ENDRA Life Sciences(NDRA) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's discussion and analysis of financial condition and results Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents ENDRA Life Sciences Inc.'s unaudited condensed consolidated financial statements and related notes for Q3 2022 and 2021 Condensed Consolidated Balance Sheets Total assets decreased from $12.87 million to $12.34 million, with stockholders' equity declining from $10.78 million to $10.20 million Balance Sheet Highlights | Metric | Sep 30, 2022 ($) | Dec 31, 2021 ($) | Change ($) | | :----- | :----------- | :----------- | :----- | | Cash | $8,016,350 | $9,461,534 | $(1,445,184) | | Total Current Assets | $11,564,688 | $12,094,115 | $(529,427) | | Total Assets | $12,342,742 | $12,874,644 | $(531,902) | | Total Current Liabilities | $1,705,154 | $1,543,767 | $161,387 | | Total Liabilities | $2,139,411 | $2,090,398 | $49,013 | | Total Stockholders' Equity | $10,203,331 | $10,784,246 | $(580,915) | Condensed Consolidated Statements of Operations Net losses increased for both three and nine months ended September 30, 2022, driven by higher R&D and sales and marketing expenses, with no revenue Statements of Operations Highlights | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Research and development | $1,830,297 | $1,173,319 | $4,890,879 | $4,059,730 | | Sales and marketing | $420,439 | $275,565 | $1,102,381 | $693,263 | | General and administrative | $1,166,480 | $1,201,851 | $3,850,918 | $3,673,771 | | Total operating expenses | $3,417,216 | $2,650,735 | $9,844,178 | $8,426,764 | | Operating loss | $(3,417,216) | $(2,650,735) | $(9,844,178) | $(8,426,764) | | Net Loss | $(3,440,227) | $(2,658,242) | $(9,889,496) | $(8,126,622) | | Net loss per share – basic and diluted | $(0.05) | $(0.06) | $(0.18) | $(0.20) | - Research and development expenses increased by 56% for the three months and 20% for the nine months ended September 30, 2022, compared to the prior year, due to increased wages and related expenses for TAEUS product line development[10][110][117] - Sales and marketing expenses increased by 53% for the three months and 59% for the nine months ended September 30, 2022, driven by additional headcount and pre-selling activities for the TAEUS product line[10][111][118] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $10.78 million to $10.20 million, driven by net loss, partially offset by common stock issuance proceeds Stockholders' Equity Changes (Nine Months Ended Sep 30, 2022 vs. Dec 31, 2021) | Metric | Dec 31, 2021 | Sep 30, 2022 | Change | | :----- | :----------- | :----------- | :----- | | Common stock shares outstanding | 42,554,514 | 63,174,455 | 20,619,941 | | Additional paid in capital ($) | $79,456,938 | $88,768,831 | $9,311,893 | | Accumulated deficit ($) | $(68,690,810) | $(78,580,306) | $(9,889,496) | | Total Stockholders' Equity ($) | $10,784,246 | $10,203,331 | $(580,915) | - During the nine months ended September 30, 2022, the company issued 20,619,941 shares of common stock, generating net proceeds of $8,399,512[16][60] Condensed Consolidated Statements of Cash Flows Net cash decreased by $1.45 million for the nine months ended September 30, 2022, due to $9.68 million used in operations, partially offset by $8.40 million from financing Cash Flow Highlights (Nine Months Ended Sep 30) | Metric | 2022 ($) | 2021 ($) | | :----- | :----------- | :----------- | | Net cash used in operating activities | $(9,680,682) | $(8,469,658) | | Net cash used in investing activities | $(164,014) | $(45,000) | | Net cash provided by financing activities | $8,399,512 | $13,080,526 | | Net increase (decrease) in cash | $(1,445,184) | $4,565,875 | | Cash, end of period | $8,016,350 | $11,793,189 | - Cash used in operating activities increased to $9.68 million in the nine months ended September 30, 2022, from $8.47 million in the prior year, mainly due to higher net loss and increased inventory[18][125][126] - Proceeds from financing activities decreased significantly from $13.08 million in 2021 to $8.40 million in 2022, primarily due to lower proceeds from common stock issuance and no warrant exercises in 2022[18][129] Notes to the Condensed Consolidated Financial Statements This section details the company's business, significant accounting policies, specific financial accounts, COVID-19 impact, and subsequent events Note 1 - Nature of the Business ENDRA Life Sciences Inc. develops technology to enhance clinical diagnostic ultrasound for safe diagnosis and treatment where CT/MRI is impractical - ENDRA develops technology to increase the capabilities of clinical diagnostic ultrasound for safe diagnosis and treatment of medical conditions, especially where CT/MRI is unavailable or impractical[20] Note 2 - Summary of Significant Accounting Policies This note outlines significant accounting policies, including estimates, consolidation, cash, inventory, fixed assets, leases, revenue, R&D, EPS, fair value, share-based compensation, going concern, and COVID-19 impact - The company's financial statements are prepared using U.S. GAAP, requiring management to make estimates affecting various accounts, including deferred income tax assets, accrued expenses, and fair value of equity instruments[23][24] - The COVID-19 pandemic's impact on the company's business and financial results is uncertain and could lead to material impacts on future consolidated financial statements[26][27] - The company recorded a right-of-use asset of $541,456 and a corresponding lease liability of $552,830 as of September 30, 2022, in accordance with ASU No. 2016-02[33] - Research and development costs are expensed as incurred, totaling $1,830,297 for the three months and $4,890,879 for the nine months ended September 30, 2022[36] - The company has a cumulative net loss of $78,580,306 as of September 30, 2022, and its ability to continue as a going concern is dependent on obtaining additional capital[48][50] Note 3 - Inventory Inventory, including raw materials and subassemblies, increased from $1.28 million to $2.63 million as of September 30, 2022 Inventory Value | Metric | Sep 30, 2022 ($) | Dec 31, 2021 ($) | Change ($) | | :----- | :----------- | :----------- | :----- | | Inventory | $2,634,077 | $1,284,578 | $1,349,499 | - As of September 30, 2022, the company had no pending orders for the sale of a TAEUS system[52] Note 4 - Fixed Assets Net fixed assets increased to $230,612 from $131,130, driven by property, leasehold, capitalized software, and TAEUS development assets Fixed Assets, Net | Metric | Sep 30, 2022 ($) | Dec 31, 2021 ($) | Change ($) | | :----- | :----------- | :----------- | :----- | | Fixed assets, net | $230,612 | $131,130 | $99,482 | - Depreciation expense for the nine months ended September 30, 2022, was $64,532, a decrease from $94,977 in the prior year[55] Note 5 - Accounts Payable and Accrued Liabilities Total current liabilities increased to $1.56 million from $1.41 million, including accounts payable and various accrued liabilities Current Liabilities | Metric | Sep 30, 2022 ($) | Dec 31, 2021 ($) | Change ($) | | :----- | :----------- | :----------- | :----- | | Accounts payable | $636,695 | $791,052 | $(154,357) | | Accrued payroll | $164,357 | $101,459 | $62,898 | | Accrued bonuses | $517,195 | $396,043 | $121,152 | | Insurance premium financing | $234,100 | $117,133 | $116,967 | | Total | $1,558,097 | $1,411,437 | $146,660 | Note 6 - Bank Loans The $308,600 SBA PPP loan was forgiven in May 2021, and a CAD 40,000 TD Bank loan is due December 31, 2022, with a 25% forgiveness clause - The $308,600 SBA Paycheck Protection Program loan was fully forgiven on May 10, 2021[57][120] - The company has a CAD 40,000 loan from TD Bank, due December 31, 2022, with 0% interest during the initial term and a 25% forgiveness clause if 75% is repaid by the due date[58] Note 7 - Capital Stock As of September 30, 2022, 63.17 million common shares and 141,397 Series A Preferred shares were outstanding, with 20.62 million common shares issued for $8.40 million net proceeds Capital Stock Outstanding | Stock Type | Shares Outstanding (Sep 30, 2022) | | :--------- | :-------------------------------- | | Common Stock | 63,174,455 | | Series A Preferred Stock | 141,397 | | Series B Preferred Stock | 0 | - The company issued 20,619,941 common shares for $8,399,512 net proceeds during the nine months ended September 30, 2022, via the June 2021 ATM Agreement[60][61] Note 8 - Common Stock Options As of September 30, 2022, 8.01 million common stock options were outstanding at an average exercise price of $1.58, with 2.80 million options granted for $909,072 fair value Common Stock Option Activity (Nine Months Ended Sep 30, 2022) | Metric | Number of Options | Weighted Average Exercise Price ($) | | :----- | :---------------- | :------------------------------ | | Balance outstanding at Dec 31, 2021 | 5,249,210 | $2.21 | | Granted | 2,804,285 | $0.41 | | Cancelled or expired | (47,769) | - | | Balance outstanding at Sep 30, 2022 | 8,005,726 | $1.58 | | Exercisable at Sep 30, 2022 | 3,142,632 | $2.28 | - The aggregate fair value of stock options granted during the nine months ended September 30, 2022, was $909,072, estimated using the Black-Scholes-Merton model[62] Note 9 - Common Stock Warrants Outstanding common stock warrants decreased from 2.44 million to 206,753, primarily due to the expiration of 2.23 million warrants Common Stock Warrant Activity (Nine Months Ended Sep 30, 2022) | Metric | Number of Warrants | Weighted Average Exercise Price ($) | | :----- | :----------------- | :------------------------------ | | Balance outstanding at Dec 31, 2021 | 2,437,164 | $5.54 | | Expired | (2,230,411) | $5.94 | | Balance outstanding at Sep 30, 2022 | 206,753 | $1.25 | | Exercisable at Sep 30, 2022 | 206,753 | $1.25 | Note 10 - Commitments and Contingencies The company has an office lease extended to December 31, 2025, employment agreements with key executives, and no material legal proceedings - The office lease was amended in March 2021, extending the term to December 31, 2025, and increasing the initial monthly rent to $15,452[66] Operating Lease Liabilities Maturities (as of Sep 30, 2022) | Year | Operating Lease ($) | | :--- | :-------------- | | 2022 | $47,741 | | 2023 | $196,721 | | 2024 | $202,624 | | 2025 and beyond | $202,624 | | Total | $649,710 | - Key executives (CEO, CTO, Renaud Maloberti) have employment agreements with specified annual base salaries ($423,000 for CEO, $324,000 for CTO, $296,000 for Renaud Maloberti) and termination benefits[72][75][79] Note 12 - Subsequent Events A Series C Preferred Stock dividend was declared on September 26, 2022, to facilitate a reverse stock split vote for Nasdaq compliance - The company declared a dividend of Series C Preferred Stock on September 26, 2022, to facilitate a stockholder vote on a reverse stock split proposal[83] - Each whole share of Series C Preferred Stock entitles the holder to 1,000,000 votes on the reverse stock split proposal, and shares will be redeemed for no consideration upon approval or board order[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ENDRA is developing its TAEUS technology for NAFLD, facing significant losses and requiring additional financing, with risks in regulatory approvals, market acceptance, and Nasdaq compliance Forward-Looking Statements This section contains forward-looking statements about future plans and financial performance, subject to uncertainties and risks, with no obligation to update - The report contains forward-looking statements about future plans, strategies, and financial performance, identifiable by terms like "believe," "expect," "may," "will," and "anticipate"[85] - Actual results may differ materially due to factors such as limited commercial experience, financing needs, ability to achieve profitability, market acceptance of TAEUS, regulatory approvals, and the impact of COVID-19[85][86] Available Information Material information is distributed via press releases, social media, and the company's website, but is not incorporated into SEC filings - Material information is distributed via press releases, Twitter (@endralifesci), LinkedIn, and the Investors section of the company's website (www.endrainc.com)[87](index=87&type=chunk) Overview ENDRA is developing TAEUS technology to enhance diagnostic ultrasound for conditions like NAFLD, with CE mark approval and ongoing FDA de novo approval efforts for its FLIP System - ENDRA is developing the TAEUS technology platform to enhance clinical diagnostic ultrasound, aiming to broaden patient access to diagnosis and treatment for significant medical conditions[88] - The first-generation TAEUS application is designed to quantify liver fat for nonalcoholic fatty liver disease (NAFLD) diagnosis, an alternative to surgical biopsies or MRI scans[89] - The TAEUS FLIP System received CE mark approval in March 2020 for marketing in the European Union and other CE mark geographies[92] - The company is pursuing FDA de novo approval for its TAEUS FLIP System, with an application planned for Q4 2022 or Q1 2023, after voluntarily withdrawing its 510(k) application[93] Financial Operations Overview No revenue from TAEUS technology, with R&D, sales and marketing, and G&A expenses expected to rise due to development, market expansion, and public company costs Revenue No revenue has been generated from TAEUS technology as of September 30, 2022 - No revenue has been generated by the TAEUS technology as of September 30, 2022[94] Research and Development Expenses R&D expenses, including wages and equipment for TAEUS development and IP protection, are expected to continue as the company pursues FDA approval - R&D expenses include wages, fees, equipment for TAEUS development, and costs for intellectual property protection[96][102] - The company plans to incur R&D expenses for the foreseeable future due to ongoing TAEUS development and the pursuit of FDA approval for the NAFLD TAEUS system[96] Sales and Marketing Expenses Sales and marketing expenses are increasing due to EU team expansion and planned US staffing upon FDA approval for the NAFLD TAEUS device - Sales and marketing expenses are increasing due to the expansion of the sales team in the EU (UK, France, Germany) and planned staffing for US operations post-FDA approval[97] General and Administrative Expenses G&A expenses, covering salaries and professional fees, are expected to increase due to R&D support, sales expansion, and public company compliance costs - G&A expenses are expected to increase due to hiring personnel, stock-based compensation, and fees for consultants, lawyers, and accountants, as well as costs associated with being a public company[98] Critical Accounting Policies and Estimates This section details critical accounting policies and estimates, including deferred income tax assets, accrued expenses, fair value of equity instruments, share-based compensation, and debt discounts Use of Estimates Financial statement preparation requires management estimates impacting asset, liability, and expense amounts, with actual results potentially differing - Management's estimates are critical for financial statements, affecting deferred income tax assets, accrued expenses, and fair value of equity instruments[99][100] Share-based Compensation The Omnibus Plan allows for stock option grants with an annually increasing share pool, and compensation is expensed over the vesting period using the Black-Scholes model - The Omnibus Plan's share pool automatically increased by 1,622,848 shares on January 1, 2022, to 9,084,076 shares, with 1,078,350 shares remaining available as of September 30, 2022[101][103] - Share-based compensation is valued using the Black-Scholes model and expensed straight-line over the vesting period, adjusted for forfeitures[104][105] Debt Discount and Detachable Debt-Related Warrants Debt discounts from conversion features and warrants are deducted from debt liability and amortized as interest expense over the securities' term - Debt discounts from conversion features and warrants are recorded as a reduction to debt liability and amortized as interest expense over the term of the securities[106] Recent Accounting Pronouncements Recent accounting pronouncements are not expected to materially impact the company's financial statements - Recent accounting pronouncements are not expected to have a material impact on the company's financial statements[51][107] Results of Operations Net losses increased for both three and nine months ended September 30, 2022, due to higher operating expenses and the absence of a debt extinguishment gain Three months ended September 30, 2022 and 2021 Net loss for Q3 2022 increased to $3.44 million from $2.66 million, driven by higher R&D and sales and marketing expenses, with no revenue Revenue No revenue was generated in Q3 2022 or Q3 2021 - No revenue was generated in Q3 2022 or Q3 2021[108] Cost of Goods Sold No cost of goods sold was incurred in Q3 2022 or Q3 2021 - No cost of goods sold was incurred in Q3 2022 or Q3 2021[109] Research and Development R&D expenses increased by 56% to $1.83 million for Q3 2022, driven by higher wages for TAEUS product development R&D Expenses (Q3 YoY) | Metric | Q3 2022 ($) | Q3 2021 ($) | Change ($) | % Change | | :----- | :------ | :------ | :----- | :------- | | R&D Expenses | $1,830,297 | $1,173,319 | $656,978 | 56% | Sales and Marketing Sales and marketing expenses increased by 53% to $420,439 for Q3 2022, due to additional headcount and pre-selling activities Sales & Marketing Expenses (Q3 YoY) | Metric | Q3 2022 ($) | Q3 2021 ($) | Change ($) | % Change | | :----- | :------ | :------ | :----- | :------- | | Sales & Marketing Expenses | $420,439 | $275,565 | $144,874 | 53% | General and Administrative G&A expenses slightly decreased by 3% to $1.17 million for Q3 2022, influenced by lower wage and stock compensation expenses G&A Expenses (Q3 YoY) | Metric | Q3 2022 ($) | Q3 2021 ($) | Change ($) | % Change | | :----- | :------ | :------ | :----- | :------- | | G&A Expenses | $1,166,480 | $1,201,851 | $(35,371) | (3)% | | Wage and related expenses | $479,228 | $517,831 | $(38,603) | (7.5)% | | Stock compensation expense | $111,861 | $136,008 | $(24,147) | (17.8)% | Net Loss Net loss for Q3 2022 increased to $3.44 million from $2.66 million in the prior year Net Loss (Q3 YoY) | Metric | Q3 2022 ($) | Q3 2021 ($) | Change ($) | | :----- | :------ | :------ | :----- | | Net Loss | $(3,440,227) | $(2,658,242) | $(781,985) | Nine months ended September 30, 2022 and 2021 Net loss for the nine months ended September 30, 2022, increased to $9.89 million from $8.13 million, driven by higher R&D and sales and marketing expenses and no debt extinguishment gain Revenue No revenue was generated in the nine months ended Sep 30, 2022 or 2021 - No revenue was generated in the nine months ended Sep 30, 2022 or 2021[115] Cost of Goods Sold No cost of goods sold was incurred in the nine months ended Sep 30, 2022 or 2021 - No cost of goods sold was incurred in the nine months ended Sep 30, 2022 or 2021[116] Research and Development R&D expenses increased by 20% to $4.89 million for the nine months ended September 30, 2022, due to higher wages for TAEUS product development R&D Expenses (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | % Change | | :----- | :------- | :------- | :----- | :------- | | R&D Expenses | $4,890,879 | $4,059,730 | $831,149 | 20% | Sales and Marketing Sales and marketing expenses increased by 59% to $1.10 million for the nine months ended September 30, 2022, due to additional headcount and pre-selling activities Sales & Marketing Expenses (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | % Change | | :----- | :------- | :------- | :----- | :------- | | Sales & Marketing Expenses | $1,102,381 | $693,263 | $409,118 | 59% | General and Administrative G&A expenses increased by 5% to $3.85 million for the nine months ended September 30, 2022, mainly due to higher wage expenses G&A Expenses (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | % Change | | :----- | :------- | :------- | :----- | :------- | | G&A Expenses | $3,850,918 | $3,673,771 | $177,147 | 5% | | Wage and related expenses | $1,600,240 | $1,518,718 | $81,522 | 5.4% | | Stock compensation expense | $312,636 | $366,799 | $(54,163) | (14.8)% | Gain on Extinguishment of Debt A gain of $308,600 from SBA PPP loan forgiveness was recognized in the nine months ended September 30, 2021, with no such gain in 2022 - A gain of $308,600 from the forgiveness of the SBA PPP loan was recognized in the nine months ended September 30, 2021[120] Net Loss Net loss for the nine months ended September 30, 2022, increased to $9.89 million from $8.13 million in the prior year Net Loss (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | | :----- | :------- | :------- | :----- | | Net Loss | $(9,889,496) | $(8,126,622) | $(1,762,874) | Near-Term Liquidity and Capital Resources The company has an accumulated deficit of $78.58 million and $8.02 million in cash, requiring additional financing as current funds are sufficient only into H1 2023 - As of September 30, 2022, the company had an accumulated deficit of $78,580,306 and cash of $8,016,350[122] - Current cash is expected to fund operations only into the first half of 2023, necessitating additional capital for commercialization plans[123] - The company's ability to make additional sales under its shelf registration statement via the June 2021 ATM Agreement is currently prevented by General Instruction I.B.6 of Form S-3 due to market value of public float[123] Operating Activities Cash used in operating activities increased to $9.68 million for the nine months ended September 30, 2022, due to higher net loss and changes in operating assets and liabilities Net Cash Used in Operating Activities (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | | :----- | :------- | :------- | :----- | | Net cash used in operating activities | $(9,680,682) | $(8,469,658) | $(1,211,024) | Investing Activities Cash used in investing activities increased to $164,014 for the nine months ended September 30, 2022, due to increased fixed asset purchases Net Cash Used in Investing Activities (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | | :----- | :------- | :------- | :----- | | Net cash used in investing activities | $(164,014) | $(45,000) | $(119,014) | Financing Activities Cash from financing activities decreased to $8.40 million for the nine months ended September 30, 2022, due to lower common stock proceeds and no warrant exercises Net Cash Provided by Financing Activities (YTD YoY) | Metric | YTD 2022 ($) | YTD 2021 ($) | Change ($) | | :----- | :------- | :------- | :----- | | Net cash provided by financing activities | $8,399,512 | $13,080,526 | $(4,681,014) | - Proceeds from issuance of common stock were $8,399,512 in 2022, down from $10,294,899 in 2021. No proceeds from warrant exercises were recorded in 2022, compared to $2,785,627 in 2021[129] Long-Term Liquidity Significant future expenses for TAEUS development and market expansion necessitate substantial additional capital, with risks in securing financing due to market conditions - The company expects significant future expenses for TAEUS development, regulatory approvals, inventory, marketing expansion, and other applications[130] - Substantial additional capital will be required to complete commercialization and development, as existing cash is insufficient, and external funding sources are not committed[131][132] - Access to capital may be limited by the COVID-19 pandemic, economic slowdowns, recessions, inflation, rising interest rates, and tightening credit markets[132] COVID-19 Pandemic COVID-19 has delayed clinical trials and regulatory reviews for NAFLD TAEUS, with potential for further delays from future adverse developments - The COVID-19 pandemic has delayed clinical trial activities and regulatory reviews, including for the NAFLD TAEUS application, due to resource reallocation and travel restrictions[134] - Future adverse developments in the pandemic could lead to further travel restrictions, limited in-person meetings, or delays in clinical trials[134] Nasdaq Capital Market Listing Nasdaq notified the company of non-compliance with the $1.00 minimum bid price, prompting a reverse stock split proposal for compliance by January 1, 2023 - The company received a Nasdaq notification on January 5, 2022, for non-compliance with the $1.00 minimum bid price requirement[136][148] - The company has until January 1, 2023, to regain compliance and is seeking stockholder approval for a reverse stock split (ratio 1-for-2 to 1-for-30) to address the deficiency[137][138][148][149] - Delisting from Nasdaq could reduce stock liquidity, negatively impact stock price, hinder capital raising, and result in the loss of federal preemption of state securities laws[139][149] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk[140] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of September 30, 2022, due to a material weakness in accounting personnel segregation of duties, with remediation contingent on funding Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were ineffective as of September 30, 2022, due to a material weakness in accounting personnel for segregation of duties - Disclosure controls and procedures were deemed ineffective as of September 30, 2022[141] - A material weakness was identified: insufficient personnel resources within the accounting function to segregate duties over financial transaction processing and reporting[142] - Remediation plans include hiring additional accounting personnel or consultants and developing written accounting policies, contingent on obtaining sufficient funding[143][145] Changes in Internal Control over Financial Reporting No material changes to internal control over financial reporting occurred during the nine months ended September 30, 2022 - No material changes to internal control over financial reporting occurred during the nine months ended September 30, 2022[144] PART II - OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings No pending legal proceedings are expected to materially adversely affect the company's business or financial condition - No pending legal proceedings are expected to have a material adverse effect on the company's business or financial condition[145] Item 1A. Risk Factors This section refers to risk factors from the 2021 Form 10-K, with an updated discussion on Nasdaq minimum bid price compliance and potential delisting risks - The company refers to the "Risk Factors" section in its Annual Report on Form 10-K for December 31, 2021, for a comprehensive list of risks[146] - A key updated risk factor is the potential delisting from Nasdaq due to non-compliance with the $1.00 minimum bid price requirement, which could negatively impact stock liquidity, price, and ability to raise capital[147][149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - This item is not applicable[150] Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - This item is not applicable[151] Item 4. Mine Safety Disclosure This item is not applicable for the reporting period - This item is not applicable[152] Item 5. Other Information This item is not applicable for the reporting period - This item is not applicable[153] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including corporate documents, preferred stock designations, warrant forms, and Sarbanes-Oxley certifications - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), preferred stock designations (Series A, C), warrant forms, and certifications (CEO, CFO) required by SEC regulations[154][155] Signatures The report was signed by the CEO and Chairman, and the Senior Director of Finance, on November 14, 2022 - The report was signed by Francois Michelon (CEO and Chairman) and Irina Pestrikova (Senior Director, Finance) on November 14, 2022[159]