, significant expenses included within each reported measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition. The ASU is to be applied retrospectively to all prior periods presented in the financial statements with an effective date for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.
Accounting Pronouncements Adopted in 2024
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplified the accounting for convertible instruments. ASU 2020-06 eliminated certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminated certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance became effective for the Company in the first quarter of 2024 and was applied using a full retrospective approach. The adoption did not have a material impact on the Company's financial statements.
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 change in accumulated other comprehensive income (loss) presented on the condensed consolidated balance sheets for the three months ended March 31, 2024 and 2023, is reflected in the table below net of tax:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Net unrealized gain (loss) on foreign currency translation | ( | ) | ||||||
| Balance at end of period | $ | $ | ||||||
4. Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value which are the following:
| • | Level 1—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| • | Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation. |
The Company’s fair value hierarchies for its financial assets and liabilities, which require fair value measurement on a recurring basis are as follows:
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| March 31, 2024 | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liabilities | $ | $ | $ | $ | ||||||||||||
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2024, which were measured at fair value on a recurring basis:
| Warrant Liabilities | ||||
| Balance as of December 31, 2023 | $ | |||
| Loss on modification of warrant | ||||
| Net gain on revaluation of warrants issued | ( | ) | ||
| Balance as of March 31, 2024 | $ | |||
Refer to Note 11. Capitalization and Equity Structure – Warrants for additional information regarding the valuation of warrants.
5. Inventories
Inventories consisted of the following:
| March 31, 2024 |
December 31, 2023 |
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| Raw materials |
$ | $ | ||||||
| Work in progress |
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| Finished goods |
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| Inventories |
$ | $ | ||||||
6. Revenue
The Company’s medical device segment (EksoHealth) revenue is primarily generated through the sale and subscription of the EksoNR, Ekso Indego Therapy, and Ekso Indego Personal devices, along with the sale of support and maintenance contracts. 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, Ekso Indego Therapy, and Ekso Indego Personal devices. Support and maintenance contracts extend coverage beyond the Company’s standard warranty agreements ranging from
The Company’s industrial device segment (EksoWorks) revenue is primarily generated through the sale of the upper body exoskeleton EVO and associated accessories. 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.
Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to extended support and maintenance contracts, but also includes other offerings for which the Company has been paid in advance and earns revenue when the Company transfers control of the product or service.
Deferred revenue consisted of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Deferred extended maintenance and support | $ | |||||||
| Deferred device and advances | ||||||||
| Total deferred revenues | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Deferred revenues, non-current | $ | $ | ||||||
On September 25, 2023, the Company entered into a warranty claim lump-sum agreement with Parker Hannifin Corporation ("Parker"), pursuant to which, among other things, Parker paid the Company $
Deferred revenue activity consisted of the following for the three months ended March 31, 2024:
| Beginning balance | $ | |||
| Deferral of revenue | ||||
| Recognition of deferred revenue | ( | ) | ||
| Ending balance | $ |
The Company expects to recognize approximately $
In addition to deferred revenue, the Company has a non-cancellable backlog of $
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2024:
| EksoHealth | EksoWorks | Total | ||||||||||
| Device revenue | $ | $ | $ | |||||||||
| Service and support | ||||||||||||
| Subscriptions | ||||||||||||
| Parts and other | ||||||||||||
| $ | $ | $ | ||||||||||
The following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2023:
| EksoHealth | EksoWorks | Total | ||||||||||
| Device revenue | $ | $ | $ | |||||||||
| Service and support | ||||||||||||
| Subscriptions | ||||||||||||
| Parts and other | ||||||||||||
| $ | $ | $ | ||||||||||
7. Accrued Liabilities
Accrued liabilities consisted of the following:
| March 31, 2024 |
December 31, 2023 |
|||||||
| Salaries, benefits and related expenses |
$ | $ | ||||||
| Device warranty |
||||||||
| Other |
||||||||
| Total |
$ | $ | ||||||
Warranty
The current portion of the device warranty liability is classified as a component of Accrued liabilities, while the long-term portion of the device warranty liability is classified as a component of Other non-current liabilities in the condensed consolidated balance sheets. A reconciliation of the changes in the device warranty liability for the three months ended March 31, 2024 is as follows:
| Three Months Ended |
||||
| March 31, 2024 |
||||
| Balance at beginning of the period |
$ | |||
| Additions for estimated future expense |
||||
| Incurred costs |
( |
) | ||
| Balance at end of the period |
$ | |||
| Balance as of March 31, 2024 |
||||
| Current portion |
$ | |||
| Long-term portion |
||||
| Total |
$ | |||
8. Goodwill and Intangible Assets
On December 5, 2022, the Company acquired the Human Motion Control ("HMC") business unit from Parker (the "HMC Acquisition"). The assets acquired from the business unit included intellectual property rights associated with the Ekso Indego Personal, Ekso Indego Therapy, and future products in the orthotics and prosthetics space.
Goodwill
The Company accounted for the acquisition as a business combination in accordance with ASC 805, Business Combinations, by applying the acquisition method, and accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values at the acquisition date The excess of the purchase price over the net assets acquired of $
The Company determined no impairment existed for goodwill for the three months ended March 31, 2024.
Intangible Assets
The following table summarizes the components of gross assets, accumulated amortization, and net carrying values for definite and indefinite lived intangible asset balances as of March 31, 2024:
| March 31, 2024 | ||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||
| Trade name | N/A | |||||||||||
| Intellectual property | ||||||||||||
| Customer relationships | ( | ) | ||||||||||
| Below market lease | ( | ) | ||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | |||||||
| December 31, 2023 | ||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Developed technology | $ | $ | ( | ) | $ | |||||||
| Trade name | N/A | |||||||||||
| Intellectual property | ||||||||||||
| Customer relationships | ( | ) | ||||||||||
| Below market lease | ( | ) | ||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | |||||||
Definite lived intangible assets are amortized over their estimated lives using the straight line method, which is estimated as years for developed technology, years for intellectual property, years for customer relationships and year for below market lease. The acquired trade name was estimated to have an indefinite life, and consequently, no amortization expense was recorded. The Company determined no impairment existed for intangible assets for the three months ended March 31, 2024.
The estimated future amortization expenses related to definite lived intangible assets as of March 31, 2024 were as follows:
| Fiscal Year | Amount | |||
| 2024 - remainder | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and thereafter | ||||
| Total | $ | |||
Amortization expense related to the acquired definite lived intangible assets was $
9. Notes Payable, net
PWB Term Loan
In August 2020, the Company entered into a loan agreement (the "PWB Loan Agreement") with a lender, Pacific Western Bank, and received a loan in the principal amount of $
The Company was required to pay accrued interest on the current loan on the 13th day of each month through and including August 13, 2023, at which time the unpaid principal and accrued and unpaid interest was due and payable in full. On August 17, 2023, the Company entered into an amendment to the PWB Loan Agreement extending the maturity date to August 13, 2026 with interest only payments until such date, having daily borrowings bearing interest at a variable annual rate equal to the greater of the Lender's "prime rate" then in effect and
The PWB Loan Agreement contains a liquidity covenant, which requires that the Company maintain cash in accounts of the lender or subject to control agreements in favor of the lender in an amount equal to at least the outstanding balance of the PWB Term Loan, which was $
The interest rate of the PWB Term Loan is subject to increase in the event of late payment and after occurrence of and during the continuation of an event of default. The Company may elect to prepay the PWB Term Loan at any time, in whole or in part, without penalty or premium.
The debt issuance costs and debt discounts combined with the stated interest resulted in an effective interest rate of
The following table presents scheduled principal payments of the Company’s PWB term loan as of March 31, 2024:
| Period | Amount | |||
| 2024-2025 | $ | |||
| 2026 | ||||
| Total principal payments | ||||
| Less debt discount and issuance cost | ( | ) | ||
| Note payable, net | $ | |||
| Current portion | $ | |||
| Long-term portion | ||||
| Note payable, net | $ | |||
Parker Hannifin Promissory Note
In connection with the HMC Acquisition, on December 5, 2022, the Company delivered a $
The Promissory Note, upon the occurrence of an event of default, allows for the levying of interest equal to the lesser of (a)
The Company recorded the Promissory Note of $
The following table presents scheduled principal payments of the Company's Promissory Note as of March 31, 2024:
| Period | Amount | |||
| 2024 - remainder | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total principal payments | ||||
| Less debt discount | ( | ) | ||
| Note payable, net | $ | |||
| Current portion | ||||
| Long-term portion | ||||
| Note payable, net | $ | |||
10. Lease Obligations
The Company has determined that the new San Rafael Lease constitutes an operating lease under ASC 842 and estimates the lease term as July 2022 through October 2026. The option to extend for a -year period lacks significant economic incentives and disincentives, which would make exercise reasonably certain. Fixed lease payments for identified lease components over the identified term have been discounted at the Company's estimated incremental borrowing rate as of the date of contract execution and are reflected in the condensed consolidated balance sheets under the captions Lease liabilities, current and Lease liabilities, and the corresponding right of use asset is reflected in the condensed consolidated balance sheets under the caption Right-of-use assets. Non-lease components, such as common area maintenance costs, are excluded from the lease liability calculation and expensed as incurred. The Company records a straight-line monthly rent expense for the San Rafael Lease equal to the sum of all fixed lease payments divided by the number of months in the lease term.
The Company's operating lease agreement for its office in Hamburg, Germany commenced in May 2022 and expires in June 2025 and it provides the Company with an option to renew for -year period.
The Company has determined that the new Hamburg lease agreement constitutes a lease under ASC 842 and estimates the lease term as May 2022 through June 2025. The option to extend for a five-year period lacks significant economic incentives and disincentives which would make exercise reasonably certain. Fixed lease payments for identified lease components over the identified term have been discounted at the Company's estimated incremental borrowing rate and are reflected in the condensed consolidated balance sheets under the captions Lease liabilities, current and Lease liabilities, and the corresponding right of use asset is reflected in the condensed consolidated balance sheets under the caption Right-of-use assets. Non-lease components, such as common area maintenance costs, are excluded from the lease liability calculation and expensed as incurred. The Company records a straight-line monthly rent expense for this lease equal to the sum of all fixed lease payments divided by the number of months in the lease term.
The Company’s future lease payments as of March 31, 2024, which are presented as Lease liabilities, current and Lease liabilities on the Company’s condensed consolidated balance sheets are as follows:
| Periods | Operating Leases | |||
| 2024 - remainder | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| Weighted-average remaining lease term (in years) | ||||
| Weighted-average discount rate | % | |||
Lease expense under the Company’s operating leases was $
11. Capitalization and Equity Structure
Summary
The Company’s authorized capital stock at March 31, 2024 and December 31, 2023 consisted of
January 2024 Offering
On January 10, 2024, the Company entered into a securities purchase agreement with certain institutional investors to sell an aggregate of
At the Market Offering
In October 2020, the Company entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co., LLC (the "Agent"), under which the Company may issue and sell shares of its common stock, from time to time, to or through the Agent. The Company may offer and sell shares having an aggregate offering price of up to $
Warrants
Warrants outstanding as of March 31, 2024 and December 31, 2023 were as follows:
| Exercise | Remaining term | |||||||||||||||||||||||
| Source | Price | (Years) | December 31, 2023 | Issued | Exercised | March 31, 2024 | ||||||||||||||||||
| 2021 Warrants | $ | |||||||||||||||||||||||
| June 2020 Investor Warrants | $ | |||||||||||||||||||||||
| June 2020 Placement Agent Warrants | $ | |||||||||||||||||||||||
| December 2019 Warrants | $ | |||||||||||||||||||||||
| December 2019 Placement Agent Warrants | $ | |||||||||||||||||||||||
| May 2019 Warrants | $ | |||||||||||||||||||||||
2021 Warrants
In February 2021, the Company issued warrants (the "2021 Warrants"), exercisable for up to
In addition, the 2021 Warrants contain a cashless exercise provision, whereby, if, at the time a holder exercises its 2021 Warrants, a registration statement registering the issuance or the resale of the shares of common stock underlying the 2021 Warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate exercise price, the holder may elect to instead receive, upon such exercise (either in whole or in part), the net number of shares of the Company’s common stock determined according to a formula set forth in the 2021 Warrants. The 2021 Warrants will be automatically exercised on a cashless basis on their expiration date. The 2021 Warrants could also require payment of liquidated damages by the Company in the form of cash payments in the event of a failure by the Company to timely deliver shares of common stock upon exercise of such warrants.
The 2021 Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the 2021 Warrants, the Company or any successor entity will, at the option of a holder of a 2021 Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s 2021 Warrant by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s 2021 Warrant within five trading days after the notice of exercise by the holder of the put option. Because of this put-option provision, the 2021 Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the 2021 Warrants is measured at fair value upon issuance and at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the 2021 Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Current share price | $ | $ | ||||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
June 2020 Investor Warrants
In June 2020, the Company issued warrants (the "June 2020 Investor Warrants"), exercisable for up to
In addition, the June 2020 Investor Warrants contain a cashless exercise provision, whereby, if, at the time a holder exercises its June 2020 Investor Warrants, a registration statement registering the issuance or the resale of the shares of common stock underlying the June 2020 Investor Warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate exercise price, the holder may elect to instead receive, upon such exercise (either in whole or in part), the net number of shares of the Company’s common stock determined according to a formula set forth in the June 2020 Investor Warrant. The June 2020 Investor Warrants will be automatically exercised on a cashless basis on their expiration date.
The June 2020 Investor Warrants could also require payment of liquidated damages by the Company in the form of cash payments in the event of a failure by the Company to timely deliver shares of common stock upon exercise of such warrants.
The June 2020 Investor Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the June 2020 Investor Warrants, the holders of the June 2020 Investor Warrants will be entitled to receive upon exercise of the June 2020 Investor Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the June 2020 Investor Warrants immediately prior to such Fundamental Transaction. Alternatively, the Company or any successor entity will, at the option of a holder of a June 2020 Investor Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s June 2020 Investor Warrant by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s June 2020 Investor Warrant. Because of this put-option provision, the June 2020 Investor Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the June 2020 Investor Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the June 2020 Investor Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Current share price | $ | $ | ||||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
June 2020 Placement Agent Warrants
In June 2020, the Company issued warrants (the "June 2020 Placement Agent Warrants"), exercisable for up to
Because of the put-option provision in the June 2020 Placement Agent Warrants, these warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the June 2020 Placement Agent Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the June 2020 Placement Agent Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Current share price | $ | $ | ||||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
December 2019 Warrants
In December 2019, pursuant to a securities purchase agreement (the "December 2019 Offering"), the Company issued warrants (the "December 2019 Warrants") to purchase
The December 2019 Warrants also contain a cashless exercise provision and could require cash payments in the event of a failure to timely deliver securities or in the event of insufficient authorized shares. The December 2019 Warrants will be automatically exercised on a cashless basis on their expiration date. The December 2019 Warrants also contain a put option, under which, if the Company enters into a Fundamental Transaction, as defined in the December 2019 Warrants, the Company or any successor entity will, at the option of a holder of a December 2019 Warrant, exercisable concurrently with or at any time within 30 days after the consummation of such Fundamental Transaction, purchase such holder’s December 2019 Warrant by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such holder’s December 2019 Warrant within five trading days after the notice of exercise by the holder of the put option. Because of this put-option provision, the December 2019 Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the December 2019 Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the December 2019 Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Current share price | $ | $ | ||||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
December 2019 Placement Agent Warrants
In December 2019, in connection with the December 2019 Offering, the Company issued warrants to purchase
The warrant liability related to the December 2019 Placement Agent Warrants is measured at fair value at each reporting date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. The following assumptions were used in the Black-Scholes Model to measure the fair value of the December 2019 Placement Agent Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Current share price | $ | $ | ||||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
Management has assessed that the likelihood of a Change of Control (as defined in the December 2019 Placement Agent Warrants), occurring during the term of the December 2019 Placement Agent Warrants is low, and that if such an event were to occur, the difference between the cashless exercise value and the warrants fair value is nominal.
May 2019 Warrants
In May 2019, pursuant to an underwriting agreement, (the "May 2019 Offering"), the Company issued the warrants (the "May 2019 Warrants") to purchase
In addition, if the Company effects or enters into any issuance of common stock or options or convertible securities exercisable for or convertible into common stock at a price which varies or may vary with the market price of the shares of the Company's common stock, subject to certain exceptions, a May 2019 Warrant holder may, at the time of exercise of the holder’s warrant, elect to exercise the warrant at such variable price.
The May 2019 Warrants include a put option, whereby while the May 2019 Warrants are outstanding, if the Company enters into a Change of Control, as defined in the May 2019 Warrants, the Company or any successor entity will, at the option of a 2019 Warrant holder exercise within 90 days after the public disclosure of the Change of Control transaction, purchase such holder’s May 2019 Warrants by paying to such holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such warrants on the later date of consummation of the Change of Control transaction or two trading days after the notice of such request. Because of this put option provision, the May 2019 Warrants are classified as a liability and are marked to market at each reporting date.
The warrant liability related to the May 2019 Warrants is measured at fair value at each reporting and exercise date using certain estimated inputs, which are classified within Level 3 of the fair value hierarchy. Because of the price protection feature contained in the May 2019 Warrants, the Company uses a combination of the Black-Scholes Model and the Lattice Model to estimate the fair value of the warrants at each reporting period. The following assumptions were used in the Black-Scholes Model in combination with the Lattice Model to measure the fair value of the May 2019 Warrants:
| March 31, 2024 | December 31, 2023 | |||||||
| Share price | $ | $ | (1) | |||||
| Conversion price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility of stock | % | % | ||||||
(1) As of December 31, 2023, management determined that a financing event was likely in the first quarter of 2024, and reduced the share price used in the model by 25% in order to reflect the total amount that would be realized accordingly.
Management has assessed that the likelihood of a Change of Control occurring during the term of the warrants is low, and that if such an event were to occur, the difference between the cashless exercise value and the May 2019 Warrants fair value is nominal.
12. Stock-based Compensation
The Company's Amended and Restated 2014 Equity Incentive Plan (the "2014 Plan") expired on January 31, 2024. Following such expiration, no grants may be made under the 2014 Plan, but the grants in effect prior to such expiration were not impacted by the expiration.
Stock Options
The following table summarizes information about the Company’s stock options outstanding as of March 31, 2024, and activity during the three months then ended:
| Weighted- |
||||||||||||||||
| Average |
||||||||||||||||
| Weighted- |
Remaining |
Aggregate |
||||||||||||||
| Stock |
Average |
Contractual |
Intrinsic |
|||||||||||||
| Awards |
Exercise Price |
Life (Years) |
Value |
|||||||||||||
| Balance as of December 31, 2023 |
$ | |||||||||||||||
| Options cancelled |
( |
) | ||||||||||||||
| Balance as of March 31, 2024 |
$ | $ | ||||||||||||||
| Vested and expected to vest as of March 31, 2024 |
$ | $ | ||||||||||||||
| Exercisable as of March 31, 2024 |
$ | $ | ||||||||||||||
There were
Restricted Stock Units
The Company issues time-based restricted stock units (“RSUs”) and performance-based restricted stock units ("PSUs") to employees and non-employee members of the Board. Each RSU and PSU represents the right to receive one share of the Company’s common stock upon vesting and subsequent settlement. PSUs vest upon achievement of performance targets based on the Company's annual operating plan. The fair values of RSUs and PSUs are determined based on the closing price of the Company’s common stock on the date of grant.
Combined RSU and PSU activity for the three months ended March 31, 2024 is summarized below:
| Weighted- |
||||||||
| Number of |
Average Grant |
|||||||
| Shares |
Date Fair Value |
|||||||
| Unvested as of December 31, 2023 |
$ | |||||||
| Vested |
( |
) | ||||||
| Unvested as of March 31, 2024 |
$ | |||||||
As of March 31, 2024, $
Compensation Expense
Stock-based compensation expense is included in the condensed consolidated statements of operations and comprehensive loss in general and administrative, research and development, or sales and marketing expenses, depending on the nature of the services provided. Stock-based compensation expense related to options, RSUs and PSUs was recorded as follows:
| Three Months Ended March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Sales and marketing |
$ | $ | ||||||
| Research and development |
||||||||
| General and administrative |
||||||||
| $ | $ | |||||||
401(k) Plan Share Match
During the three months ended March 31, 2024, the Company issued
The expense for the 401(k) Plan share matching was $
13. Income Taxes
There were no material changes to the unrecognized tax benefits in the three months ended March 31, 2024, and the Company does not expect significant changes to unrecognized tax benefits through the end of the fiscal year.
14. Commitments and Contingencies
Material Contracts
The Company has license agreements with the Regents of the University of California to maintain exclusive rights to certain patents. The Company is required to pay
In connection with the HMC Acquisition, the Company assumed license agreements with Vanderbilt University to maintain exclusive rights to patents on the Company's behalf.
The Vanderbilt Exoskeleton License Agreement was entered into as of October 15, 2012 and will continue until April 29, 2038, unless sooner terminated. Under this agreement, the Company is required to pay
The Vanderbilt Knee License Agreement was entered into as of March 1, 2022 and will continue until February 15, 2041, unless sooner terminated. Under this agreement, the Company is required to pay
The Company also entered into transitional use agreements with Parker granting the Company access to certain information technology systems and shared services relating to manufacturing facilities in Macedonia, Ohio for twelve months following the date of the acquisition. As consideration for access to these resources, the Company made monthly payments of $
Purchase Obligations
The Company purchases components from a variety of suppliers and uses contract manufacturers to provide manufacturing services for its products. Purchase obligations are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
The Company had purchase obligations primarily for purchases of inventory and manufacturing related service contracts totaling $
The Company has operating lease commitments totaling $
Loss Contingencies
In the normal course of business, the Company is subject to various legal matters. In the opinion of management, the resolution of such matters will not have a material adverse effect on the Company’s condensed consolidated financial statements.
15. Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Numerator: |
||||||||
| Net loss applicable to common stockholders, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Denominator: |
||||||||
| Weighted-average number of shares, basic and diluted |
||||||||
| Net loss per share, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
The following table sets forth potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
| Three Months Ended |
||||||||
| March 31, |
||||||||
| 2024 |
2023 |
|||||||
| Options to purchase common stock |
||||||||
| Restricted stock units |
||||||||
| Warrants for common stock |
||||||||
| Total common stock equivalents |
||||||||
16. Segment Disclosures
The Company has reportable segments: EksoHealth and EksoWorks. The EksoHealth segment designs, manufactures, and markets exoskeletons for applications in the medical markets. The EksoWorks segment designs, manufactures, and markets exoskeleton devices to allow able-bodied users to perform difficult repetitive work for extended periods. The reportable segments are each managed separately because they serve distinct markets.
The Company evaluates performance and allocates resources based on segment gross profit margin. The Company does not consider operating expenses or net assets as segment measures and, accordingly, are not allocated.
Segment reporting information is as follows:
| EksoHealth | EksoWorks | Total | ||||||||||
| Three months ended March 31, 2024 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Three months ended March 31, 2023 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit | $ | $ | ( | ) | $ | |||||||
The Company operates in the following regions: (1) Americas, (2) Europe, the Middle East, and Africa (EMEA), and (3) Asia Pacific (APAC). Individual countries with revenue greater than 10% of total revenue for the three and three months ended March 31, 2024 and 2023 are disclosed separately from the regional totals. Geographic information for revenue based on location of customers is as follows:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Americas | ||||||||
| United States | $ | $ | ||||||
| Other | ||||||||
| Americas revenue | ||||||||
| EMEA | ||||||||
| France | ||||||||
| Germany | ||||||||
| Other | ||||||||
| EMEA revenue | ||||||||
| APAC | ||||||||
| Indonesia | ||||||||
| Other | ||||||||
| APAC revenue | ||||||||
| Total Revenue | $ | $ | ||||||
17. Related Party Transactions
On February 4, 2023, the Company entered into a mutual release and settlement agreement with an entity to settle and resolve any and all potential claims brought forth in connection with a consulting agreement executed between the entity and the Company in July 2017. Under the terms of the consulting agreement, the Company was required to make milestone payments for the introduction of potential partners for, and the consummation of, a strategic joint venture. A member of the Company's board of directors is affiliated with one of two entities under common control.
The Company's total settlement amount was $
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (this "Quarterly Report"), the “Company”, “we”, “its” and “our” refers to Ekso Bionics Holdings, Inc. and its wholly-owned subsidiaries. The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which is incorporated herein by reference (the “Annual Report”).
This Quarterly Report contains forward-looking statements. These forward-looking statements include statements other than statements of historical facts contained or incorporated by reference in this Quarterly Report, including statements regarding (i) the plans and objectives of management for future operations, including those relating to the design, development and commercialization of exoskeleton products for humans, (ii) 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.
The following factors, among others, including those described in the section titled “Risk Factors” included in our Annual Report, as updated and supplemented in this Quarterly Report under the heading “Part II – Item 1A. Risk Factors,” could cause our future results to differ materially from those expressed in the forward-looking information:
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our ability to obtain adequate financing to fund operations and to develop or enhance our technology; |
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our ability to generate sufficient cash flow to service our debt obligations; |
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our ability to obtain or maintain regulatory approval to market our medical devices; |
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our ability to complete clinical trials on a timely basis and that completed clinical trials will be sufficient to support commercialization of our products; |
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the anticipated timing, cost and progress of the development and commercialization of new products or services, and improvements to our existing products, and related impacts on our profitability and cash position; |
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our ability to effectively market and sell our products and expand our business, both in unit sales and product diversification; |
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our ability to achieve broad customer adoption of our products and services; |
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existing or increased competition; |
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our ability to sell additional units, and, once sold, recognize the expected margins, using the reimbursement code for our Ekso Indego Personal device with the Centers for Medicare and Medicaid Services ("CMS"); |
| • | our ability to obtain CE certificates registered by Ekso Bionics, Inc. for our Ekso Indego Therapy and Ekso Indego Personal devices; | |
| • | rapid changes in technological solutions available to our markets; | |
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volatility with our business, including long and variable sales cycles, which could have a negative impact on our results of operations for any given quarter; |
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changes to our domestic or international sales and operations; |
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our ability to obtain or maintain patent protection for our intellectual property; |
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the scope, validity and enforceability of our and third-party intellectual property rights; |
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significant government regulation of medical devices and the healthcare industry; |
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our ability to receive regulatory clearance from certain government authorities, including any conditions, limitations or restrictions placed on such approvals; |
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our customers’ ability to get third-party reimbursement for our products and services associated with them and our ability to manage the complex and lengthy reimbursement process; |
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the potential for our products to be subject to voluntary or involuntary recall; |
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our product liability insurance may not adequately cover potential claims; |
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warrant claims and our accelerated maintenance program results in additional operating costs to us; |
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our failure to implement our business plan or strategies; |
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our ability to successfully consummate acquisitions on acceptable terms and to integrate any such acquisitions; |
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our early termination of leases, difficulty filling vacancies or negotiating improved lease terms; |
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our ability to retain or attract key employees; |
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scope, scale and duration of the impact of outbreaks of a pandemic disease, such as COVID-19; |
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stock volatility or illiquidity; |
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our ability to maintain adequate internal controls over financial reporting; |
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the impacts of foreign currency price fluctuations; and |
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overall economic and market conditions. |
Although we believe that the assumptions underlying the forward-looking statements and forward-looking information contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, such statements and information included in this Quarterly Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements and forward-looking information included herein, the inclusion of such statements and information should not be regarded as a representation by us or any other person that the results or conditions described in such statements and information or that our objectives and plans will be achieved. Such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
Our Business
We design, develop, and market exoskeleton products that augment human strength, endurance, and mobility. Our exoskeleton technology serves multiple end markets and can be utilized both by persons with physical disabilities or impairments and on able-bodies. The majority of our sales are generated in our Enterprise Health business line within our EksoHealth Segment, which includes the sales of products and services related to neurorehabilitation in clinical settings. We also provide products and service to individual users, primarily driven by sales of our Ekso Indego Personal product in our Personal Health business line.
In addition to our current products and services, we continue to explore business development initiatives to fuel growth and long-term value in our existing segments.
EksoHealth
Our Enterprise Health business line focuses on sales of our EksoNR and Ekso Indego Therapy products to customers, including inpatient rehabilitation hospitals and clinics as well as some outpatient rehabilitation clinics. Our marketing to these customers involves the education of clinical and executive stakeholders on the economic and clinical value of our products and services. In tandem, we continue to leverage our EksoNR and Ekso Indego customer base to educate and mentor strategic target centers that specialize in stroke, ABI and SCI rehabilitation in specific geographies. We believe that our Enterprise Health business line will be a source of stable sales growth.
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.
EksoWorks
Sales of products to able-bodied individuals for use in industrial or work-related use are represented by our EksoWorks segment. Our only active product within our EksoWorks segment is EVO. Our primary end market for our EksoWorks segment is comprised of commercial enterprises that are focused on solving ergonomic challenges for their workers. These challenges include injury prevention, fatigue reduction, and/or improved worker productivity. While EVO is a general-purpose product, we currently target specific vertical markets including aerospace, automotive, general manufacturing, and certain construction trades.
Economic and Industry Trends
Our revenue is highly dependent on market demand for our exoskeleton products. This market demand is influenced by many factors including the level of awareness of robotic exoskeleton rehabilitation among the rehabilitation clinics with significant stroke, ABI, and SCI populations, the imperatives among construction and manufacturing companies to drive adoption of improved safety and health practices, the levels of reimbursements our customers will be able to receive, as well as conditions relating to overall economic growth and general business activity. Difficult and challenging economic conditions, including an increasingly inflationary environment, could lead to increased price-based competition. In particular, the effects of such increasing price-based competition may have an especially significant impact on certain products that we offer, including the EksoNR and Ekso Indego, which have a lengthy sale and purchase order cycle because they are major capital expenditure items and generally require the approval of senior management at purchasing institutions. Furthermore, we do business in the Americas, EMEA and APAC, which results in our business being impacted by demand changes in each of those regions, as well as changes in the strength of the local currencies relative to the U.S. Dollar.
With the recent approval of CMS lump sum reimbursement for Indego Personal, we believe we will see increased demand for this device as we are able to more economically serve the larger U.S. patient population suffering from SCI. Specifically, according to the National Spinal Cord Injury Statistical Center, an estimated 294,000 individuals are currently living with SCI and another 17,810 suffer from new SCI injuries each year. Approximately 56% of individuals with SCI are enrolled in Medicare or Medicaid within 5 years post-injury. With Medicare reimbursement recently approved, we plan to sell products to individuals in this market through Durable Medical Equipment suppliers (DMEs). DMEs typically resell products from DME manufacturers to individual users. DMEs are responsible for the Medicare reimbursement process, which requires a physician’s prescription and evidence of medical necessity to be submitted to and approved by Medicare before reimbursement is provided. See “Part I—Item 1A. Risk Factors,” specifically the risk titled “Coverage policies and reimbursement levels of third-party payers, including Medicare or Medicaid, may impact sales of our products” in our Annual Report for more information.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our most critical accounting estimates include:
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the standalone selling prices used to allocate the contract consideration to the individual performance obligations in our device sales arrangements, which impacts revenue recognition; |
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the unobservable inputs and assumptions used by management in estimating the fair value of our warrant liabilities, which impacts net income or loss; |
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| • | the valuation of inventory, which impacts gross profit margins; |
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the estimates made regarding the recoverability of our net deferred tax asset, which impacts our financial condition; |
| • | the fair value of the assets acquired and liabilities assumed in our business combination; | |
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future warranty costs; |
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| • | accounting for leases; and | |
| • | useful lives assigned to long-lived assets. |
Standalone Selling Prices
Our device sales arrangements contain multiple products and services, most often including the device(s) and service, both of which we have identified as distinct performance obligations. Revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which we separately sell the products or services. If a standalone selling price is not directly observable, then we estimate the standalone selling prices considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, type of customer, and gross margin targets. Changes in the relative standalone selling price between devices and service can have an impact on how transaction prices are allocated between revenue and deferred revenue.
Warrant Liabilities
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.
Inventory Valuation
Inventory is stated 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. The cost basis of our inventory is reduced for any products that are considered excessive or obsolete based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which could have a material adverse effect on the results of our operations.
Deferred Tax Asset
We estimate a valuation allowance in consideration of the realizability of our net deferred tax assets, primarily based on our assessment of the timing, likelihood and amounts of potential future income during which such items become deductible. It is inherently difficult and subjective to estimate such amounts, as we must determine the probability of various possible outcomes and estimate future amounts. Management does not believe it is more likely than not that we will generate future income in a timeframe and amount sufficient to realize our net deferred tax assets. Changes in management's estimate of future income in the timeframe during which the temporary differences and carryforwards comprising our deferred tax assets become deductible could result in a material impact to our financial position including the recognition of a net deferred tax asset.
Assets Acquired and Liabilities Assumed in Business Combinations
We allocate the fair value of the purchase price of an acquisition to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, the amount and timing of projected future cash flows based on expected future growth rates and margins, discount rate used to determine the present value of these cash flows, future changes in technology and royalty for similar brand licenses, and asset lives. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are included in the consolidated statement of operations.
Future Warranty Costs
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.
Accounting for Leases
In accordance with ASC 842, Leases, at the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present, generally based on whether we have the right to obtain substantially all of the economic benefits from the use of an identified asset and whether we have the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which we do not own. 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, we utilize our incremental borrowing rate to determine the present value of the future lease payments, which is a hypothetical rate based on our understanding of what our credit rating would be to borrow and resulting interest we would pay 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 payments may be fixed or variable; however, only fixed payments are included in our lease liability. Variable lease payments may include costs such as common area maintenance, utilities, or other costs. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.
Useful Lives Assigned to Long-Lived Assets
The useful life of an asset represents the period during which the asset is expected to contribute directly or indirectly to future cash flows. We estimate the useful lives of the Company’s long-lived assets based on various factors, including the expected period of economic benefit of the asset in use, our intended use of the asset, economic factors such asset obsolescence and technological advances, any limitations imposed by legal, regulatory, or contractual requirements, and industry norms. These assumptions affect the timing and amount of depreciation expense, which could have a material adverse effect on the results of our operations.
Results of Operations
The following table presents our results of operations for the three months ended March 31, 2024 and 2023 (in thousands, except percentages):
| Three Months Ended March 31, |
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| 2024 |
2023 |
Change |
% Change |
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| Revenue |
$ | 3,756 | $ | 4,122 | $ | (366 | ) | (9 | )% | |||||||
| Cost of revenue |
1,805 | 2,122 | (317 | ) | (15 | )% | ||||||||||
| Gross profit |
1,951 | 2,000 | (49 | ) | (2 | )% | ||||||||||
| Gross profit % |
52 | % | 49 | % | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
1,818 | 2,088 | (270 | ) | (13 | )% | ||||||||||
| Research and development |
1,136 | 1,154 | (18 | ) | (2 | )% | ||||||||||
| General and administrative |
2,253 | 3,206 | (953 | ) | (30 | )% | ||||||||||
| Total operating expenses |
5,207 | 6,448 | (1,241 | ) | (19 | )% | ||||||||||
| Loss from operations |
(3,256 | ) | (4,448 | ) | 1,192 | (27 | )% | |||||||||
| Other (expense) income, net: |
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| Interest expense, net |
(57 | ) | (112 | ) | 55 | (49 | )% | |||||||||
| Loss on modification of warrant |
(109 | ) | — | (109 | ) | (1 | ) | |||||||||
| Gain (loss) on revaluation of warrant liabilities |
342 | (26 | ) | 368 | (1415 | )% | ||||||||||
| Unrealized (loss) gain on foreign exchange |
(349 | ) | 217 | (566 | ) | (261 | )% | |||||||||
| Other income (loss), net |
— | (20 | ) | 20 | (100 | )% | ||||||||||
| Total other (expense) income, net |
(173 | ) | 59 | (232 | ) | (393 | )% | |||||||||
| Net loss |
$ | (3,429 | ) | $ | (4,389 | ) | $ | 960 | (22 | )% | ||||||
(1) Not meaningful
Revenue
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.
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.
Gross Profit and Gross Margin
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.
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.
Operating Expenses
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.
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.
Total Other (Expense) Income, Net
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.
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.
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.
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.
Liquidity and Capital Resources
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.
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.
We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt.
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.
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.
Cash
The following table summarizes the sources and uses of cash (in thousands).
| Three months ended March 31, |
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| 2024 |
2023 |
|||||||
| Net cash used in operating activities |
$ | (3,466 | ) | $ | (4,214 | ) | ||
| Net cash used in investing activities |
(8 | ) | (42 | ) | ||||
| Net cash provided by financing activities |
3,657 | — | ||||||
| Effect of exchange rate changes on cash |
(22 | ) | 8 | |||||
| Net increase (decrease) in cash |
161 | (4,248 | ) | |||||
| Cash and restricted cash at beginning of period |
8,638 | 20,525 | ||||||
| Cash and restricted cash at end of period |
$ | 8,799 | $ | 16,277 | ||||
Net Cash Used in Operating Activities
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.
Net Cash Used in Investing Activities
Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was related to leasehold improvements for our headquarters and manufacturing facility in San Rafael, California and manufacturing equipment.
Net Cash Provided by Financing Activities
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.
Material Cash Requirements and Going Concern
Our material cash requirements include the following items, some of which are represented in the table of Contractual Obligations and Commitments: (1) employee wages, benefits and incentives, (2) the procurement of raw materials and components to support the manufacturing and sale of our products, (3) expenditures for the ongoing improvement and development of existing and new technologies, (4) debt repayments (for additional information see Note 9 in the notes to our condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q), and (5) operating lease payments (for additional information see Note 10 in the notes to our condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q).
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.
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.
Contractual Obligations and Commitments
The following table summarizes our outstanding contractual obligations as of March 31, 2024, and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
| Payments Due By Period: |
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| Less than |
||||||||||||||||
| Total |
One Year |
1-3 Years |
3-5 Years |
|||||||||||||
| Term loan |
$ | 2,411 | $ | 176 | $ | 2,235 | $ | — | ||||||||
| Promissory note |
4,375 | 1,250 | 2,500 | 625 | ||||||||||||
| Facility operating leases |
1,106 | 438 | 668 | — | ||||||||||||
| Purchase obligations |
2,387 | 2,387 | — | — | ||||||||||||
| Total |
$ | 10,279 | $ | 4,251 | $ | 5,403 | $ | 625 | ||||||||
Refer to Note 14. Commitments and Contingencies in the notes to our condensed consolidated financial statements for additional information regarding our contractual obligations and lease commitments.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes in our market risk during the three months ended March 31, 2024, compared to the disclosures in Part II, Item 7A of our Annual Report.
Item 4. Controls and Procedures
Disclosure Controls and Procedures.
Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
It should be noted that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment and makes assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Management believes that the financial statements included in this Quarterly Report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time we are subject to legal proceedings and claims arising in the ordinary course of business. Based on our current knowledge, we believe that the amount or range of reasonably possible losses will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, or financial condition.
The results of any litigation cannot be predicted with certainty, and an unfavorable resolution in any legal proceedings could materially affect our future business, results of operations, or financial condition. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. For additional information, please refer to Note 14. Commitments and Contingencies in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report.
We have not identified any material changes to the risk factors previously disclosed in Part I - Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 other than as set forth below:
Coverage policies and reimbursement levels of third-party payers, including Medicare or Medicaid, may impact sales of our products.
To the extent that the adoption of our products by our customers is dependent in the future on their ability to obtain adequate reimbursement for the products or treatments provided using our product from third-party payers, including government payors such as Medicare and Medicaid, managed care organizations and commercial payors, the coverage policies and reimbursement levels of these third-party payers may impact the decisions of healthcare providers, facilities, or end users to purchase our products or the prices they would be willing to pay for those products. Reimbursement rates could also affect the acceptance rates of new technologies. We have no control over these factors.
In the United States, the principal decisions about reimbursement for new medical products are typically made by CMS. CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Because there is no uniform policy of coverage and reimbursement in the United States, each payor generally determines for its own enrollees or insured patients whether to cover or otherwise establish a policy to reimburse our diagnostic tests, and seeking payor approvals is a time-consuming and costly process. Our business plan within our Personal Health business line depends in a large part on sales of our Ekso Indego Therapy product by individuals with SCI who are covered by Medicare or Medicaid.
If CMS delays or cancels reimbursement decisions, or materially changes the reimbursement level it has set, our ability to sell into this market may be diminished. In addition, the policies affecting the implementation of individual reimbursement decisions are made by regional DME MACs. Certain policies are not yet known to us and may affect the number of individual purchases that are approved to receive reimbursement in the future. We cannot be certain that coverage for our current and our planned future products will be provided in the future by additional payors or that existing agreements, policy decisions or reimbursement levels will remain in place, remain adequate, or be fulfilled under existing terms and provisions. If we cannot obtain coverage and adequate reimbursement from private and governmental payors such as Medicare and Medicaid for our current products or new products that we may develop in the future, demand for such products may decline or may not grow as we expect, which could limit our ability to generate revenue and have a material adverse effect on our financial condition, results of operations and cash flow.
The coverage and reimbursement market may be additionally impacted by future legislative changes. There are increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs which may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our products. Specifically, there have been several recent U.S. presidential executive orders, Congressional inquiries, and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug and medical device pricing, reduce the cost under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional legislative changes.
If we fail to manage the complex and lengthy reimbursement process, our business and operating results could be adversely affected.
The sale of products in our Personal Health business line primarily depends on reimbursements provided by third party payors. We distribute these products to end users through the VA hospitals. Our products are also distributed through DME suppliers, who will then pursue reimbursement from Medicare, Medicaid, or private insurance providers. Our financial condition and results of operations may be affected by coverage and reimbursement policies of these payors, which are also subject to change over time. The reimbursement process is complex and can involve lengthy delays between the time that a product is delivered to the consumer and the time that the reimbursement amounts are settled. Depending on the payor, we or our customers may be required to obtain certain payor-specific documentation from physicians and other healthcare providers before submitting claims for reimbursement. Certain payors have filing deadlines and they will not pay claims submitted after such time. We are also subject to extensive pre-payment and post-payment audits by governmental and private payors that could result in material delays, refunds of monies received or denials of claims submitted for payment under such third-party payor programs and contracts. We cannot ensure that we will be able to continue to effectively manage the process which would adversely affect our business, financial condition and results of operations.
During the quarter ended March 31, 2024, director or officer, as defined in Rule 16a-1(f), adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," each as defined in Regulation S-K Item 408.
| Exhibit Number |
Description |
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| 101* |
The following financial statements from the Ekso Bionics Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline Extensible Business Reporting Language (“iXBRL”): |
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| • |
unaudited condensed consolidated balance sheets; |
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| • |
unaudited condensed consolidated statements of operations and comprehensive income (loss); |
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| • |
unaudited condensed consolidated statements of stockholders’ equity; |
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| • |
unaudited condensed consolidated statement of cash flows; and |
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| • |
notes to unaudited condensed consolidated financial statements. |
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| 101.ins | Inline XBRL Instant Document | |||
| 101.sch | Inline XBRL Taxonomy Schema Document | |||
| 101.cal | Inline XBRL Taxonomy Calculation Linkbase Document | |||
| 101.def | Inline XBRL Taxonomy Definition Linkbase Document | |||
| 101.lab | Inline XBRL Taxonomy Label Linkbase Document | |||
| 101.pre | Inline XBRL Taxonomy Presentation Linkbase Document | |||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |||
| * |
Filed herewith. |
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| + |
Furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, Ekso Bionics Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EKSO BIONICS HOLDINGS, INC. |
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| Date: April 29, 2024 |
By: |
/s/ Scott G. Davis |
| Scott G. Davis |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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| Date: April 29, 2024 |
By: |
/s/ Jerome Wong |
| Jerome Wong |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION
I, Scott G. Davis, certify that:
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(1) |
I have reviewed this Quarterly Report on Form 10-Q of Ekso Bionics Holdings, Inc.; |
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(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
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(4) |
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
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(5) |
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: April 29, 2024
|
/s/ Scott G. Davis |
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|
Scott G. Davis |
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|
Principal Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Jerome Wong, certify that:
|
(1) |
I have reviewed this Quarterly Report on Form 10-Q of Ekso Bionics Holdings, Inc.; |
|
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
|
(4) |
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
|
(5) |
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: April 29, 2024
|
/s/ Jerome Wong |
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|
Jerome Wong |
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|
Principal Financial Officer |
Exhibit 32.1
CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of Ekso Bionics Holdings, Inc. (the “Company”), for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Scott G. Davis, Chief Executive Officer and principal executive officer, hereby certify as of the date hereof, solely for purposes of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
Dated: April 29, 2024
|
/s/ Scott G. Davis |
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|
Scott G. Davis |
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|
Principal Executive Officer |
Exhibit 32.2
CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of Ekso Bionics Holdings, Inc. (the “Company”), for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Jerome Wong, Chief Financial Officer and principal financial officer, hereby certify as of the date hereof, solely for purposes of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
Dated: April 29, 2024
|
/s/ Jerome Wong |
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|
Jerome Wong |
|||||
|
Principal Financial Officer |