ENDRA Life Sciences Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. ENDRA is developing TAEUS ultrasound technology, including an application intended to quantify liver fat. The company reported no revenue and had no pending TAEUS system orders at quarter-end.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $2.995 million | $3.572 million | $5.934 million | $6.427 million |
| Operating loss | $2.995 million | $3.572 million | $5.934 million | $6.427 million |
| Net loss | $2.557 million | $3.591 million | $5.500 million | $6.449 million |
| Basic and diluted loss per share | $0.43 | $1.17 | $1.20 | $2.46 |
There was no gross profit or margin because the company had no revenue or cost of goods sold. Q2 and six-month other income was $437,433 and $434,015, respectively, largely reflecting a $413,844 employee retention tax credit. No income tax provision was recorded.
At June 30, cash was $4.819 million, working capital was $6.051 million, total assets were $9.245 million, and total liabilities were $2.314 million. Current liabilities were $2.033 million. Debt consisted principally of lease liabilities: $163,013 current and $281,154 long-term; loans were $28,484. Stockholders’ equity was $6.931 million.
Six-month operating cash use was $4.775 million, investing cash use was $27,000, and financing cash inflow was $4.733 million. Cash declined by $69,639 from year-end 2022. Inventory was $2.758 million.
Changes versus the prior comparable period
- Six-month net loss narrowed by about $949,000, while operating expenses fell about $493,000. R&D declined 9% and sales and marketing declined 37%; G&A increased 1%.
- Q2 R&D fell 24% and sales and marketing fell 28%, which management attributed to completed initial-product development and the departure of the Chief Commercial Officer, respectively.
- Six-month operating cash use improved from $6.434 million to $4.775 million. Cash at period-end was substantially lower than the $11.278 million reported at June 30, 2022.
- In May 2023, an underwritten offering issued 4,312,500 common shares and warrants for up to 2,156,250 shares, generating approximately $4.7 million net. Common shares outstanding rose from 3,169,103 at December 31, 2022 to 7,481,603 at June 30, 2023; additional warrant exercise could further dilute shareholders.
Outlook, risks and notable matters
- Management stated that additional capital is needed to fund operations through the next 12 months and to support commercialization beyond Q4 2023. The company has no committed external financing other than its ATM arrangement and cautioned that financing may not be available on acceptable terms. Failure to obtain funding could require delaying or reducing development or commercialization, or ceasing operations.
- The filing includes a going-concern warning. ENDRA has an accumulated deficit of $87.370 million, no established revenue stream sufficient to cover operating costs, and expects continued losses and significant spending.
- TAEUS FLIP received CE mark approval in 2020. ENDRA withdrew its FDA 510(k) application and planned to pursue a de novo review with additional clinical data, targeting submission as soon as practicable in 2023. Regulatory timing and approval are uncertain; the filing provides no quantified sales or earnings guidance.
- Management described plans to continue EU commercialization and prepare for U.S. commercialization if FDA approval is obtained. As of June 30, the company had full-time sales representatives in the UK, France and Germany.
- Disclosure controls and procedures were deemed ineffective due to insufficient accounting personnel to segregate duties. Management planned to add accounting resources and improve written procedures, contingent on funding.
- The company reported no material pending litigation and no off-balance-sheet arrangements. It maintains cash at multiple banks in response to banking-system liquidity concerns.
Most important facts for investors to verify
- Available cash, actual cash burn, and whether additional financing has been secured since June 30, 2023.
- Progress and timing of the FDA de novo submission, clinical data, and required regulatory approvals.
- Whether TAEUS commercialization is producing orders or revenue, and whether inventory is recoverable given no orders were pending at quarter-end.
- Potential dilution from outstanding warrants, options, and further equity financing.
- Remediation of the accounting-function material weakness and improvement in disclosure controls.