ENDRA Life Sciences Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. ENDRA is developing TAEUS, an ultrasound technology platform, including an application intended to assess liver fat. The company reported no commercial revenue.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $2.781 million | $2.939 million |
| Operating loss | $2.781 million | $2.939 million |
| Net loss | $2.776 million | $2.943 million |
| Net loss per share, basic and diluted | $0.26 | $0.93 |
| Cash used in operating activities | $2.144 million | $2.507 million |
| Cash at period end | $1.135 million | $2.834 million at Dec. 31, 2023 |
| Working capital | $53,818 | — |
| Total liabilities | $1.363 million | $1.095 million at Dec. 31, 2023 |
Gross margin is not applicable because the company reported no revenue or cost of goods sold. Operating expenses comprised R&D of $1.042 million, sales and marketing of $239,000, and G&A of $1.500 million. The company had no bank loans outstanding at March 31; lease liabilities totaled $324,064, including $178,239 current. Accumulated deficit was $94.706 million.
Material changes and notable items
- Net loss narrowed by about 6% year over year. R&D expense declined 25% to $1.042 million as ENDRA said it completed development of its initial product and shifted spending toward commercialization. Sales and marketing rose 31% to $239,000; G&A rose 10% to $1.500 million, including higher professional fees and stock compensation.
- Operating cash use improved year over year, but cash fell by $1.699 million during the quarter. Financing provided $468,902, including $419,967 from common-stock issuance and $77,419 from warrant exercises, partly offset by repayment of a $28,484 loan.
- ENDRA recorded a $142,733 inventory reserve, equal to 5% of inventory, citing potential damage and a longer-than-expected time to initial sales. It reported no pending TAEUS system orders at quarter end.
- Common shares outstanding were 10,914,447 at March 31 and 11,035,659 as of May 14, 2024. A new ATM agreement permits up to $6.2 million in gross sales; no shares had been sold under it by March 31. Q1 ATM proceeds were raised under the prior agreement.
Outlook, risks, and contingencies
- Going concern and funding: Management disclosed substantial doubt about ENDRA’s ability to continue as a going concern. The company said it needs additional capital to fund operations through the next 12 months and to continue its commercialization plans through Q2 2024. It has no assurance of obtaining sufficient financing on acceptable terms; without it, it may delay or curtail development and commercialization, restructure, or cease operations. Equity financing could dilute shareholders.
- Regulatory and commercial outlook: After FDA questions on its de novo application, ENDRA said it needs additional clinical and device-test data and cybersecurity responses. It planned an FDA pre-submission meeting in Q2 2024, anticipated completing necessary clinical studies by Q4 2024, and targeted a new de novo submission in the first half of 2025. These are forward-looking expectations, not guaranteed milestones.
- Nasdaq listing: Subsequent to quarter end, Nasdaq notified ENDRA on May 3 that its share price had been below $1 for 30 consecutive trading days. The company had until October 30, 2024 to regain compliance; the notice had no immediate effect on listing.
- Controls and legal matters: Management concluded disclosure controls were not effective and identified a material weakness from insufficient accounting personnel to segregate duties. Remediation plans depend on available resources and funding. ENDRA reported no litigation it believed would materially affect its financial position or results.
Important facts for investors to verify
- Cash runway, near-term financing availability, and whether the ATM or other funding sources can meet operating needs.
- Progress and costs for the additional FDA data, clinical studies, and planned de novo submission.
- Commercial demand and inventory condition, particularly given no pending system orders and the inventory reserve.
- Nasdaq bid-price compliance by October 30, 2024, and potential dilution from future equity issuance or equity awards.
- Whether management remediates the accounting-control material weakness and restores effective disclosure controls.