EKSO BIONICS HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
In this Quarterly Report, the "Company", "we", "its" and "our" refers toEkso 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 on Form 10-Q for the quarter endedSeptember 30, 2022 (this "Quarterly Report") and in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , 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) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) 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 theSEC , (iv) our beliefs regarding the potential for commercial opportunities for exoskeleton technology in general and our exoskeleton products in particular, (v) our beliefs regarding potential clinical and other health benefits of our medical devices, and (vi) the assumptions underlying or relating to any statement described in points (i), (ii), (iii), (iv) or (v) 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: •our ability to obtain adequate financing to fund operations and to develop or enhance our technology; •our ability to obtain or maintain regulatory approval to market our medical devices; •our ability to complete clinical trials on a timely basis and that completed clinical trials will be sufficient to support commercialization of our products; •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; •our ability to effectively market and sell our products and expand our business, both in unit sales and product diversification; •our ability to achieve broad customer adoption of our products and services; •existing or increased competition; •rapid changes in technological solutions available to our markets; •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; •changes to our domestic or international sales and operations; •our ability to obtain or maintain patent protection for our intellectual property; •the scope, validity and enforceability of our and third-party intellectual property rights; •significant government regulation of medical devices and the healthcare industry; •our ability to receive regulatory clearance from certain government authorities, including any conditions, limitations or restrictions placed on such approvals; •our customers' ability to get third-party reimbursement for our products and services associated with them; •the potential for our products to be subject to voluntary or involuntary recall; •our product liability insurance may not adequately cover potential claims; •warrant claims and our accelerated maintenance program results in additional operating costs to us; •our failure to implement our business plan or strategies; •our ability to successfully consummate acquisitions on acceptable terms and to integrate any such acquisitions; •our early termination of leases, difficulty filling vacancies or negotiating improved lease terms; •our ability to retain or attract key employees; •scope, scale and duration of the impact of outbreaks of a pandemic disease, such as COVID-19 (coronavirus); •stock volatility or illiquidity; •our ability to maintain adequate internal controls over financial reporting; •the impacts of foreign currency price fluctuations; and -------------------------------------------------------------------------------- Table of Contents •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 markets and can be utilized both by able-bodied persons and by persons with physical disabilities. We have sold or leased devices that (i) enable individuals with neurological conditions affecting gait, including ABI, SCI and MS, to rehabilitate, and in some cases, to walk again, (ii) assist individuals with a broad range of upper extremity impairments, and (iii) allow industrial workers to perform difficult repetitive work for extended periods. We believe that the commercial opportunity for exoskeleton technology adoption is accelerating as a result of recent advancements in material technologies, electronic and electrical engineering, control technologies, and sensor and software development. Taken individually, many of these advancements have become ubiquitous in peoples' everyday lives. Supported by an industry leading intellectual property portfolio, we believe that we have learned how to integrate these existing technologies and wrap the result around a human being efficiently, elegantly and safely. We further believe this endeavor is achievable across a broad spectrum of applications, from persons with lower limb paralysis to able-bodied users.
EksoHealth
EksoHealth is our business unit focused on the development and commercialization of exoskeletons for medical applications.
Our leading product in EksoHealth, the EksoNR, is a robotic exoskeleton used to provide physical therapy for patients with lower extremity impairment. EksoNR includes unique features designed specifically to assist physical therapists and other clinicians to teach patients to walk again after suffering a neurological impairment. Typical conditions that can be treated with the assistance of EksoNR include ABIs, such as stroke and traumatic brain injuries, as well as SCIs, MS, and others. The benefits of EksoNR rehabilitation can include earlier mobilization of patients, longer and more intense rehab sessions, and increased quality of sessions as compared to alternative therapies. EksoNR is typically used in clinical settings, most commonly at inpatient rehab facilities and stroke centers.
EksoUE, our exoskeleton device for upper limb medical applications, is a wearable upper body exoskeleton used for rehabilitation. EksoUE is designed to help patients with a wide range of upper limb impairments and aims to provide them with a greater active range of motion and increased endurance for higher intensity rehabilitation sessions.
EksoWorks
EksoWorks is our business unit focused on developing, marketing, and selling exoskeletons and other assistive tools for industrial applications. Target users for these devices are generally able-bodied, and, as such, the technologies are primarily employed to reduce worker fatigue. The benefits of fatigue reduction can include reduced rates of injuries, higher productivity, increased worker morale, and lower employee turnover. EksoWorks products are primarily sold to companies deploying the technologies for use directly in their operations. Our wearable exoskeleton products in EksoWorks include EksoVest and the new EVO, both of which are designed to support the weight of a worker's arms and tools during overhead applications, reducing the fatigue associated with working at or above shoulder height for extended periods. These products are currently targeted at end users in the aerospace, automotive, manufacturing, and construction trades.
Before ceasing marketing of the EksoZeroG support arm and associated products and accessories, at the end of the second quarter of 2022, we manufactured and sold our EksoZeroG tool carrier, which could be mounted on a lifting platform or
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Table of Contents scaffolding. Refer to Note 6. Revenue Recognition in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.
Third Quarter 2022 Highlights
• Reservation of a total of 33 EksoNR units in the third quarter of 2022
• Declared turnover of
•Strong cash position of
Economic and industrial 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 ABI and SCI populations, the imperatives among construction and manufacturing companies to drive adoption of improved safety and health practices, as well as conditions relating to overall economic growth and general business activity. Difficult and challenging economic conditions, including growing supply chain issues amidst 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, 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, our business includes operations in theAmericas , EMEA and APAC, so we are affected by demand for our products in those regions, as well as the strengthening or weakening of local currencies relative to theU.S. Dollar. The COVID-19 pandemic and related public health measures have also materially affected how we and our customers are operating our businesses, and have materially affected our operating results, as demand for our exoskeleton products decreased as many inpatient rehabilitation facilities temporarily shifted priorities and delayed capital expenditures. While the duration and extent to which this will impact our future results remain uncertain, we have seen certain recovery in the demand for our exoskeleton products following the gradual reopening and recovery of the broader global economy, and we believe the clinical need for our products has not diminished, as evidenced by clinical data showing the increased prevalence of strokes during the pandemic. Although concerns about the emergence of new, more infectious variants of the coronavirus remain, we have gradually resumed in-person engagements in addition to virtual meetings with our current and prospective customers through conferences, training events and educational demos to offer our support and showcase the value of our Ekso devices. Further, now that our clinical team is fully vaccinated and are active onsite atU.S. rehab centers, we expect to see an uptick in live in-person interactions going forward. Although market uncertainties related to the pandemic make it difficult for us to project the full impact on our business and customers, we believe that we are well-positioned to serve our customers when business conditions begin to normalize. Throughout the pandemic, our top priority has been to protect the health and safety of our employees and our consumers. Employees who are essential to the daily operations are required to work in our facilities where enhanced personal protective equipment is in place. In addition, we have a hybrid work from home and office policy for our employees whose jobs can be performed outside of the office. Management continues to actively monitor the global situation, including the geopolitical instability arising out of military conflict and escalating tensions betweenRussia andUkraine , and its effects on our financial position and operations. Management Changes OnJanuary 14, 2022 ,Jack Peurach , our former President and Chief Executive Officer, notified us of his intention to resign as an officer and member of the Board of Directors of the Company to pursue other endeavors. OnJanuary 20, 2022 , our Board andMr. Peurach reached an understanding regarding his decision to leave the Company and entered into an Executive Separation and Release Agreement pursuant to whichMr. Peurach's last day of service as the President, Chief Executive Officer and as a member of the Company's Board wasJanuary 21, 2022 . In addition, our Board of Directors appointedSteven Sherman , who currently serves and previously had served as the Chairman of our Board, to become Chief Executive Officer of the Company effectiveJanuary 22, 2022 .Mr. Sherman continues to serve as the Chairman of the Board of the Company, and Board memberStanley Stern has been designated the Board's lead -------------------------------------------------------------------------------- Table of Contents independent director. Furthermore, our Board of Directors appointedScott Davis to become President and Chief Operating Officer effectiveJanuary 22, 2022 . OnMarch 4, 2022 ,William Shaw , our former Chief Commercial Officer, notified our Board of Directors of his intention to resign as Chief Commercial Officer of the Company effectiveMarch 11, 2022 in connection with his retention as an employee at another company. OnMay 23, 2022 ,John F. Glenn our former Chief Financial Officer, notified the Company of his decision to resign from his position as the Company's Chief Financial Officer, effectiveJune 17, 2022 , in connection with his retention as an employee at another public company.Mr. Glenn's resignation is not the result of any dispute or disagreement with the Company including any matters relating to the Company's accounting practices or financial reporting. OnMay 25, 2022 , our board of directors approved the appointment ofJerome Wong as Interim Chief Financial Officer, effective uponMr. Glenn's departure.Mr. Wong was approved by our board of directors as Chief Financial Officer, Corporate Secretary and Principal Financial Officer onOctober 26, 2022 , after serving as Interim Chief Financial Officer fromMay 25, 2022 toOctober 25, 2022 .
Significant Accounting Policies and 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 withU.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: •the standalone selling prices used to allocate the contract consideration to the individual performance obligations in our device sales arrangements, which impacts revenue recognition; •the unobservable inputs and assumptions used by management in estimating the fair value of our warrant liabilities, which impacts net income or loss; •the valuation of inventory, which impacts gross profit margins; and •the estimates made regarding the recoverability of our net deferred tax asset, which impacts our financial condition.
Autonomous 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.
Responsibilities Related to Warrants
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 endedSeptember 30, 2022 , management made no changes to its estimates regarding the likelihood of future events, but revised its estimates regarding the timing 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. -------------------------------------------------------------------------------- Table of Contents 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. Accounting Policies An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the condensed consolidated financial statements. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the condensed consolidated financial statements. Refer to Note. 2 Basis of Presentation and Summary of Significant Accounting Policies and Estimates in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. -------------------------------------------------------------------------------- Table of Contents Results of Operations
The following table presents our operating results for the three months ended
Three Months Ended September 30,
2022 2021 Change % Change
Revenue $ 3,329 $ 3,049 $ 280 9 %
Cost of revenue 1,643 1,242 401 32 %
Gross profit 1,686 1,807 (121) (7) %
Gross profit % 51 % 59 %
Operating expenses:
Sales and marketing 1,742 1,685 57 3 %
Research and development 936 618 318 51 %
General and administrative 2,662 2,293 369 16 %
Total operating expenses 5,340 4,596 744 16 %
Loss from operations (3,654) (2,789) (865) 31 %
Other (expense) income, net:
Interest expense (34) (24) (10) 42 %
Gain on revaluation of warrant liabilities 112 1,125 (1,013) n/m(1)
Unrealized loss on foreign exchange (732) (268) (464) n/m(1)
Other income (expense), net 4 (2) 6 n/m(1)
Total other (expense) income, net (650) 831 (1,481) (178) %
Net loss $ (4,304) $ (1,958) $ (2,346) 120 %
(1)Not Meaningful
Revenue
Revenue increased $0.3 million , or 9%, for the three months ended September 30,
2022 , compared to the same period of 2021. Revenue in the third quarter of 2022
included approximately $3.2 million in EksoHealth revenue and approximately $0.1
million in EksoWorks revenue.
EksoHealth revenue increased approximately $0.5 million for the three months
ended September 30, 2022 , compared to the same period of 2021. The increase in
revenue was primarily driven by an increase in the volume of EksoNR device sales
in the EMEA and APAC regions. EksoWorks revenue decreased approximately $0.2
million for the three months ended September 30, 2022 , compared to the same
period of 2021. The decrease in EksoWorks revenue was primarily driven by a
reduction in the volume of EVO and EksoVest sales.
Gross profit
Gross profit decreased 7% for the three months endedSeptember 30, 2022 compared to the same period of 2021, driven by a decrease in gross profit margins in EksoHealth and EksoWorks segments. Gross margin was approximately 51% for the three months endedSeptember 30, 2022 , compared to a gross margin of 59% for the same period of 2021. The overall decrease in gross margin was primarily due to the increase in EksoHealth service costs for both labor and materials usage, and increases in inventory costs due to the continued global supply shortage. Additionally, the average selling price for the EksoNR, on an aggregate basis across all regions, for the three months endedSeptember 30, 2022 decreased 12% compared to the same period in 2021 as a result of a relative increase of indirect device sales placed through our distributors. The decrease in gross margin was partially offset by the relative increase in EksoHealth revenue, which generally has higher gross margins, in overall revenue composition.
EksoHealth’s service costs have increased due to increased headcount, significant increases in shipping and freight costs related to service activities, and servicing an increased number of client units.
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Functionnary costs
Research and development expenses increased$0.3 million , or 51%, for the three months endedSeptember 30, 2022 , compared to the same period of 2021, primarily due to an increase in product development activity mostly related to sustaining engineering activity for the EksoNR and the development of next generation products.
General and administrative expenses increased
Total other (expense) income, net
Gain on revaluation of warrant liabilities was$0.1 million for the three months endedSeptember 30, 2022 , and was associated with the revaluation of warrants issued in 2019, 2020 and 2021. Gain on warrant liabilities was$1.1 million for the three months endedSeptember 30, 2021 , 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 and the risk-free rate. Unrealized loss on foreign exchange for the three months endedSeptember 30, 2022 was$0.7 million compared to an unrealized loss on foreign exchange of$0.3 million for the same period of 2021. The unrealized loss was primarily the result of foreign currency revaluations of our inter-company monetary assets and liabilities.
The following table presents our operating results for the nine months ended
Nine Months Ended September 30,
2022 2021 Change % Change
Revenue $ 9,361 $ 7,170 $ 2,191 31 %
Cost of revenue 4,825 2,836 1,989 70 %
Gross profit 4,536 4,334 202 5 %
Gross profit % 48 % 60 %
Operating expenses:
Sales and marketing 5,212 5,265 (53) (1) %
Research and development 2,855 1,930 925 48 %
General and administrative 7,589 6,415 1,174 18 %
Total operating expenses 15,656 13,610 2,046 15 %
Loss from operations (11,120) (9,276) (1,844) 20 %
Other (expense) income, net:
Interest expense (90) (77) (13) 17 %
Gain on revaluation of warrant liabilities 1,011 2,011 (1,000) n/m(1)
Gain on forgiveness of note payable - 1,099 (1,099) n/m(1)
Unrealized loss on foreign exchange (1,704) (640) (1,064) n/m(1)
Other income (expense), net 1 (18) 19 (106) %
Total other (expense) income, net (782) 2,375 (3,157) (133) %
Net loss $ (11,902) $ (6,901) $ (5,001) 72 %
(1)Not Meaningful
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Table of Contents Revenue Revenue increased$2.2 million , or 31%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021. Revenue for the nine months endedSeptember 30, 2022 included approximately$8.3 million in EksoHealth revenue and approximately$1.0 million in EksoWorks revenue. EksoHealth revenue increased approximately$2.0 million , or 32%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021. The increase in revenue was primarily driven by an increase in the volume of EksoNR device sales in theAmericas , EMEA, and APAC regions. EksoWorks revenue increased approximately$0.2 million , or 19%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021. The increase in revenue was primarily related to the recognition of previously deferred prepaid royalties associated with a license and distribution agreement that expired.
Gross profit
Gross profit increased 5% for the nine months endedSeptember 30, 2022 compared to the same period of 2021, largely driven by the increase in EksoHealth revenue as discussed above. Gross margin was approximately 48% for the nine months endedSeptember 30, 2022 , compared to a gross margin of 60% for the same period of 2021. The overall decrease in gross margin was primarily due to an increase in EksoHealth service costs for both labor and materials usage, and increases in inventory costs due to the continued global supply shortage. The decrease in gross margin was partially offset by the recognition of previously deferred prepaid royalties associated with a license and distribution agreement that expired. EksoHealth service costs increased due to increased headcount and the servicing of an increased number of customer units, owing to the receipt of service parts during the period, the shortage of which had previously precluded the completion of service. Additionally, we have experienced significant increases in the cost of shipping and freight related to service activities.
Functionnary costs
Research and development expenses increased$0.9 million , or 48%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021, due to an increase in product development activity mostly related to sustaining engineering activity for the EksoNR. General and administrative expenses increased$1.2 million , or 18%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021, primarily due to noncash stock-based compensation related to the appointment of our new Chief Executive Officer, severance expense associated with the departure of our former Chief Executive Officer, an increase in business development activities, and costs associated with our move to our new headquarters and manufacturing facility inSan Rafael, California .
Total other (expense) income, net
Gain on revaluation of warrant liabilities was$1.0 million for the nine months endedSeptember 30, 2022 , and was associated with the revaluation of warrants issued in 2019, 2020 and 2021. Gain on warrant liabilities was$2.0 million for the nine months endedSeptember 30, 2021 , 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 and risk free rate. Gain on forgiveness of note payable of$1.1 million for the nine months endedSeptember 30, 2021 , related to the forgiveness of our PPP Loan. There was no comparable item in the nine months endedSeptember 30, 2022 . Unrealized loss on foreign exchange for the nine months endedSeptember 30, 2022 was$1.7 million compared to an unrealized loss on foreign exchange of$0.6 million for the same period of 2021. The unrealized loss was primarily due to foreign currency revaluations of our inter-company monetary assets and liabilities.
Cash and capital resources
Since our inception, we have devoted substantially all of our efforts toward the development and commercialization of exoskeletons for the medical and industrial markets. and toward raising capital. We have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt.
Cash and capital resources
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OnSeptember 30, 2022 , we had working capital of$28.9 million , compared to working capital of$40.9 million atDecember 31, 2021 . The decrease in working capital was primarily due to a lower cash balance from cash used in operations. Our cash as ofSeptember 30, 2022 , consisted of bank deposits with third party financial institutions. As ofSeptember 30, 2022 , of our$29.2 million of cash,$28.1 million was held domestically while$1.1 million was held by foreign subsidiaries. As described in Note 8 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q under the caption Notes Payable, net, borrowings under our new secured term loan agreement withPacific Western Bank have a requirement of minimum cash on hand equivalent to the current outstanding principal balance. As ofSeptember 30, 2022 ,$2.0 million of cash must remain as restricted. After considering cash restrictions, effective unrestricted cash as ofSeptember 30, 2022 is estimated to be$27.2 million . With this unrestricted cash balance, we believe that we currently have sufficient cash to fund our operations beyond the look forward period of one year from the issuance of these condensed consolidated financial statements.
Cash
The following table summarizes the sources and uses of cash (in thousands).
Nine
months ended
2022 2021
Net cash used in operating activities $ (11,044) $ (8,081)
Net cash used in investing activities (141) (60)
Net cash provided by financing activities - 38,712
Effect of exchange rate changes on cash (41) 6
Net (decrease) increase in cash (11,226) 30,577
Cash at the beginning of the period 40,406 12,862
Cash at the end of the period $ 29,180 $ 43,439
Net cash used in operations increased$3.0 million , or 37%, for the nine months endedSeptember 30, 2022 , compared to the same period of 2021 primarily due to higher payments for business development costs incurred in late 2021, increased employee compensation, and increased inventory purchases.
Net cash used in investing activities increased$0.1 million for the nine months endedSeptember 30, 2022 , compared to the same period of 2021 due to cash outflows for leasehold improvements for our new headquarters and manufacturing facility inSan Rafael, California .
Net cash provided by financing activities
Net cash provided by financing activities of$38.7 million for the nine months endedSeptember 30, 2021 , was generated from the sale of common stock and warrants for net proceeds of$36.5 million in connection with the equity financing, net proceeds of$0.7 million from our "at the market offering" program, and proceeds of$1.4 million from the exercise of warrants. There was no comparable amount for the nine months endedSeptember 30, 2022 .
Material cash needs
Our material cash requirements include the following items, some of which are represented in the table of Contractual Obligations and Commitments: (1) employee wages, benefits and incentives, (2) the procurement of raw materials and components to support the manufacturing and sale of our products, (3) expenditures for the ongoing improvement and development of existing and new technologies, (4) debt repayments (for additional information see Note 8 in the notes to our condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q), and (5) operating lease payments (for additional information see Note 9 in the notes to our condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q). -------------------------------------------------------------------------------- Table of Contents We plan on utilizing our existing unrestricted cash balance to fund our material cash requirements in the short and long term.
Contractual obligations and commitments
The following table summarizes our outstanding contractual obligations as ofSeptember 30, 2022 , and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands): Payments Due By Period: Less than Total One Year 1-3 Years 3-5 Years Note payable, principal and interest$ 2,124 $ 2,124 $ - $ - Facility operating leases 1,579 314 822 443 Purchase obligations 3,203 3,203 - - Total$ 6,906 $ 5,641 $ 822 $ 443 In response to, or in anticipation of, supplier disruptions and extended lead times, we may stockpile certain components or raw materials to help prevent disruption in our production of the EksoNR. Such purchasing behavior is a contributing factor to the increase in purchase obligations as compared to prior periods. These actions have, and could continue to have, a short-term adverse impact on our cash used in operating activities and increase our inventory balance. Obligations related to these activities are reflected in the line purchase obligations in the table above. Refer to Note 13. Commitments and Contingencies in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our license agreements, purchase obligations, and lease commitments.
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