ENDRA Life Sciences(NDRA) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements ENDRA Life Sciences Inc. reported a $3.3 million net loss for Q1 2020, an increase from $2.7 million in Q1 2019, with $3.1 million cash and going concern uncertainty Condensed Consolidated Balance Sheets Total assets decreased to $4.4 million from $7.2 million, driven by a $3.1 million cash balance as of March 31, 2020 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 ($) | December 31, 2019 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | $3,102,728 | $6,174,207 | | Total Current Assets | $3,772,868 | $6,535,099 | | Total Assets | $4,398,887 | $7,176,269 | | Liabilities & Equity | | | | Total Current Liabilities | $1,551,045 | $2,072,787 | | Total Liabilities | $1,876,849 | $2,415,599 | | Total Stockholders' Equity | $2,522,038 | $4,760,670 | Condensed Consolidated Statements of Operations Net loss increased to $3.32 million (or $0.29 per share) in Q1 2020, up from $2.75 million in Q1 2019, due to higher G&A Statement of Operations Summary (Unaudited) | Metric | Three Months Ended March 31, 2020 ($) | Three Months Ended March 31, 2019 ($) | | :--- | :--- | :--- | | Research and development | $1,518,146 | $1,773,498 | | General and administrative | $1,467,745 | $916,903 | | Total operating expenses | $3,100,846 | $2,747,219 | | Operating loss | $(3,100,846) | $(2,747,219) | | Net Loss | $(3,322,797) | $(2,748,736) | | Net loss per share | $(0.29) | $(0.37) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $3.09 million in Q1 2020, leading to a cash balance decrease to $3.10 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2020 ($) | Three Months Ended March 31, 2019 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,088,367) | $(2,540,662) | | Net cash used in investing activities | $(22,350) | $(5,239) | | Net cash provided by financing activities | $39,238 | $0 | | Net decrease in cash | $(3,071,479) | $(2,545,901) | Notes to Condensed Consolidated Financial Statements Notes detail TAEUS technology, going concern doubt due to insufficient cash, and subsequent events including a PPP loan - The company is developing technology to enhance clinical diagnostic ultrasound capabilities, aiming to provide a cost-effective alternative to CT and MRI scans[18] - There is substantial doubt about the company's ability to continue as a going concern for one year, as its cash resources are insufficient to meet anticipated needs without additional financing[44][45] - Subsequent to the quarter's end, the company received a $308,600 loan under the Paycheck Protection Program (PPP)[99] - During Q1 2020, the company issued over 4.5 million shares of common stock upon conversion of Series A Preferred Stock and over 234,000 shares upon conversion of Series B Preferred Stock[62] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A focuses on TAEUS technology commercialization, $3.3 million net loss, critical liquidity issues, going concern doubt, and impacts from COVID-19 and Nasdaq non-compliance - The company's primary focus is on its TAEUS technology, intended to enhance clinical ultrasound. The first application targets nonalcoholic fatty liver disease (NAFLD)[107][111] - In March 2020, the company received CE mark approval for its TAEUS FLIP System, allowing for commercialization in the European Union and other CE mark geographies[115] - Cash on hand of $3.1 million as of March 31, 2020, is projected to fund operations only into the third quarter of 2020, necessitating additional financing[135][137] - On April 24, 2020, the company received a deficiency notice from Nasdaq for failing to maintain a minimum bid price of $1.00 per share[150] Results of Operations Q1 2020 saw no revenue, R&D expenses decreased by 14%, while sales & marketing rose by 102% and G&A by 60%, leading to a $3.3 million net loss Comparison of Operating Expenses (Q1 2020 vs Q1 2019) | Expense Category | Q1 2020 ($) | Q1 2019 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Research & Development | $1,518,146 | $1,773,498 | -14% | | Sales & Marketing | $114,955 | $56,818 | +102% | | General & Administrative | $1,467,745 | $916,903 | +60% | | Net Loss | $3,322,797 | $2,748,736 | +21% | Liquidity and Capital Resources Cash of $3.1 million as of March 31, 2020, is sufficient only into Q3 2020, raising going concern doubt and necessitating additional capital - The company believes its cash on hand at March 31, 2020, will only be sufficient to fund operations into the third quarter of 2020, and it will need to raise additional capital[137] - In March 2020, the company established an at-the-market (ATM) equity offering agreement to sell up to $7.2 million of common stock, though no shares were sold under this program as of March 31, 2020[135] - In response to COVID-19's economic impact, the company reduced cash salaries for management by 33% for the remainder of 2020, compensating with restricted stock units[149] Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, ENDRA is not required to provide market risk disclosures - As a smaller reporting company, ENDRA is not required to provide quantitative and qualitative disclosures about market risk[154] Controls and Procedures Disclosure controls and procedures were not effective as of March 31, 2020, due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2020[155] - A material weakness was identified due to insufficient accounting personnel to segregate duties over financial transaction processing and reporting[156] PART II – OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to materially affect its business or financial condition - There are currently no legal matters that management believes would have a material effect on the Company's financial position or results of operations[95][160] Risk Factors The COVID-19 pandemic poses significant risks, potentially disrupting clinical trials, regulatory approvals, supply chains, and pre-sales activities - The COVID-19 pandemic could severely impact business operations, including clinical trials, regulatory timelines, and supply chains[162][163] - Specific potential disruptions from the pandemic include delays in patient enrollment for clinical trials, interruptions in FDA operations, supply chain issues, and limited access to capital[165] Other Items (Items 2, 3, 4, 5) Items 2, 3, 4, and 5, covering various disclosures, are reported as not applicable for the period - No information was reported for Item 2, 3, 4, and 5, as they were not applicable[166][167][168][169] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance, securities, agreements, and certifications