ENDRA Life Sciences Inc. (Nasdaq: NDRA) — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 30, 2022. This is an annual report, not a standalone fourth-quarter report.
Business context
ENDRA is a development-stage medical-device company building its Thermo-Acoustic Enhanced Ultrasound (TAEUS) platform. Its first application, TAEUS FLIP, is intended to quantify liver fat and support assessment of nonalcoholic fatty liver disease. The company had CE mark approval for Europe but had not generated TAEUS revenue or received U.S. FDA authorization by year-end. It reported no pending system orders at December 31, 2021.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.48 million | $5.92 million |
| Sales and marketing expense | $1.08 million | $0.58 million |
| General and administrative expense | $4.94 million | $5.00 million |
| Operating loss | $11.50 million | $11.50 million |
| Net loss | $11.23 million | $11.73 million |
| Net loss attributable to common stockholders | $11.35 million | $12.12 million |
| Basic and diluted loss per share | $0.28 | $0.63 |
| Cash used in operating activities | $11.12 million | $10.75 million |
- Revenue-based margins are not meaningful because the company had no revenue. Operating expenses totaled $11.50 million, roughly flat year over year.
- Cash at year-end was $9.46 million, versus $7.23 million in 2020. Working capital was $10.55 million; current assets were $12.09 million and current liabilities $1.54 million.
- Financing activities provided $13.40 million in 2021: $10.62 million from common-stock issuance and $2.79 million from warrant exercises. Common shares outstanding increased to 42.55 million from 34.05 million.
- Year-end liabilities included $28,484 of loans and $650,477 of lease liabilities; total liabilities were $2.09 million. The $308,600 Paycheck Protection Program loan was forgiven in 2021 and recorded as a gain.
- The auditor and management cited substantial doubt about the company’s ability to continue as a going concern. Management said year-end cash was expected to fund operations into the second half of 2022, but additional financing would be needed.
Material changes and outlook
- R&D expense fell 7%, which management attributed primarily to completing development of the initial product and reallocating some spending toward commercialization. Sales and marketing expense rose 85% with added staff and presales activity; G&A declined 1%.
- In February 2022, ENDRA announced it would pursue FDA review through the de novo pathway rather than continue with its 510(k) approach. It planned to submit additional clinical data, including a study comparing TAEUS measurements with MRI-PDFF. Timing and eventual clearance were uncertain; diagnostic claims may require further FDA submissions and clinical data.
- Management planned to expand European commercialization and prepare for U.S. commercialization if FDA authorization is obtained. The filing provides no revenue or profitability guidance and says development and regulatory costs and timing are difficult to estimate.
- After year-end, the company issued 1,534,721 shares through its ATM program for net proceeds of $683,588. A January 2022 Nasdaq notice gave the company until July 5, 2022 to regain the $1.00 minimum bid-price requirement, with possible additional time subject to conditions.
- Key risks include the need for further capital and potential shareholder dilution, regulatory and clinical uncertainty, limited market acceptance or reimbursement, reliance on third parties for product design and manufacturing, COVID-related disruption, and possible Nasdaq delisting. Management also reported a material weakness in financial reporting controls due to insufficient accounting personnel to segregate duties; remediation was ongoing.
Most important facts for investors to verify
- Current cash runway, subsequent cash burn, and availability and terms of additional financing or ATM share issuance.
- Progress, timing, clinical requirements, and FDA decisions under the de novo pathway, including what claims any authorization would permit.
- Actual European sales, customer adoption, and whether the company converts its presales and clinical relationships into orders and revenue.
- Nasdaq bid-price compliance status and any effect on listing or access to capital.
- Progress in addressing the material weakness in internal controls and any subsequent changes to financial reporting reliability.