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Ekso Bionics Holdings - Material Weakness in Internal Control Reported

Ekso Bionics Holdings – Material Weakness in Internal Control Reported

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Ekso Bionics Holdings, Inc. (NASDAQ:EKSO)

According to Ekso Bionics Holdings, the Northern California-based company is a “worldwide pioneer in the field of robotic exoskeletons” which is “committed to developing the latest technology and engineering to help people rethink current physical limitations and achieve the remarkable.” Ekso’s “products unlock human strength, endurance, and mobility potential, with broad applications across medical and industrial markets.”

Ekso Bionics Holdings Concludes that Ekso Bionics’s Report on Effectiveness of Ekso Bionics’s Internal Control Over Financial Reporting as of December 31, 2016 Should No Longer Be Relied Upon

Ekso Bionics filed a Form 8-K, dated December 14, 2017, which stated:

On December 8, 2017, OUM & Co. LLP (“OUM”) notified Ekso Bionics Holdings, Inc. . . . that it had concluded that its report on the effectiveness of [Ekso Bionics’s] internal control over financial reporting as of December 31, 2016 should no longer be relied upon and that a material weakness in [Ekso Bionics’s] internal control over financial reporting existed as of such date. [Emphasis added]

The share price of Ekso Bionics Holdings, on this news, fell $0.15, or 6.17%, to close at $2.28 on December 15, 2017. 

The Form 8-K filed by Ekso Bionics Holdings also stated:

As part of its original audit of [Ekso Bionics’s] financial statements included in the 2016 10-K, OUM assessed [Ekso Bionics’s] internal control over financial reporting as of December 31, 2016. At that time, OUM and [Ekso Bionics] concluded that [Ekso Bionics] maintained effective internal control over financial reporting as of December 31, 2016.

Subsequent to the issuance of the 2016 10-K, the Public Company Accounting Oversight Board conducted an inspection of OUM’s 2016 audit of [Ekso Bionics]. As a result, OUM reevaluated [Ekso Bionics] information technology (IT) general controls, and has now concluded that a “material weakness” existed as of December 31, 2016. [Emphasis added]

As a result of the identified material weakness, OUM has performed additional testing on [Ekso Bionics’s] financial statements as of and for the year ended December 31, 2016 to reconfirm their opinion on the fairness of the financial statements included in the 2016 10-K without reliance on the effectiveness of [Ekso Bionics’s] internal controls. As noted above, OUM has now reconfirmed its unqualified opinion on the fairness of [Ekso Bionics’s] financial statements included in the 2016 10-K.

After consultation with OUM, management has now concluded that [Ekso Bionics’s] internal control over financial reporting was not effective at December 31, 2016 and, accordingly, its disclosure controls and procedures were not effective at December 31, 2016 or for subsequent interim periods. As a natural course of business, management has, over the course of 2017, been working to further strengthen its internal controls. Specifically, [Ekso Bionics] has implemented a more robust accounting and enterprise resource planning system with software provided by Infor (which became operational in October 2017). [Emphasis added]

Ekso Bionics To Amend Its Filings To Reflect Material Weakness in Internal Control Over Financial Reporting

Ekso Bionics’s Form 8-K also stated that Ekso Bionics

. . . plan[s] to amend [its] Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2017, June 30, 2017 and September 30, 2017 to reflect the conclusion by management that there was a material weakness in internal control over financial reporting and that [Ekso Bionics’s] disclosure controls and procedures were not effective as of the end of the periods covered by these reports. OUM’s auditor’s report on the Company’s internal control over financial reporting will also be revised to state that [Ekso Bionics’s] internal control over financial reporting at December 31, 2016 was not effective.

Ekso Bionics Amended Annual & Quarterly Reports & Stock Drop

Post-market, on December 27, 2017, Ekso Bionics filed an amended annual report (Form 10-K/A) for 2016 and amended quarterly reports for the first three quarters of 2017.

On this news, Ekso’s share price fell sharply during intraday trading on December 28, 2017.

According to Ekso Bionics’s amended annual report:

As previously disclosed in Item 8.01 of our Current Report on Form 8-K filed on December 14, 2017, [Ekso Bionics’s] independent registered public accounting firm, OUM & Co. LLP (“OUM”) notified management and the Audit Committee of Ekso Bionics Holdings, Inc. (the “Company”) that it had concluded that its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 should no longer be relied upon and that a material weakness in the Company’s internal control over financial reporting existed as of such date. [Emphasis added]

 . . .

As part of its original audit of the Company’s financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “Original Filing”), OUM assessed the Company’s internal control over financial reporting as of December 31, 2016. At that time, OUM and the Company concluded that [Ekso Bionics] maintained effective internal control over financial reporting as of December 31, 2016.

Subsequent to the issuance of the Original Filing, the Public Company Accounting Oversight Board conducted an inspection of OUM’s 2016 audit of the Company. As a result, OUM reevaluated the Company’s information technology (IT) general controls, and has now concluded that a “material weakness” existed as of December 31, 2016. [Emphasis added]

After consultation with OUM, management also concluded that [Ekso Bionics’s] internal control over financial reporting was not effective at December 31, 2016 and, accordingly, its disclosure controls and procedures were not effective at December 31, 2016. [Emphasis added]

Ekso Bionics – Amended Quarterly Reports

Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended March 31, 2017.

Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended June 30, 2017.

Click 10-Q/A to review Esko Bionics’s 10-Q/A for the quarterly period ended September 30, 2017.

Ekso Bionics Holdings Investors

Kehoe Law Firm, P.C. is investigating whether Ekso Bionics Holdings and certain officers or directors engaged in securities fraud or other unlawful business practices.  If you are an Ekso Bionics investor and have questions or concerns about Kehoe Law Firm’s investigation or your potential legal rights, please complete the form above on the right, e-mail [email protected] or contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected].

Kehoe Law Firm, P.C.