ENDRA Life Sciences Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 28, 2024. This annual filing reports full-year results, not standalone Q4 results. ENDRA is developing TAEUS, a thermo-acoustic ultrasound platform, initially intended to measure liver fat and support assessment of fatty liver disease. The company had not generated product revenue by year-end.
Key financial results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.00 million | $6.55 million |
| Sales and marketing expense | $0.82 million | $1.43 million |
| General and administrative expense | $4.70 million | $5.17 million |
| Operating loss | $10.52 million | $13.16 million |
| Net loss | $10.06 million | $13.18 million |
| Cash used in operating activities | $9.55 million | $12.77 million |
| Cash and cash equivalents at year-end | $2.83 million | $4.89 million |
FY2023 other income was $460,485, mostly from an Employer Retention Tax Credit of $413,844. The company reported no cost of goods sold; gross margin is not meaningful because revenue was zero. Working capital was $2.13 million. Total assets were $6.75 million and total liabilities were $1.10 million. Loans were $28,484 at year-end, with no long-term loans; lease liabilities totaled $365,919. The Canadian bank loan was repaid after year-end.
Changes versus FY2022
- Net loss narrowed by about 24%, while operating expenses fell about 20%. Management attributed lower R&D expense to completion of initial product development and a shift toward commercialization; lower sales and marketing expense was largely due to the Chief Commercial Officer’s departure.
- Operating cash use improved by about $3.22 million, but year-end cash fell by $2.06 million after operating and investing outflows, partly offset by $7.52 million of financing cash inflows.
- Common shares outstanding increased from 3.17 million to 10.39 million during 2023, reflecting equity issuance and warrant exercises. Further dilution remains possible.
Outlook, risks and unusual items
- Liquidity and going concern: The auditor and management disclosed substantial doubt about the company’s ability to continue as a going concern. Management said available cash was expected to support operations only through Q2 2024 and additional financing was needed for the next twelve months. The company had no committed funding sufficient to cover its needs; failure to raise capital could force cuts, asset sales, a strategic transaction, restructuring or cessation of operations.
- Regulatory pathway: ENDRA received CE marking for its liver application in 2020. In Q4 2023, the FDA requested additional information on the de novo application. The company said it needs additional clinical and device-test data and cybersecurity responses, expects to complete necessary clinical studies by Q4 2024, and anticipates a new de novo submission in H1 2025. These are management expectations, not assured outcomes.
- European certification: The filing states that the existing CE certification is subject to MDR transition conditions and may remain valid through December 31, 2028; ENDRA is working toward MDR conformity assessment.
- Commercialization: No TAEUS systems were pending sale orders at year-end. The company described a planned initial system price of approximately $65,000, but reimbursement, adoption and sales remain uncertain. Its GE Healthcare collaboration, including certain negotiation rights, was extended through December 16, 2024.
- Inventory and controls: Inventory was $2.62 million and included a 5% reserve of $138,045 for shrinkage, potential damage and a longer-than-expected period before initial sales. Management reported ineffective disclosure controls and a material weakness in financial reporting controls due to insufficient accounting staff to segregate duties.
- Other matters: FY2023 included $996,430 of stock-based compensation. No material pending legal proceedings were reported. The company identified no cybersecurity risks believed likely to have a material effect as of the report date.
Most important facts for investors to verify
- Current cash runway, subsequent financing proceeds, ATM availability and dilution, and whether funding covers the FDA studies and operating plan.
- Progress, cost and enrollment status of the additional clinical studies, FDA feedback, and timing and requirements for a new de novo submission.
- Whether the CE certification remains compliant with MDR conditions and whether recertification work is on track.
- Inventory usability, reserve adequacy, actual customer orders, commercial pricing and reimbursement prospects.
- Progress in remediating the material weakness in internal controls and any subsequent changes in reported financial information.