Ekso Bionics(EKSO) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Ekso Bionics' unaudited condensed consolidated financial statements are presented, highlighting liquidity challenges and substantial doubt regarding its going concern status Condensed Consolidated Balance Sheets Total assets decreased from $21.9 million to $16.9 million, driven by reduced cash and receivables, while total liabilities and stockholders' equity also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $8,516 | $10,872 | | Accounts receivable, net | $2,658 | $5,208 | | Total current assets | $14,062 | $18,807 | | Total assets | $16,944 | $21,915 | | Liabilities & Equity | | | | Total current liabilities | $7,550 | $7,832 | | Warrant liabilities | $1,788 | $4,307 | | Total liabilities | $11,716 | $15,118 | | Total stockholders' equity | $5,228 | $6,797 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q1 2020 revenue significantly decreased to $1.5 million, resulting in a $2.5 million net loss, an improvement from Q1 2019 due to a gain on warrant revaluation Q1 2020 vs. Q1 2019 Statement of Operations (in thousands, except per share) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Revenue | $1,468 | $3,616 | | Gross Profit | $637 | $1,599 | | Total Operating Expenses | $5,418 | $6,511 | | Loss from Operations | $(4,781) | $(4,912) | | Gain (loss) on revaluation of warrant liabilities | $2,519 | $(1,122) | | Net Loss | $(2,534) | $(6,551) | | Basic and diluted net loss per share | $(0.44) | $(1.51) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $1.7 million in Q1 2020, with the cash balance decreasing by $2.4 million to $8.5 million by quarter-end Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,722) | $(5,177) | | Net cash used in investing activities | $0 | $(7) | | Net cash (used in) provided by financing activities | $(589) | $6,769 | | Net increase (decrease) in cash | $(2,356) | $1,581 | | Cash at end of period | $8,516 | $9,236 | Notes to Condensed Consolidated Financial Statements Notes provide critical context, addressing liquidity, going concern uncertainty, China JV status, debt obligations, and subsequent events like a PPP loan and loan amendment - The company's cash on hand is not sufficient to fund operations for the next twelve months, which raises substantial doubt about its ability to continue as a going concern. As of March 31, 2020, cash was $8.5 million, but restricted cash requirements reduced effective unrestricted cash to an estimated $5.0 million[31][205] - On March 24, 2020, the company effected a 1-for-15 reverse stock split of its common stock to regain compliance with Nasdaq's minimum bid price requirement[32][120] - The company's China joint venture is under review by the Committee on Foreign Investment in the United States (CFIUS), which has imposed interim measures temporarily suspending the company's contributions and integration activities for the JV[99] - Subsequent to the quarter end, the company received a $1.1 million unsecured loan under the Paycheck Protection Program (PPP) and amended its term loan to defer principal payments for three months[173][174] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 59% Q1 2020 revenue decline due to COVID-19, a 17% operating expense reduction, and reiterates the need for significant additional financing to address going concern issues Q1 2020 vs Q1 2019 Results of Operations (in thousands) | Metric | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,468 | $3,616 | $(2,148) | (59)% | | Gross Profit | $637 | $1,599 | $(962) | (60)% | | Total Operating Expenses | $5,418 | $6,511 | $(1,093) | (17)% | | Net Loss | $(2,534) | $(6,551) | $4,017 | (61)% | - The decrease in revenue was primarily driven by the impact of the COVID-19 pandemic, as customers shifted priorities and delayed orders that are typically booked late in the quarter[193] - The reduction in operating expenses reflects company-wide initiatives implemented in the prior year and improved operational efficiencies, including lower headcount and reduced marketing and R&D costs[197][198][199] - Management states that based on current cash resources, the company has sufficient funds to operate until the end of the fourth quarter of 2020, but will require significant additional financing to continue beyond that[208] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, including foreign currency exchange rate fluctuations from international operations, but inflation has not had a material effect - The company is exposed to exchange rate risk due to its business in foreign countries, including subsidiaries in Germany and Singapore[220] - Management does not believe inflation has had a material effect on the business, but notes that an inability to offset significant inflationary pressures with price increases could harm future results[219] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[222] - No changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[225] PART II. OTHER INFORMATION Legal Proceedings The company is not subject to any pending legal proceedings that would materially impact its financial condition or results of operations - As of the filing date, the company is not the subject of any pending legal proceedings, and management is not aware of any threatened proceedings that would have a material impact[227] Risk Factors Material risk factors include COVID-19 impacts, potential China JV restrictions from CFIUS review, and risks associated with the recent reverse stock split - The COVID-19 outbreak could materially adversely affect financial results due to business disruptions, supply chain delays, reduced customer demand, and potential impacts on the company's workforce and ability to raise capital[229][230] - The company's China JV is under review by CFIUS, which has imposed interim measures suspending contributions. An adverse outcome could restrict technology transfer or compel the company to abandon the JV[237][238] - The 1-for-15 reverse stock split effected on March 24, 2020, has decreased the liquidity of the common stock. While the company regained compliance with Nasdaq's minimum bid price rule, there is no assurance it can maintain compliance in the future[241][243][244] Other Information The company amended its loan agreement, deferring principal payments for three months and revising the liquidity covenant to a minimum cash balance requirement - The company amended its loan agreement to defer principal payments for three months starting in May 2020, with interest-only payments required during this period[245] - The loan's liquidity covenant was changed from a 'three-months of monthly cash burn' requirement to a minimum cash balance equal to the outstanding loan amount[245] Exhibits Exhibits filed with Form 10-Q include the second amendment to the loan agreement and CEO/CFO certifications - Key exhibits filed include the Second Amendment to the Loan and Security Agreement with Western Alliance Bank and certifications from the CEO and CFO[250][249][251]