ENDRA Life Sciences Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. ENDRA is developing Thermo-Acoustic Enhanced Ultrasound (TAEUS) technology, including an application intended to quantify liver fat. The filing reports no product revenue; TAEUS had not been commercially sold as of June 30, 2022.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $0 | $0 in Q2 2021 and first half 2021 |
| Operating expenses | $3.57 million for Q2; $6.43 million for first half | $3.20 million and $5.78 million, respectively, in 2021 |
| Net loss | $3.59 million for Q2; $6.45 million for first half | $3.20 million for Q2 2021; $5.59 million attributable to common stockholders for first half 2021 |
| Loss per share | $0.06 for Q2; $0.12 for first half | $0.08 and $0.14, respectively, in 2021 |
| Cash and working capital | $11.28 million cash; $12.99 million working capital | $9.46 million cash at December 31, 2021 |
| Operating cash flow | Used $6.43 million in first half | Used $5.72 million in first half 2021 |
| Financing cash flow | Provided $8.40 million in first half, from common-stock issuance | Provided $12.58 million in first half 2021 |
| Total liabilities | $1.98 million, including $586,193 lease liabilities and $28,484 in loans | $2.09 million at December 31, 2021 |
Gross and operating margins are not meaningful because the company reported no revenue or cost of goods sold. First-half R&D expense rose 6% to $3.06 million, sales and marketing rose 63% to $682,000, and general and administrative expense rose 9% to $2.68 million. The prior-year first-half comparison included a $308,600 PPP loan-forgiveness gain, which did not recur in 2022.
Material changes and capital
- The company issued 20.62 million common shares through its at-the-market program in the first half, receiving approximately $8.40 million net. Shares outstanding increased from 42.55 million at year-end 2021 to 63.17 million at June 30, 2022.
- Inventory increased to $2.37 million from $1.28 million; the company reported no pending TAEUS system orders at quarter-end.
- Cash increased by $1.82 million during the first half, as stock proceeds exceeded operating and investing cash use. Operating cash use increased year over year.
Outlook, risks, and other notable matters
- Management estimated available cash would fund current operations into the first half of 2023, but said additional capital would be needed. The company has no committed funding beyond its ATM agreement and said it could not make additional sales under its shelf registration statement at the time because of public-float limitations. Financing may be unavailable or may dilute shareholders; without sufficient funding, operations, development, or commercialization could be delayed, reduced, or discontinued. The filing identifies substantial going-concern uncertainty.
- ENDRA withdrew its FDA 510(k) application for TAEUS FLIP and planned to submit a de novo application with additional clinical data in Q3 2022. The device had CE mark approval for EU and other CE-mark geographies. Regulatory timing, clinical results, and commercial acceptance remain uncertain.
- The company expected continued spending on R&D, regulatory work, inventory, and commercialization. Management said it could not reliably estimate the costs or timelines of continued development and approvals.
- Nasdaq had granted an extension through January 1, 2023, to regain compliance with the $1 minimum bid-price requirement. Failure could lead to delisting; a reverse stock split was identified as a possible response.
- Disclosure controls were reported ineffective as of June 30, 2022, due to a material weakness: insufficient accounting personnel to segregate financial-processing and reporting duties. Remediation plans depend on available funding.
- COVID-19 had affected clinical activities and regulatory reviews; future effects and liquidity impact were uncertain. Management reported no legal matters believed likely to materially affect financial position or results.
Key facts for investors to verify
- Actual cash runway and financing availability, including any later use of the ATM or other capital raising.
- Status and timing of the planned FDA de novo submission and supporting clinical data.
- Progress toward Nasdaq bid-price compliance and any reverse-split action.
- Remediation of the accounting-control material weakness and whether controls improve.
- Inventory usability, customer orders, and progress toward TAEUS commercialization and revenue.