UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER 001-37969
ENDRA LIFE SCIENCES INC. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 26-0579295 | |
(State of incorporation) | (I.R.S. Employer Identification No.) |
3600 Green Court, Suite 350, Ann Arbor, MI | 48105-1570 | |
(Address of principal executive office) | (Zip code) |
(734) 335-0468
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.0001 per share | NDRA | The Nasdaq Stock Market LLC | ||
Warrants, each to purchase one share of Common Stock | NDRAW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐ NoAs of November 14, 2017,15, 2021, there were 3,907,02742,165,726 shares of our Common Stock,common stock, par value $0.0001 per share, outstanding.
TABLE OF CONTENTS
Page | |||||
3 | |||||
Condensed Consolidated Balance Sheets – September 30, 2021 (unaudited) and December 31, 2020 | 3 | ||||
4 | |||||
5 | |||||
6 | |||||
Notes to the Condensed Consolidated Financial Statements (unaudited) | 8 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||||
Quantitative and Qualitative | 24 | ||||
24 | |||||
25 | |||||
25 | |||||
25 | |||||
25 | |||||
25 | |||||
25 | |||||
26 | |||||
27 | |||||
2 | ||
Table of Contents | ||
PART I - FINANCIAL INFORMATION
ENDRA Life Sciences Inc.
Condensed Consolidated Balance Sheets
September 30, | December 31, | |
| Assets | 2017 | 2016 |
| Assets | (Unaudited) | |
| Cash | $6,977,462 | $144,953 |
| Prepaid expenses | 101,254 | - |
| Inventory | 131,679 | 40,105 |
| Other current assets | 12,422 | 10,535 |
| Total Current Assets | 7,222,817 | 195,594 |
| Other Assets | ||
| Fixed assets, net | 256,909 | 295,168 |
| Total Assets | $7,479,726 | $490,761 |
| Liabilities and Stockholders’ Equity (Deficit) | ||
| Current Liabilities | ||
| Accounts payable and accrued liabilities | $312,042 | $434,552 |
| Notes payable | - | 50,000 |
| Convertible notes payable, related party, net of discount | - | 99,804 |
| Convertible notes payable, net of discount | - | 800,172 |
| Total Current Liabilities | 312,042 | 1,384,528 |
| Total Liabilities | 312,042 | 1,384,528 |
| Stockholders’ Equity (Deficit) | ||
| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding | - | - |
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,907,027 and 723,335 shares issued and outstanding at September 30, 2017 and December 31, 2016 | 390 | 72 |
| Stock payable | - | 81,000 |
| Additional paid in capital | 22,768,089 | 11,543,634 |
| Accumulated deficit | (15,600,795) | (12,518,473) |
| Total Stockholders’ Equity (Deficit) | 7,167,684 | (893,767) |
| Total Liabilities and Stockholders’ Equity (Deficit) | $7,479,726 | $490,761 |
|
| September 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
| |||
Assets | ||||||||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 11,793,189 |
|
| $ | 7,227,316 |
|
Prepaid expenses |
|
| 1,177,201 |
|
|
| 390,800 |
|
Inventory |
|
| 1,499,743 |
|
|
| 589,620 |
|
Total Current Assets |
|
| 14,470,133 |
|
|
| 8,207,736 |
|
Non-Current Assets |
|
|
|
|
|
|
|
|
Fixed assets, net |
|
| 162,265 |
|
|
| 212,242 |
|
Right of use assets |
|
| 675,822 |
|
|
| 339,012 |
|
Other assets |
|
| 5,986 |
|
|
| 5,986 |
|
Total Assets |
| $ | 15,314,206 |
|
| $ | 8,764,976 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 1,449,130 |
|
| $ | 910,183 |
|
Lease liabilities, current portion |
|
| 127,696 |
|
|
| 76,480 |
|
Total Current Liabilities |
|
| 1,576,826 |
|
|
| 986,663 |
|
|
|
|
|
|
|
|
|
|
Long Term Debt |
|
|
|
|
|
|
|
|
Loans |
|
| 28,484 |
|
|
| 337,084 |
|
Lease liabilities |
|
| 552,830 |
|
|
| 271,908 |
|
Total Long Term Debt |
|
| 581,314 |
|
|
| 608,992 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
| 2,158,140 |
|
|
| 1,595,655 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock, $0.0001 par value; 10,000 shares authorized; 141.397 and 190.288 shares issued and outstanding, respectively |
|
| 1 |
|
|
| 1 |
|
Series B Convertible Preferred Stock, $0.0001 par value; 1,000 shares authorized; no shares issued and outstanding |
|
| 0 |
|
|
| 0 |
|
Common stock, $0.0001 par value; 80,000,000 shares authorized; 42,165,726 and 34,049,704 shares issued and outstanding, respectively |
|
| 4,215 |
|
|
| 3,404 |
|
Additional paid in capital |
|
| 78,695,367 |
|
|
| 64,493,611 |
|
Stock payable |
|
| 42,665 |
|
|
| 10,794 |
|
Accumulated deficit |
|
| (65,586,182 | ) |
|
| (57,338,489 | ) |
Total Stockholders’ Equity |
|
| 13,156,066 |
|
|
| 7,169,321 |
|
Total Liabilities and Stockholders’ Equity |
| $ | 15,314,206 |
|
| $ | 8,764,976 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended | Three Months Ended | Nine months Ended | Nine months Ended | |
September 30, | September 30, | September 30, | September 30, | |
2017 | 2016 | 2017 | 2016 | |
| Revenue | $287,000 | $- | $344,772 | $- |
| Cost of Goods Sold | 118,270 | - | 169,697 | - |
| Gross Profit | $168,730 | $- | $175,075 | $- |
| Operating Expenses | ||||
| Research and development | 300,527 | 137,540 | 571,066 | 336,417 |
| Sales and marketing | 47,375 | 16,040 | 55,403 | 26,197 |
| General and administrative | 731,762 | 451,530 | 1,878,093 | 1,110,263 |
| Total operating expenses | 1,079,664 | 605,110 | 2,504,562 | 1,472,877 |
| Operating loss | (910,934) | (605,110) | (2,329,487) | (1,472,877) |
| Other Expenses | ||||
| Loss on warrant exercise | - | - | - | (5,823) |
| Interest expense | (2,026) | (372,789) | (752,835) | (607,789) |
| Total other expenses | (2,026) | (372,789) | (752,835) | (607,789) |
| Loss from operations before income taxes | (908,908) | (977,898) | (3,082,322) | (2,086,490) |
| Provision for income taxes | - | - | - | - |
| Net Loss | $(908,908) | $(977,898) | $(3,082,322) | $(2,086,490) |
| Net loss per share – basic and diluted | $(0.23) | $(1.35) | $(1.30) | $(2.88) |
| Weighted average common shares – basic and diluted | 3,907,027 | 723,335 | 2,367,452 | 723,266 |
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
| $ | 1,173,319 |
|
| $ | 1,769,339 |
|
| $ | 4,059,730 |
|
| $ | 4,774,534 |
|
Sales and marketing |
|
| 275,565 |
|
|
| 139,751 |
|
|
| 693,263 |
|
|
| 389,469 |
|
General and administrative |
|
| 1,201,851 |
|
|
| 1,346,360 |
|
|
| 3,673,771 |
|
|
| 4,083,572 |
|
Total operating expenses |
|
| 2,650,735 |
|
|
| 3,255,450 |
|
|
| 8,426,764 |
|
|
| 9,247,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (2,650,735 | ) |
|
| (3,255,450 | ) |
|
| (8,426,764 | ) |
|
| (9,247,575 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (232,426 | ) |
Gain on extinguishment of debt |
|
| 0 |
|
|
| 0 |
|
|
| 308,600 |
|
|
| 0 |
|
Other income (expense) |
|
| (7,507 | ) |
|
| (2,621 | ) |
|
| (8,458 | ) |
|
| 5,261 |
|
Total other expenses |
|
| (7,507 | ) |
|
| (2,621 | ) |
|
| 300,142 |
|
|
| (227,165 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes |
|
| (2,658,242 | ) |
|
| (3,258,071 | ) |
|
| (8,126,622 | ) |
|
| (9,474,740 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (2,658,242 | ) |
| $ | (3,258,071 | ) |
| $ | (8,126,622 | ) |
| $ | (9,474,740 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend |
|
| 0 |
|
|
| (395,551 | ) |
|
| (121,071 | ) |
|
| (395,551 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | (2,658,242 | ) |
| $ | (3,653,622 | ) |
| $ | (8,247,693 | ) |
| $ | (9,870,291 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted |
| $ | (0.06 | ) |
| $ | (0.15 | ) |
| $ | (0.20 | ) |
| $ | (0.41 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – basic and diluted |
|
| 41,912,535 |
|
|
| 23,889,591 |
|
|
| 40,471,906 |
|
|
| 23,808,012 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months Ended | Nine months Ended | |
September 30, | September 30, | |
2017 | 2016 | |
| Cash Flows from Operating Activities | ||
| Net loss | $(3,082,322) | $(2,086,490) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 46,121 | 48,612 |
| Common stock, options and warrants issued for services | 600,514 | 199,723 |
| Additional warrants issued during exchange | - | 5,823 |
| Amortization of discount of convertible debt | 711,472 | 561,812 |
| Imputed interest on promissory notes | 1,480 | - |
| Changes in operating assets and liabilities: | ||
| Increase in prepaid expenses | (101,254) | - |
| Increase in inventory | (91,574) | (21,375) |
| Increase in other assets | (1,887) | (439) |
| Increase (decrease) in accounts payable and accrued liabilities | (7,879) | 19,918 |
| Net cash used in operating activities | (1,925,329) | (769,459) |
| Cash Flows from Investing Activities: | ||
| Purchases of fixed assets | (7,862) | - |
| Net cash used in investing activities | (7,862) | - |
| Cash Flows from Financing Activities | ||
| Proceeds from issuance of common stock | 8,590,700 | 5,000 |
| Proceeds from notes payable | - | 50,000 |
| Repayment of notes payable | (50,000) | - |
| Proceeds from convertible notes | 225,000 | 1,386,448 |
| Net cash provided by financing activities | 8,765,700 | 1,441,448 |
| Net increase in cash | 6,832,509 | 56,415 |
| Cash, beginning of period | 144,953 | 19,128 |
| Cash, end of period | $6,977,462 | $75,543 |
| Supplemental disclosures: | ||
| Interest paid | $- | $- |
| Income tax paid | $- | $- |
| Supplemental disclosures of non-cash Items: | ||
| Discount on convertible notes | $225,000 | $- |
| Common shares to be issued for accrued salaries - related parties | $- | $60,910 |
| Conversion of convertible notes and accrued interest | $1,726,079 | $- |
Three Months Ended September 30, 2020
|
| Series A Convertible |
|
| Series B Convertible |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Stock |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Payable |
|
| Deficit |
|
| Equity |
| ||||||||||
Balance as of June 30, 2020 |
|
| 896,225 |
|
| $ | 1 |
|
|
| - |
|
| $ | 0 |
|
|
| 16,437,491 |
|
| $ | 1,644 |
|
| $ | 52,227,904 |
|
|
| 181,437 |
|
|
| (51,434,106 | ) |
|
| 976,880 |
|
Series A Convertible Preferred Stock converted to common stock |
|
| (705,937 | ) |
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 811,423 |
|
|
| 81 |
|
|
| 4,709 |
|
|
| (4,790 | ) |
|
| 0 |
|
|
| 0 |
|
Common stock issued for cash |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 539,365 |
|
|
| 54 |
|
|
| 530,362 |
|
|
| 0 |
|
|
| 0 |
|
|
| 530,416 |
|
Common Stock issued for warrant exercise |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 7,040,133 |
|
|
| 702 |
|
|
| 4,948,897 |
|
|
| (85,626 | ) |
|
| 0 |
|
|
| 4,863,973 |
|
Common stock issued for services |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 30,000 |
|
|
| 3 |
|
|
| 27,297 |
|
|
| (27,300 | ) |
|
| 0 |
|
|
| 0 |
|
Common stock issued for RSUs |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 157,298 |
|
|
| 16 |
|
|
| 110,093 |
|
|
| 0 |
|
|
| 0 |
|
|
| 110,109 |
|
Cost of funding |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (243,028 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (243,028 | ) |
Fair value of vested stock options |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 282,419 |
|
|
| 0 |
|
|
| 0 |
|
|
| 282,419 |
|
Deemed dividend |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 395,551 |
|
|
| 0 |
|
|
| (395,551 | ) |
|
| 0 |
|
Stock Payable for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
- Preference Dividend |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,531 | ) |
|
| 2,531 |
|
|
| - |
|
|
| 0 |
|
- Consultants |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 30,000 |
|
|
| 0 |
|
|
| 30,000 |
|
- RSUs to board and management |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 42,284 |
|
|
| 0 |
|
|
| 42,284 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3,258,071 | ) |
|
| (3,258,071 | ) |
Balance as of September 30, 2020 |
|
| 190,288 |
|
| $ | 1 |
|
|
| - |
|
| $ | 0 |
|
|
| 25,015,710 |
|
| $ | 2,500 |
|
| $ | 58,281,673 |
|
| $ | 138,536 |
|
| $ | (55,087,728 | ) |
| $ | 3,334,982 |
|
Three Months Ended September 30, 2021
|
| Series A Convertible |
|
| Series B Convertible |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Stock |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Payable |
|
| Deficit |
|
| Equity |
| ||||||||||
Balance as of June 30, 2021 |
|
| 141,397 |
|
| $ | 1 |
|
|
| - |
|
| $ | - |
|
|
| 41,857,352 |
|
| $ | 4,185 |
|
| $ | 77,838,745 |
|
|
| 74,907 |
|
|
| (62,927,940 | ) |
|
| 14,989,898 |
|
Common stock issued for cash, net of funding costs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 283,953 |
|
|
| 28 |
|
|
| 496,585 |
|
|
| - |
|
|
| - |
|
|
| 496,613 |
|
Common stock issued for option exercise |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,606 |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
Fair value of vested stock options |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 327,797 |
|
|
| 0 |
|
|
| 0 |
|
|
| 327,797 |
|
Stock payable for preference dividend |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (4,218 | ) |
|
| 4,218 |
|
|
| 0 |
|
|
| 0 |
|
Common stock issued for RSU |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 22,815 |
|
|
| 2 |
|
|
| 36,458 |
|
|
| (36,460 | ) |
|
| 0 |
|
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,658,242 | ) |
|
| (2,658,242 | ) |
Balance as of September 30, 2021 |
|
| 141,397 |
|
| $ | 1 |
|
|
| - |
|
| $ | 0 |
|
|
| 42,165,726 |
|
| $ | 4,215 |
|
| $ | 78,695,367 |
|
| $ | 42,665 |
|
| $ | (65,586,182 | ) |
| $ | 13,156,066 |
|
| 5 |
| Table of Contents |
Nine Months Ended September 30, 2020
|
| Series A Convertible |
|
| Series B Convertible |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Stock |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Payable |
|
| Deficit |
|
| Equity |
| ||||||||||
Balance as of December 31, 2019 |
|
| 6,338,490 |
|
| $ | 1 |
|
|
| 351,711 |
|
| $ | - |
|
|
| 8,421,401 |
|
| $ | 842 |
|
| $ | 49,933,736 |
|
|
| 43,528 |
|
|
| (45,217,437 | ) |
|
| 4,760,670 |
|
Series A Convertible Preferred Stock converted to common stock |
|
| (6,148,202 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,173,226 |
|
|
| 717 |
|
|
| 75,207 |
|
|
| (75,924 | ) |
|
| - |
|
|
| - |
|
Series B Convertible Preferred Stock converted to common stock |
|
| - |
|
|
| - |
|
|
| (351,711 | ) |
|
| - |
|
|
| 360,279 |
|
|
| 36 |
|
|
| 1,634 |
|
|
| (1,670 | ) |
|
| - |
|
|
| - |
|
Common stock issued for cash |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,421,858 |
|
|
| 142 |
|
|
| 1,321,748 |
|
|
| - |
|
|
| - |
|
|
| 1,321,890 |
|
Common stock issued for note conversions |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 331,441 |
|
|
| 33 |
|
|
| 493,814 |
|
|
| 0 |
|
|
| 0 |
|
|
| 493,847 |
|
Common stock issued for warrant exercise |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 7,098,108 |
|
|
| 709 |
|
|
| 4,999,328 |
|
|
| (85,626 | ) |
|
| 0 |
|
|
| 4,914,411 |
|
Common stock issued for services |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 52,099 |
|
|
| 5 |
|
|
| 67,295 |
|
|
| 0 |
|
|
| 0 |
|
|
| 67,300 |
|
Common stock issued for RSU |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 157,298 |
|
|
| 16 |
|
|
| 110,093 |
|
|
| 0 |
|
|
| 0 |
|
|
| 110,109 |
|
Cost of funding |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (270,328 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (270,328 | ) |
Fair value of vested stock options |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 1,196,445 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,196,445 |
|
Fair value adjustment related to warrants repricing |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 395,551 |
|
|
| 0 |
|
|
| (395,551 | ) |
|
| 0 |
|
Stock payable for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
- Preference Dividend |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (42,850 | ) |
|
| 42,850 |
|
|
| 0 |
|
|
| 0 |
|
- Consultants |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 30,000 |
|
|
| 0 |
|
|
| 30,000 |
|
- RSU to board and management |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 185,378 |
|
|
| 0 |
|
|
| 185,378 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (9,474,740 | ) |
|
| (9,474,740 | ) |
Balance as of September 30, 2020 |
|
| 190,288 |
|
| $ | 1 |
|
|
| - |
|
| $ | 0 |
|
|
| 25,015,710 |
|
| $ | 2,500 |
|
| $ | 58,281,673 |
|
| $ | 138,536 |
|
| $ | (55,087,728 | ) |
| $ | 3,334,982 |
|
Nine Months Ended September 30, 2021
|
| Series A Convertible |
|
| Series B Convertible |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Total |
| ||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Stock |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Payable |
|
| Deficit |
|
| Equity |
| ||||||||||
Balance as of December 31, 2020 |
|
| 196,794 |
|
| $ | 1 |
|
|
| - |
|
| $ | - |
|
|
| 34,049,704 |
|
| $ | 3,404 |
|
| $ | 64,493,611 |
|
|
| 10,795 |
|
|
| (57,338,489 | ) |
|
| 7,169,322 |
|
Series A Convertible Preferred Stock converted to common stock |
|
| (55,397 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 67,889 |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Common stock issued for cash, net of funding costs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,198,170 |
|
|
| 420 |
|
|
| 10,294,479 |
|
|
| - |
|
|
| - |
|
|
| 10,294,899 |
|
Common stock issued for warrant exercise |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,770,786 |
|
|
| 377 |
|
|
| 2,785,250 |
|
|
| - |
|
|
| - |
|
|
| 2,785,627 |
|
Common stock issued for option exercise |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23,835 |
|
|
| 2 |
|
|
| (2 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Fair value of vested stock options |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 922,375 |
|
|
| 0 |
|
|
| 0 |
|
|
| 922,375 |
|
Stock payable for preference dividend |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| (31,870 | ) |
|
| 31,870 |
|
|
| 0 |
|
|
| 0 |
|
Common stock issued for services |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 32,527 |
|
|
| 3 |
|
|
| 74,997 |
|
|
| 0 |
|
|
| 0 |
|
|
| 74,000 |
|
Common stock issued for RSU |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 22,815 |
|
|
| 2 |
|
|
| 36,458 |
|
|
| 0 |
|
|
| 0 |
|
|
| 36,460 |
|
Deemed dividend |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 121,071 |
|
|
| 0 |
|
|
| (121,071 | ) |
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (8,126,622 | ) |
|
| (8,126,622 | ) |
Balance as of September 30, 2021 |
|
| 141,397 |
|
| $ | 1 |
|
|
| - |
|
| $ | 0 |
|
|
| 42,165,726 |
|
| $ | 4,215 |
|
| $ | 78,695,367 |
|
| $ | 42,665 |
|
| $ | (65,586,182 | ) |
| $ | 13,156,066 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||
|
| September 30, |
|
| September 30, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | (8,126,622 | ) |
| $ | (9,474,740 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 94,977 |
|
|
| 45,114 |
|
Stock compensation expense including common stock issued for RSUs |
|
| 1,032,835 |
|
|
| 1,559,232 |
|
Amortization of debt discount |
|
| 0 |
|
|
| 232,426 |
|
Amortization of right of use assets |
|
| 75,768 |
|
|
| 48,859 |
|
Gain on extinguishment of debt |
|
| (308,600 | ) |
|
| 0 |
|
Stock payable for investor relations |
|
| 0 |
|
|
| 30,000 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Increase in prepaid expenses |
|
| (786,401 | ) |
|
| (444,805 | ) |
Increase in inventory |
|
| (910,123 | ) |
|
| (209,766 | ) |
Decrease in other asset |
|
| 0 |
|
|
| 29,250 |
|
Increase(decrease) in accounts payable and accrued liabilities |
|
| 528,797 |
|
|
| (444,167 | ) |
Decrease in lease liability |
|
| (70,289 | ) |
|
| (44,892 | ) |
Net cash used in operating activities |
|
| (8,469,653 | ) |
|
| (8,673,489 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Purchases of fixed assets |
|
| (45,000 | ) |
|
| (10,483 | ) |
Net cash used in investing activities |
|
| (45,000 | ) |
|
| (10,483 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from warrant exercise |
|
| 2,785,627 |
|
|
| 4,644,084 |
|
Proceeds from loans |
|
| 0 |
|
|
| 337,084 |
|
Proceeds from issuance of common stock |
|
| 10,294,899 |
|
|
| 1,321,890 |
|
Net cash provided by financing activities |
|
| 13,080,526 |
|
|
| 6,303,058 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| 4,565,875 |
|
|
| (2,380,914 | ) |
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
| 7,227,316 |
|
|
| 6,174,207 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
| $ | 11,793,189 |
|
| $ | 3,793,293 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash items |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 40,887 |
|
| $ | 1,920 |
|
Income tax paid |
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash items |
|
|
|
|
|
|
|
|
Conversion of convertible notes and accrued interest |
| $ | 0 |
|
| $ | 493,814 |
|
Exchange of balance in convertible notes and accrued interest for Series A preferred stock |
| $ | 0 |
|
| $ | 0 |
|
Deemed dividend |
| $ | 121,071 |
|
| $ | 395,551 |
|
Conversion of Series A Convertible Preferred Stock |
| $ | (7 | ) |
| $ | (717 | ) |
Conversion of Series B Convertible Preferred Stock |
| $ | 0 |
|
| $ | (36 | ) |
Stock dividend payable |
| $ | (31,870 | ) |
| $ | (47,641 | ) |
Stock issued for RSU |
| $ | 36,462 |
|
| $ | 0 |
|
Right of use asset |
| $ | 675,822 |
|
| $ | 356,060 |
|
Lease liability |
| $ | 680,526 |
|
| $ | 364,113 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
| Table of Contents |
ENDRA Life Sciences Inc.
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 20172021 and 2016
(Unaudited)
Note 1 – Nature of the Business
ENDRA Life Sciences Inc. (“ENDRA” or the “Company”) has developed and is developing a medical imagingcontinuing to develop technology based onfor increasing the thermoacoustic effect that improves the sensitivity and specificitycapabilities of clinical ultrasound.
ENDRA was incorporated on July 18, 2007 as a Delaware corporation.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.
The COVID-19 outbreak, which the World Health Organization has classified as a pandemic, has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel.
The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions, the speed of the anticipated recovery, access to capital markets, and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2021 and through the date of the filing of this Quarterly Report on Form 10-Q. The accounting matters assessed included, but were not limited to, estimates related to the accounting for potential liabilities and accrued expenses, the assumptions utilized in valuing stock-based compensation issued for services, the realization of deferred tax assets, and assessments of impairment related to long-lived assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.
Despite the Company’s efforts, the ultimate impact of COVID-19 on the Company’s business depends on factors beyond the Company’s knowledge or control, including the duration and severity of the outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects. As a result, the Company is unable to estimate the extent to which COVID-19 will negatively impact its financial results or liquidity.
Principles of Consolidation
The Company’s consolidated financial statements include all accounts of the Company and its consolidated subsidiariessubsidiary and/or entities as of reporting period ending date(s) and for the reporting period(s) then ended. All inter-company balances and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periodsnine months ended September 30, 20172021 are not necessarily indicative of the results that may be expected for the year endedending December 31, 2017.2021. The balance sheet at December 31, 20162020 has been derived from the audited financial statements at suchthat date. For further information, refer to the financial statements and footnotes thereto included in ENDRA Life Sciences Inc. annual financial statements for the year ended December 31, 20162020 included in Amendment No. 10 to the Company’s Registration StatementAnnual Report on Form S-110-K filed with the SEC on May 1, 2017.
Cash and Cash Equivalents
The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three monthsone year or less, when purchased, to be cash and cash equivalents.cash. As of September 30, 20172021 and December 31, 2016,2020, the Company had no cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.
Inventory
The Company’s inventory is stated at the lower of cost or estimated net realizable value, with cost primarily determined on a weighted-average cost basis on the first-in, first-out (“FIFO”) method. The Company periodically determines whether a reserve should be taken for devaluation or obsolescence of inventory. As of September 30, 2017 and December 31, 2016, no such reserve was taken.
Capitalization of Fixed Assets
The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” ASU 2016-02 requires a lessee to record a right of Intangible Assets
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASC Topic 606”). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or tax returns. services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method. The new standard did not have a material impact on its financial position and results of operations, as it did not change the manner or timing of recognizing revenue.
Under this method, deferred tax assetsASC Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to perform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and liabilities are determined basedverify that collection of substantially all consideration is probable. The adoption of ASC Topic 606 did not have an impact on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Research and Development Costs
The Company follows ASCFASB Accounting Standards Codification (“ASC”) Subtopic 730-10, “Research and Development”. Research and development costs are charged to the statement of operations as incurred. During the three and nine months ended September 30, 2017,2021 and 2020, the Company incurred $300,527$1,173,319 and $571,066$1,769,339 of expenses related to research and development costs, respectively. During the three and nine months ended September 30, 2016,2021 and 2020, the Company incurred $137,540$4,059,730 and $336,417$4,774,534 of expenses related to research and development costs, respectively.
Net Earnings (Loss) Per Common Share
The Company computes earnings per share under ASC Subtopic 260-10, Earnings“Earnings Per Share (“ASC 260-10”)Share”. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. There were 3,186,2627,695,899 and 1,346,44110,047,010 potentially dilutive shares, which include outstanding common stock options, warrants and shares of convertible notes,preferred stock as of September 30, 20172021 and December 31, 2016,2020, respectively.
The potential shares, which are excluded from the determination of basic and diluted net loss per share as their effect is anti-dilutive, are as follows:
September 30, 2017 | December 31, 2016 | |
| Options to purchase common stock | 938,121 | 151,881 |
| Warrants to purchase common stock | 2,248,141 | 152,812 |
| Convertible notes | - | 1,041,748 |
| Potential equivalent shares excluded | 3,186,262 | 1,346,441 |
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Options to purchase common stock |
|
| 5,096,210 |
|
|
| 3,569,707 |
|
Warrants to purchase common stock |
|
| 2,437,164 |
|
|
| 6,251,103 |
|
Shares issuable upon conversion of Series A Convertible Preferred Stock |
|
| 162,525 |
|
|
| 226,200 |
|
Potential equivalent shares excluded |
|
| 7,695,899 |
|
|
| 10,047,010 |
|
Fair Value Measurements
Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in ourthe balance sheet, where it is practicable to estimate that value. As of September 30, 2017 and December 31, 2016, the amounts reported for cash, accrued liabilities and accrued interest approximated fair value because of their short maturities.
In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” the Company measures certain financial instruments at fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level(Level 1 measurements) and the lowest priority to unobservable inputs (level(Level 3 measurements). These tiers include:
● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities, approximate their fair values because of the short maturity of these instruments. The fair value of notes payable and convertible notes approximates their fair values since the current interest rates and terms on these obligations are the same as prevailing market rates.
Share-based Compensation
The Company’s 2016 Omnibus Incentive Plan which has been approved by its board of directors,(the “Omnibus Plan”) permits the grant of sharestock options and sharesother share-based awards to its employees, consultants and non-employee members of the board of directorsdirectors. Each January 1 the pool of shares available for upissuance under the Omnibus Plan automatically increases by an amount equal to 1,345,074the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the Omnibus Plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of commonpreferred stock and other outstanding convertible securities and exercise of which approximately 500,000 remainall outstanding options and warrants to purchase shares) and (ii) if the board of directors takes action to set a lower amount, the amount determined by the board. On January 1, 2021, the pool of shares available for issuance under the Omnibus Plan automatically increased by 1,599,570shares, from 5,861,658 shares to be granted. 7,461,228.
The Company records share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification. The guidance requires the use of option-pricing models that require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model, and the resulting charge is expensed using the straight-line attribution method over the vesting period. The Company has elected to use the calculated value method to account for the options it issued in 2017 (prior to commencement on June 28, 2017 of public trading in the Company’s common stock) and in 2016. A nonpublic entity that is unable to estimate the expected volatility of the price of its underlying share may measure awards based on a “calculated value,” which substitutes the volatility of appropriate public companies (representative of the company’s size and industry) as a bench mark for the volatility of the entity’s own share price. Prior to June 28, 2017, there was no active market for the Company’s common shares. The Company has used the historical closing values of these companies to estimate volatility, which was calculated to be 90%.
Stock compensation expense recognized during the period is based on the value of share-based awards that were expected to vest during the period adjusted for estimated forfeitures. The estimated fair value of grants of stock options and warrants to non-employees of the Company is charged to expense, if applicable, in the financial statements. These options vest in the same manner as the employee options granted under the stock incentive plan as described above.
Going Concern
The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a limited operating historycommercial experience and had a cumulative net loss from inception to September 30, 20172021 of $15,600,795.$65,586,182. The Company had working capital of $6,910,775$12,893,307 as of September 30, 2017.2021. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying financial statements for the period ended September 30, 20172021 have been prepared assuming the Company will continue as a going concern. TheAlthough the Company’s cash resources couldwill likely be insufficientsufficient to meet its anticipated needs during the next twelve months. Themonths, the Company will require additional financing to fund its future planned operations, including research and development and commercialization of its products.
The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. As described further below under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” the COVID-19 pandemic has impacted the Company’s business operations to some extent and is expected to continue to do so and, in light of the effect of such pandemic on financial markets, these impacts may include reduced access to capital. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be forcedrequired to delay, reduce the scope of, or scale down someeliminate one or allmore of itsthe Company’s research and development activities or commercialization efforts or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Recent Accounting Pronouncements
The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows. The Company plans to adopt the provisions of this statement in the first quarter of fiscal 2018.
Note 3 – Inventory
As of September 30, 20172021 and 2016,December 31, 2020, inventory consisted of raw materials and subassemblies to be used in the assembly of a Nexus 128TAEUS system. As of September 30, 2017 and 20162021, the Company had no orders pending for the sale of a Nexus 128TAEUS system.
Note 4 – Fixed Assets
As of September 30, 20172021 and December 31, 2016,2020, fixed assets consisted of the following:
September 30, 2017 | December 31, 2016 | |
| Computer equipment and fixtures | $579,179 | $571,318 |
| Accumulated depreciation | (322,270) | (276,150) |
| Fixed assets, net | $256,909 | $295,168 |
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Property, leasehold and capitalized software |
| $ | 718,902 |
|
| $ | 718,902 |
|
TAEUS development and testing |
|
| 124,208 |
|
|
| 79,207 |
|
Accumulated depreciation |
|
| (680,845 | ) |
|
| (585,867 | ) |
Fixed assets, net |
| $ | 162,265 |
|
| $ | 212,242 |
|
Depreciation expense for the nine months ended September 30, 20172021 and 20162020 was $46,121$94,977 and $48,612,$45,114, respectively.
| 11 |
| Table of Contents |
Note 5 – CurrentAccounts Payable and Accrued Liabilities
As of September 30, 20172021 and December 31, 2016,2020, current liabilities consisted of the following:
September 30, 2017 | December 31, 2016 | |
| Accounts payable | $228,266 | $227,744 |
| Accrued payroll | 16,324 | 105,258 |
| Accrued employee benefits | 67,452 | 29,552 |
| Accrued interest | - | 71,998 |
| Notes payable | - | 50,000 |
| Convertible notes, related party, net of discount | - | 99,804 |
| Convertible notes, net of discount | - | 800,172 |
| Total | $312,042 | $1,384,528 |
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Accounts payable |
| $ | 747,762 |
|
| $ | 402,910 |
|
Accrued payroll |
|
| 196,079 |
|
|
| 48,260 |
|
Accrued bonuses |
|
| 294,554 |
|
|
| 369,393 |
|
Accrued employee benefits |
|
| 5,750 |
|
|
| 5,750 |
|
Insurance premium financing |
|
| 204,985 |
|
|
| 83,870 |
|
Total |
| $ | 1,449,130 |
|
| $ | 910,183 |
|
Note 6 – Bank Loans
U.S. SBA Paycheck Protection Program
In April 2020, the Company issued a U.S. Small Business Administration (“SBA”) Paycheck Protection Program Note (the “SBA Note”) to First Republic Bank (the “Lender”) for a loan in the principal amount of $308,600 (the “SBA Loan”) under the Paycheck Protection Program (“PPP”) promulgated under the Coronavirus Aid, Relief and Economic Security Act of 2020, as modified by the Paycheck Protection Program Flexibility Act of 2020.
The Company has applied to the Lender for the SBA Loan to be forgiven and on May 10, 2021 received notice that the SBA Loan had been forgiven in full in accordance with the terms and provisions of the PPP.
The Company did not provide any collateral or personal guarantees for the SBA Loan, nor did the Company pay any facility charge to the government or to the Lender.
Toronto-Dominion Bank Loan
On January 28, 2016,April 27, 2020, the Company entered into promissory notesa commitment loan with three investors for a totalTD Bank under the Canadian Emergency Business Account, in the principal aggregate amount of $50,000. The notes matured one year fromCAD 40,000, which is due and payable upon the issue date, accruedexpiration of the initial term on December 31, 2022. This note bears interest on the unpaid balance at the rate of zero percent (0%) per annum during the initial term. Under this note no interest and were payable at maturity. Prior topayments are due until January 1, 2023. Under the maturity date, the Company and the promissory note holders agreed to extend the maturity date of all three notes to July 31, 2017, on the same terms as previously agreed. The Company accounted for imputed interest of $0 and $1,480 for the three and nine months ended September 30, 2017, respectively, which was calculated at a rate of 8% per annum, consistent with other notes issued by the Company. During the nine-month period ended September 30, 2017, the promissory notes were repaid in full to all holders.
Note 6). In connection with the issuance of the 2016 Notes, the Company recorded a debt discount at an initial aggregate value of $1,611,448, of which $0 and $711,472 was amortized during the three and nine months ended September 30, 2017, respectively, resulting in a debt discount balance of $0 as of September 30, 2017. The Company had interest expenses of $0 and $42,633 for the three- and nine-month periods ended September 30, 2017, respectively.
At September 30, 2017,2021, the authorized capital of the Company consisted of 60,000,00090,000,000 shares of capital stock, consistingcomprised of 50,000,00080,000,000 shares of common stock with a par value of $0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $0.0001 per share.
As of Amendment”) to its certificate of incorporation with the Secretary of State of the State of Delaware to effect the Reverse Split of the Company’s common stock, with no reduction in authorized capital stock. Pursuant to the terms of the Certificate of Amendment, the Reverse Split became effective at 11:59 p.m. Eastern Time on May 8, 2017. In the Reverse Split, every 3.5 outstandingSeptember 30, 2021, there were 42,165,726 shares of common stock, became one share141,397 shares of common stock. No fractionalSeries A Preferred Stock, and no shares were issued in connection with the Reverse Split. Subject to the terms of the Certificate of Amendment, stockholders who were otherwise entitled to receive a fractional share of common stock received one whole share of common stock.
During the nine months ended September 30, 2017,2021, the Company issued 18,833a total of 8,116,023 shares of its common stock, as follows:
● | 67,889 shares upon the conversion of 55.397 shares of its Series A Preferred Stock; | |
● | 4,198,170 shares in return for aggregate net proceeds of $10,294,904 from sales of common stock; | |
● | 3,567,899 shares upon warrant exercises for an aggregate exercise price of $2,785,627; | |
● | 202,887 shares upon cashless warrant exercises; | |
● | 23,835 shares upon cashless option exercise; and | |
● | 32,527 shares for services valued at $74,000. | |
● | 22,815 shares for RSUs valued at $36,460. |
At-the-Market Equity Offering Programs
During the nine months ended September 30, 2021, the Company entered into at-the-market equity offering sales agreements with Ascendiant to sell shares of common stock. On February 19, 2021, the Company entered into the At-The-Market Issuance Sales Agreement with Ascendiant (the “February 2021 ATM Agreement”) to sell shares of common stock for services valued at $94,165aggregate gross proceeds of up to a firm owned by David R. Wells,$12.6 million, from time to time, through an “at-the-market” equity offering program under which Ascendiant acted as sales agent. On June 21, 2021, the Company entered into the At-The-Market Issuance Sales Agreement with Ascendiant (the “June 2021 ATM Agreement” and, together with the February 2021 ATM Agreement, the “2021 ATM Agreements”) to sell shares of common stock for aggregate gross proceeds of up to $20.0 million, from time to time, through an “at-the-market” equity offering program under which Ascendiant acts as sales agent. The February 2021 ATM Agreement terminated upon the Company’s Chief Financial Officer.
Note 78 – Common Stock Options and Warrants
Common Stock Options
Stock options are awarded to the Company’s employees, consultants and non-employee members of the board of directors under the 2016 Omnibus Incentive Plan (the “Omnibus Plan”) and are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. The aggregate fair value of these stock options granted by the Company during the nine months ended September 30, 20172021 was determined to be $3,241,392$3,511,662 using the Black-Scholes-Merton option-pricing model based on the following assumptions: (i) volatility rate of 90%81% to 99%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 4 to 88-10 years. A summary of option activity under the Company’s stock optionsOmnibus Plan as of September 30, 2017,2021, and changes during the nine-month period then ended, is presented below:
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | |
| Balance outstanding at December 31, 2016 | 151,890 | $9.99 | 2.47 |
| Granted | 801,216 | 4.93 | 7.53 |
| Exercised | - | - | - |
| Forfeited | - | - | - |
| Cancelled or expired | (14,985) | 10.02 | - |
| Balance outstanding at September 30, 2017 | 938,121 | $5.67 | 6.71 |
| Exercisable at September 30, 2017 | 144,110 | $8.92 | 2.89 |
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (Years) |
| |||
Balance outstanding at December 31, 2020 |
|
| 3,569,707 |
|
| $ | 2.13 |
|
|
| 7.50 |
|
Granted |
|
| 1,679,000 |
|
|
| 1.98 |
|
|
| 7.59 |
|
Exercised |
|
| (37,645 | ) |
|
| - |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
Cancelled or expired |
|
| (114,852 | ) |
|
| - |
|
|
| - |
|
Balance outstanding at September 30, 2021 |
|
| 5,096,210 |
|
| $ | 2.08 |
|
|
| 7.03 |
|
Exercisable at September 30, 2021 |
|
| 2,073,249 |
|
| $ | 2.79 |
|
|
| 5.90 |
|
Restricted Stock Units
A restricted stock unit grants a participant the nine months endedright to receive one share of common stock, following the completion of the requisite service period. RSU’s are classified as equity. Compensation cost is based on the Company’s stock price on the grant date and is recognized on a straight-line basis over the vesting period for the entire award.
On January 28, 2021, the Company granted 22,815 RSU’s to a member of management. The RSU’s vested immediately. The total fair value of the RSU’s granted on January 28, 2021 was $45,858, based on the grant date closing price of $2.01 per share.
As of September 30, 2017, in connection with the closing of the IPO,2021 the Company had issued toand vested the underwriters and their designeesfollowing RSU’s:
|
| Restricted Stock Units Outstanding |
|
| Weighted Average Grant Date Fair Value |
| ||
Balance Outstanding at December 31, 2020 |
|
| - |
|
| $ | 0 |
|
Granted |
|
| 22,815 |
|
|
| 0.70 |
|
Vested / Released |
|
| 22,815 |
|
|
| 0 |
|
Forfeited |
|
| - |
|
|
| 0 |
|
Cancelled or expired |
|
| - |
|
|
| 0 |
|
Balance outstanding at September 30, 2021 |
|
| - |
|
| $ | 0 |
|
| 13 |
| Table of Contents |
Note 9 – Common Stock Warrants
Certain holders of our warrants to purchaseissued in private placements in (i) June 2018, exercisable for an aggregate of 154,560283,337 shares of common stock, (ii) July 2019, exercisable for an aggregate of 1,910,540 shares of common stock, and (iii) December 2019, exercisable for an aggregate of 8,958,358 shares of common stock (collectively, the “Private Warrants”) indicated to the Company that they were willing to exercise their Private Warrants at reduced exercise prices. Our board of directors approved the Company’s partially waiving the exercise prices of Private Warrants to provide for reduced exercised prices which resulted in a deemed dividend. Prices were subsequently agreed upon between the Company and each exercising warrant holder, and the Company obtained stockholder approval for the issuance of an aggregate number of shares of the Company’s common stock (the “Underwriters’ Warrants”) at anupon the exercise price of $6.25 per sharePrivate Warrants greater than 19.99% of the number of shares outstanding prior to any such issuance, in compliance with an expiration date of May 8, 2022. The Underwriters’ Warrants become exercisable on November 8, 2017.
On December 15, 2020, the Company grantedissued warrants exercisable for 314,291 shares of the Company’s common stock. Each warrant entitles the holder to purchase 10,000 shares of common stock withfor an exercise price of $5.50 per share for services. The warrants vest in six monthly installments beginning on June 12, 2017.equal to $0.875 and expire December 15, 2025. The fair value of these warrants was determined to be $27,779$171,520 using the Black-Scholes-MertonBlack-Scholes option-pricing model based on the following assumptions: (i) volatility rate of 90%89%, (ii) discount rate of 0%, (iii) zero expected dividend yield, and (iv) expected life of 35 years.
During the nine months ended September 30, 2017, $20,834 was expensed.
During the nine months ended September 30, 2021, the Company issued an aggregate of 202,887 shares of its common stock upon the cashless exercise election by certain warrant holders.
The following table summarizes all stock warrant activity of the Company for the nine months ended September 30, 2017:
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | |
| Balance outstanding at December 31, 2016 | 152,828 | $5.41 | 3.30 |
| Granted | 2,096,563 | 6.25 | 4.61 |
| Exercised | - | - | - |
| Forfeited | - | - | - |
| Expired | (1,250) | 10.02 | - |
| Balance outstanding at September 30, 2017 | 2,248,141 | $7.11 | 4.47 |
| Exercisable at September 30, 2017 | 2,089,411 | $7.18 | 4.46 |
|
| Number of Warrants |
|
| Weighted Average Exercise Price |
|
| Weighted Average Contractual Term (Years) |
| |||
Balance outstanding at December 31, 2020 |
|
| 6,251,103 |
|
| $ | 2.79 |
|
|
| 2.79 |
|
Granted |
|
| 314,291 |
|
|
| 0.88 |
|
|
| 4.21 |
|
Exercised |
|
| (3,916,996 | ) |
|
| 0.83 |
|
|
| 3.10 |
|
Forfeited |
|
| - |
|
|
| 0 |
|
|
| - |
|
Expired |
|
| (211,234 | ) |
|
| 0 |
|
|
| - |
|
Balance outstanding at September 30, 2021 |
|
| 2,437,164 |
|
| $ | 5.54 |
|
|
| 0.83 |
|
Exercisable at September 30, 2021 |
|
| 2,437,164 |
|
| $ | 5.54 |
|
|
| 0.83 |
|
Note 810 – Commitments & Contingencies
Office Lease
Effective January 1, 2015, the Company entered into an office lease agreement with Green Court, LLC, a Michigan limited liability company, for approximately 3,657 rentable square feet of space, for the initial monthly rent of $5,986, which commenced on January 1, 2015 for an initial term of 60 months. UnderOn October 10, 2017 this lease was amended increasing the termsrentable square feet of space to 3,950 and the monthly rent to $7,798. On July 16, 2019, the Company exercised its option to extend the lease for an additional 5 years past the initial term originally expiring on December 31, 2019.
On March 15, 2021, the Company entered into an amendment to the lease, adding approximately 3,248 rentable square feet, increasing the initial monthly rent to $15,452 effective May 2021, and extending the term of the lease to December 31, 2025.
The Company records the lease asset and lease liability at the present value of lease payments over the lease term. The lease typically does not provide an implicit rate; therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments. The Company’s discount rate for operating leases at September 30, 2021 was 10%. Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable. As a result, the Company has an optionbeen recognizing rents as they become payable based on the same space for an additional 60-month term. Future minimum payments under thisadoption of ASC Topic 842. The weighted-average remaining lease term is 4.25 years.
As of September 30, 2021, the maturities of operating lease liabilities are as follows:
| 2017 | $17,904 |
| 2018 | 77,348 |
| 2019 | 79,269 |
| Total | $174,521 |
|
| Operating Lease |
| |
|
|
|
| |
2021 |
| $ | 46,355 |
|
2022 |
|
| 190,963 |
|
2023 |
|
| 196,721 |
|
2024 |
|
| 202,624 |
|
2025 and beyond |
|
| 202,624 |
|
Total |
| $ | 839,287 |
|
Less: amount representing interest |
|
| (158,761 | ) |
Present value of future minimum lease payments |
|
| 680,526 |
|
Less: current obligations under leases |
|
| 127,696 |
|
Long-term lease obligations |
| $ | 552,830 |
|
For the three- and nine-month periodsthree months ended September 30, 2017,2021 and 2020, the Company incurred rent expenses of $20,828$53,263 and $52,527,$29,581, respectively.
For the three- and nine-month periodsnine months ended September 30, 2016,2021 and 2020, the Company incurred rent expenses of $18,562$119,802 and $55,687,$90,484, respectively.
Employment and Consulting Agreements
Francois Michelon – Effective May 12, 2017, the Company entered into a consulting agreement with StoryCorp that superseded the services agreement, as described below.
If Mr. Michelon’s employment is terminated by the Company without cause or Mr. Michelon terminates his employment for good reason, Mr. Michelon will be entitled to receive 12 months’ continuation of his current base salary if he has been employed at least 6 months, and compensationa lump sum payment equal to 12 months of the then applicablecontinued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if employed over 12 months.such termination occurs within one year following a change in control).
Under his employment agreement, Mr. Michelon is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.
Michael Thornton – Effective May 12, 2017, the Company and Mr. Michelon entered into a newan amended and restated employment agreement as described below.
If Mr. Thornton’s employment is terminated by the Company without cause or Mr. Thornton terminates his employment for good reason, Mr. Thornton will be entitled to receive 12 months’ continuation of his current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).
Under his employment agreement, Mr. Thornton is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.
David Wells – On May 13, 2019, the Company entered into amendedan employment agreement with David Wells that superseded a consulting agreement between the Company and restated employment agreements withStoryCorp Consulting, pursuant to which Mr. Michelon and Mr. Thornton. Mr. Michelon’sWells provided services to the Company as its Chief Financial Officer. The employment agreement provides for an annual base salary of $325,000$230,000 and eligibility for an annual cash bonus up to a percentagebe paid based on attainment of Company and individual performance objectives to be established by the Company’s board of directors (in 2019, the amount of such cash bonus if all goals were achieved would be 30% of the base salary (in 2016, upplus base fees paid to 35% of his base salary then in effect). Mr. Thornton’s employment agreement provides for an annual base salary of $245,000 and eligibility for an annual cash bonus up to a percentage of such base salary (in 2016, up to 22% of his base salary then in effect)StoryCorp under the consulting agreement). The employment agreementsagreement also provideprovides for eligibility to receive benefits substantially similar to those of the Company’s other senior executive officers.
Pursuant to the employment agreements, in connection with the closing of the IPO,agreement, on May 13, 2019 Mr. Michelon and Mr. Thornton wereWells was granted stock options to purchase 339,270 and 345,29856,000 shares of the Company’s common stock, respectively, which, taken together with the number of shares such officer already held, equaled 5.0% of the Company’s total issued and outstanding shares of common stock on a fully diluted basis following the IPO and underwriters’ exercise of their overallotment option.stock. The stock options have a weighted averagean exercise price of approximately $4.96,$1.38 per share, and vest in three equal annual installments beginning on May 12, 2018.
On June 9, 2021, Mr. Wells notified the Company and StoryCorp.
On June 11, 2021, the Company’s Board of Directors appointed Irina Pestrikova as Senior Director, Finance, effective upon Mr. Wells’ resignation. Ms. Pestrikova will serve as the Company’s Principal Financial Officer in such role. In connection with her appointment, Ms. Pestrikova will receive 75,000 stock options vesting in three equal annual installments. She will receive an annual salary of $160,000.
Litigation
From time to time the Company may become a party to litigation in the normal course of business. Management believes thatAs of September 30, 2021, there arewere no current legal matters that management believes would have a material effect on the Company’s financial position or results of operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
As used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless the context otherwise requires, the terms “we,” “us,” “our,” “ENDRA” and the “Company” refer to ENDRA Life Sciences Inc., a Delaware corporation.corporation, and its direct and indirect subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical financial statements and related notes thereto in this Form 10-Q. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or other comparable terms. All statements other than statements of historical facts included in this Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expectations for revenues, cash flows and financial performance, the anticipated results of our development efforts and the timing for receipt of required regulatory approvals and product launches. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our limited commercial experience, limited cash and history of losses; our ability to obtain adequate financing to fund our business operations in the future; our ability to achieve profitability; our ability to develop a commercially feasible application based on our Thermo-Acoustic Enhanced Ultrasound (“TAEUS”) technology; receiptmarket acceptance of necessary regulatory approvals;our technology; uncertainties associated with COVID-19 or coronavirus, including its possible effects on our operations; results of our human studies, which may be negative or inconclusive; our ability to find and maintain development partners, market acceptance ofpartners; our technology,reliance on collaborations and strategic alliances and licensing arrangements; the amount and nature of competition in our industry; our ability to protect our intellectual property; potential changes in the healthcare industry or third-party reimbursement practices; delays and changes in regulatory requirements, policy and guidelines including potential delays in submitting required regulatory applications for Food and Drug Administration (“FDA”) approval; our ability to obtain and maintain CE mark certification and secure required FDA and other governmental approvals for our TAEUS applications; our ability to comply with regulation by various federal, state, local and foreign governmental agencies and to maintain necessary regulatory clearances or approvals; and the other risks and uncertainties described in the Risk Factors section of our QuarterlyAnnual Report on Form 10-Q10-K for the period ended MarchDecember 31, 2017,2020, as filed with the SEC on June 21, 2017,March 25, 2021, and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Available Information
From time to time, we use press releases, Twitter (@endralifesci) and LinkedIn (www.linkedin.com/company/endra-inc) to distribute material information. Our press releases and financial and other material information are routinely posted to and accessible on the Investors section of our website, www.endrainc.com. Accordingly, investors should monitor these channels, in addition to our SEC filings and public conference calls and webcasts. In addition, investors may automatically receive e-mail alerts and other information about the Company by enrolling their e-mail addresses by visiting the “Email Alerts” section of our website at investors.endrainc.com. Information that is contained in and can be accessed through our website, Twitter posts and LinkedIn are not incorporated into, and do not form a part of, this Quarterly Report or any other report or document we file with the SEC.
Overview
We have commercialized anare leveraging experience with pre-clinical enhanced ultrasound technology for the pre-clinical research market and are leveraging that expertisedevices to develop technology for increasing the capabilities of clinical diagnostic ultrasound, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray computed tomography (“CT”) and magnetic resonance imaging (“MRI”) technology, isor other diagnostic technologies such as surgical biopsy, are unavailable or impractical.
In 2010, we have marketedbegan marketing and soldselling our Nexus 128 system, which combinescombined light-based thermoacoustics and ultrasound to address the imaging needs of researchers studying disease models in pre-clinical applications. Sales of the Nexus 128 system were approximately $1.4 million in 2015 and $515,000 in 2016. Our Nexus 128 system is used in a number of leading global academic research centers, including Stanford University, The University of Michigan, Shanghai Jiao Tong University, and Purdue University. We expect to continue to sell our Nexus 128 system to maintain a base level of revenue, but believe the market potential for our clinical systems is much higher.
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Unlike the near-infrared light pulses used in our legacy Nexus 128 system, our TAEUS technology uses radio frequency (“RF”) pulses to stimulate tissues, using a small fraction (less than 1%) of the energy that would be transmitted into the body during an MRI scan. The use of RF energy allows our TAEUS technology to penetrate deep into tissue, enabling the imaging of human anatomy at depths equivalent to those of conventional ultrasound. The RF pulses are absorbed by tissue and converted into ultrasound signals, which are detected by an external ultrasound receiver and a digital acquisition system that is part of the TAEUS system. The detected ultrasound is processed into images and other forms of data using our proprietary algorithms and overlaid in real time ontodisplayed to complement conventional gray-scale ultrasound images.
We expect that the first-generation TAEUS application will be a standalone ultrasound accessory designed to cost-effectively quantify fat in the liver and stage progression of non-alcoholicnonalcoholic fatty liver disease or (“NAFLD”), which can only be achieved today with impractical surgical biopsies or MRI scans. Subsequent TAEUS offerings are expected to be implemented via a second generation hardware platform that can run multiple clinical software applications that we will offer TAEUS users for a one-time licensing fee – adding ongoing customer value to the TAEUS platform and a growing software revenue stream for our Company.
In April 2016, we entered into a Collaborative Research Agreement with General Electric Company, acting through its GE Healthcare business unit and the GE Global Research Center (collectively, “GE Healthcare”). Under the terms of the agreement, GE Healthcare has agreed to assist us in our efforts to commercialize our TAEUS technology for use in a fatty liver application by, among other things, providing equipment and technical advice, and facilitating introductions to GE Healthcare clinical ultrasound customers. In return for this assistance, we have agreed to afford GE Healthcare certain rights of first offer with respect to manufacturing and licensing rights for the target application. More specifically, we have agreed that, prior to commercially releasing our NAFLD TAEUS application, we will offer to negotiate an exclusive ultrasound manufacturer relationship with GE Healthcare for a period of at least one year of commercial sales. The commercial sales would involve, within our sole discretion, either our Company commercially selling GE Healthcare ultrasound systems as the exclusive ultrasound system with our TAEUS fatty liver application embedded, or GE Healthcare being the exclusive ultrasound manufacturer to sell ultrasound systems with our TAEUS fatty liver application embedded. The agreement is subject to termination by either party upon not less than 60 days’ notice. On April 21, 2017,December 16, 2020, we and GE Healthcare entered into an amendment to our agreement, extending its term by one year to April 22, 2018.
Each of our TAEUS device targeting Non-Alcoholic Fatty Liver Disease (NAFLD). The agreements call for StarFishplatform applications will require regulatory approvals before we are able to sell or license the application. Based on certain factors, such as the installed base of ultrasound systems, availability of other imaging technologies, such as CT and CriTech to provide us with the specialized engineering resources necessary to translate our current prototype TAEUS device into a clinical product meeting CEMRI, economic strength and applicable regulatory requirements, requiredwe intend to seek initial approval of our applications for commercial launchsale in the European Union targeted for 2018,and the United States, followed by China.
In March 2020, we received CE mark approval for our TAEUS FLIP (Fatty Liver Imaging Probe) System. The CE marking indicates that TAEUS FLIP System complies with all applicable European Directives and Regulations in the European Union and other CE mark geographies, including the 27 EU member states.
In June 2020, we submitted a 510(k) Application to the FDA for our TAEUS FLIP System. FDA review of a 510(k) submission requires careful review of indication for intended use, effectiveness and safety, of both the predicate device and the submitted device. We continue to work with the FDA on the submission. However, TAEUS represents an advancement in medical ultrasound technology and this process has been taking longer than expected and may continue to do so. There can be no assurance regarding the timing for the U.S. market. StarFish is an ISO 13485 certified product engineering firmFDA to complete its regulatory review or with offices in Victoria, British Columbia and Toronto, Ontario dedicatedregard to the medical deviceultimate outcome of that review.
In March 2021, we announced an agreement with a clinical-stage biopharmaceutical company to incorporate TAEUS as an add-on technology to support the company’s patient screening and life science marketplace. CriTech Research Inc., headquartered in Saline, Michigan, has more than 20 years of experience in the development and testing of safety-critical software for medical devices. CriTech is certifiedbiomarker measurement during an upcoming clinical trial. We are also party to ISO13485 and ISO 9001 for software development.
Financial Operations Overview
Revenue
No revenue has been generated by the placement and saleour TAEUS technology, which we have not commercially sold as of our Nexus 128 system for use in pre-clinical applications.
Cost of Goods Sold
No cost of goods sold is related tohas been generated by our direct costs associated with the development and shipmentTAEUS technology, which we have not commercially sold as of our thermoacoustic imaging systems placed in pre-clinical settings.
Research and Development Expenses
Our research and development expenses primarily include wages, fees and equipment for the development of our TAEUS technology platform and ourthe proposed applications. Additionally, we incur certain costs associated with the protection of our products and inventions through a combination of patents, licenses, applications and disclosures.
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Sales and Marketing Expenses
Sales and marketing expenses consist primarily of advertising,headcount and consulting costs, and marketing and consulting expenses and headcount.tradeshow expenses. Currently, our marketing efforts for our pre-clinical business are through distributors in China, the European Union, Australia, Korea and the United Kingdom, our website and attendance of key industry meetings.meetings and conferences. In connection with the commercialization of our TAEUS applications, we expect to buildare building a small sales and marketing team to train and support global ultrasound distributors, as well asand expect to execute traditional marketing activities such as promotional materials, electronic media and participation in industry events and conferences.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses for our management and personnel, and professional fees, such as for accounting, consulting and legal.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.
Share-based Compensation
Our 2016 Omnibus Incentive Plan which has been approved by our board of directors,(the “Omnibus Plan”) permits the grant of sharestock options and sharesother stock awards to our employees, consultants and non-employee members of our board of directors. Each January 1 the pool of shares available for issuance under the Omnibus Plan automatically increases by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the Omnibus Plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the board of directors for uptakes action to 1,345,074set a lower amount, the amount determined by the board. On January 1, 2021, the pool of shares issuable under the Omnibus Plan automatically increased by 1,599,570 shares from 5,861,658 shares to 7,461,228. As of September 30, 2021, there were 2,365,018 shares of common stock. stock remaining available for issuance under the Omnibus Plan.
We record share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification. The guidance requires the use of option-pricing models that require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends, and the resulting charge is expensed using the straight-line attribution method over the vesting period.
Stock compensation expense recognized during the period is based on the value of share-based awards that were expected to vest during the period adjusted for estimated forfeitures. The estimated fair value of grants of stock options and warrants to non-employees is charged to expense, if applicable, in the financial statements.
Debt Discount and Detachable Debt-Related Warrants
The Company accounts for debt discounts originating in connection with conversion features that are embedded in the notes related warrants in accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options. These costs are classified on the consolidated balance sheet as a direct deduction from the debt liability. The Company amortizes these costs over the term of the securities as interest expense-debt discount in the consolidated statement of operations. Debt discounts relate to the relative fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and accreted over the expected term of the securities to interest expense.
Recent Accounting Pronouncements
See Note 2 of the accompanying financial statements for a discussion of recently issued accounting standards.
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Results of Operations
Three Months Endedmonths ended September 30, 20172021 and 2016
Revenue
We had no revenue during the three months ended September 30, 2021 and 2020.
Cost of $287,000Goods Sold
We had no cost of goods sold during the three months ended September 30, 2021 and 2020.
Research and Development
Research and development expenses were $1,173,319 for the three months ended September 30, 2017,2021, as compared to $0$1,769,339 for the three months ended September 30, 2016. The revenue wasDecember 31, 2020, a resultdecrease of the sale of one of our Nexus 128 laboratory imaging systems in the three months ended September 30, 2017.
Sales and Marketing
Sales and marketing expenses were $47,375$275,565 for the three months ended September 30, 2017,2021, as compared to $16,040$139,751 for the three months ended September 30, 2016,2020, an increase of $31,335,$135,814, or 195%97%. The increase was primarily due to commissions paid on the sale ofadditional headcount and pre-selling activities for our Nexus 128 system.TAEUS product line. Currently, our marketing efforts for our pre-clinical business are coordinated and led by a recently hired full-time employee who is responsible for the sales of our Nexus 128 systems, as well as coordinating sales through distributors in China, the European Union, Australia and the United Kingdom, our website and attendance of key industry meetings. Our future clinical business will involveDuring the period ending September 30, 2021 we continued hiring and training additional staff to support our sales efforts. As we seek to complete the development and commercialization of our TAEUS applications, we intend to build a small sales and marketing team to train and support global ultrasound distributors, as well as execute traditional marketing activities such as promotional materials, electronic media and participation in industry conferences.
General and Administrative
Our general and administrative expenses for the three months ended September 30, 20172021 were $731,763, an increase of $280,533, or 62%,$1,201,851, compared to $451,530$1,346,360 for the three months ended September 30, 2016. General and administrative expenses increased due to an increase in headcount and related operations after our IPO in May 2017.2020, a decrease of $144,509, or 11%. Our wage and related expenses for the three months ended September 30, 20172021 were $376,810,$517,829, compared to $231,918$443,913 for the three months ended September 30, 2016.2020. Wage and related expenses in the three month periodmonths ended September 30, 20172021 included $183,473$44,652 for bonuses and $136,008 of stock compensation expense related to the issuance and vesting of options, compared to $103,483$53,751 for bonuses, $151,947 of stock compensation expense forrelated to the same period in 2016. Our professional feesissuance and vesting of options, for the three months ended September 30, 2017 were $201,733, compared to $149,4542020. Our professional fees, which include legal, audit, and investor relations, for the three months ended September 30, 2016.
Net loss
As a result of the foregoing, for the three months ended September 30, 2017,2021, we recorded a net loss of $908,908$2,658,242, compared to a net loss of $977,898$3,258,071 for the three months ended September 30, 2016.
Nine months Endedended September 30, 20172021 and 2016
Revenue
We had no revenue during the nine months ended September 30, 2021 and 2020.
Cost of $344,772Goods Sold
We had no cost of goods sold during the nine months ended September 30, 2021 and 2020.
Research and Development
Research and development expenses were $4,059,730 for the nine months ended September 30, 2017,2021, as compared to $0$4,774,534 for the nine months ended September 30, 2016. The revenue wasDecember 31, 2020, a resultdecrease of the sale of one of our Nexus 128 laboratory imaging systems, and product service fees generated from our installed base of Nexus 128 laboratory imaging systems, for the nine months ended September 30, 2017.
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Sales and Marketing
Sales and marketing expenses were $55,403$693,263 for the nine months ended September 30, 2017,2021, as compared to $26,197$389,469 for the nine months ended September 30, 2016,2020, an increase of $29,206,$303,794, or 111%78%. The increase was primarily due to commissions paid on the sale ofadditional headcount and pre-selling activities for our Nexus 128 system.TAEUS product line. Currently, our marketing efforts for our pre-clinical business are through distributors in China, the European Union, Australia and the United Kingdom, our website and attendance of key industry meetings. Our future clinical business will involveDuring the period ending September 30, 2021 we began hiring and training additional staff to support our sales efforts. As we seek to complete the development and commercialization of our TAEUS applications, we intend to build a small sales and marketing team to train and support global ultrasound distributors, as well as execute traditional marketing activities such as promotional materials, electronic media and participation in industry conferences.
General and Administrative
Our general and administrative expenses for the nine months ended September 30, 20172021 were $1,878,093, an increase of $767,830, or 69%,$3,673,771, compared to $1,110,263$4,083,572 for the nine months ended September 30, 2016. General and administrative expenses increased due to an increase in headcount and one-time expenses related to the IPO.2020, a decrease of $409,801, or 10%. Our wage and related expenses for the nine months ended September 30, 20172021 were $876,016,$1,518,718, compared to $549,429$1,647,780 for the nine months ended September 30, 2016.2020. Wage and related expenses in the nine month periodmonths ended September 30, 20172021 included $422,698$149,112 for bonuses and $366,799 of stock compensation expense related to the issuance and vesting of options, compared to $172,723$173,695 for bonuses, $627,365 of stock compensation expense forrelated to the same period in 2016. Our professional feesissuance and vesting of options, for the nine months ended September 30, 2017 were $688,649, compared to $384,3992020. Our professional fees, which include legal, audit, and investor relations, for the nine months ended September 30, 2016.
Gain on Extinguishment of Debt
During the nine months ending September 30, 2021, we received notice that the SBA Loan had been forgiven in full in accordance with the terms and provisions of the PPP, and recorded a gain on extinguishment of debt of $308,600.
Amortization of Debt Discount
During the nine months ended September 30, 2020, we incurred non-cash expenses of $232,426 related to the amortization of debt discount incurred as result of our issuance of our convertible notes and warrants issued in July 2019. During the nine months ended September 30, 2021, we had no such expense.
Net loss
As a result of the foregoing, for the nine months ended September 30, 2017,2021, we recorded a net loss of $3,082,322$8,126,622, compared to a net loss of $2,086,490$9,474,740 for the nine months ended September 30, 2016.
Liquidity and Capital Resources
To date we have generated only limited revenues from sales of our Nexus 128 system. We have funded our operations to dateprimarily through private and public sales of our securities. As of September 30, 2017,2021, we had $6,977,462$11,793,189 in cash. In May 2017,
As of the date of this Report, we completed the IPO, raising net proceeds of approximately $8.6 million after deducting offering expenses of approximately $773,000 in underwriting discounts, commissions and expenses and approximately $297,000 in offering expenses payable by the Company.
The consolidated financial statements included in this Form 10-Q have been prepared assuming the Companywe will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the nine months ended September 30, 2017, the Company2021, we incurred net losses of $3,082,322,$8,126,622 and used cash in operations of $1,925,329. These and other factors$8,469,653. While we maintain cash balances in excess of our anticipated needs for cash for the next twelve months, it is likely that we will need to raise substantial doubt about the Company’sadditional capital prior to any ability to continue as a going concern for one yearfund operations from revenue generated from the issuancesale of the financial statements.our products. The financial statements do not include any adjustments that might be necessary should the Companywe be unable to continue as a going concern.
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Operating Activities
During the nine months ended September 30, 2017, the Company2021, we used $1,925,329$8,469,653 of cash in operating activities primarily as a result of itsour net loss of $3,082,322,$8,126,622, offset by amortization of discount of convertible debt of $711,472, share-based compensation of $600,514, $46,121 in$1,032,840, gain on extinguishment of debt of $308,600, depreciation andexpense of $94,977, amortization expenses,of right of use assets of $75,768, and net changes in operating assets and liabilities of $(202,594)$(1,238,016).
During the nine months ended September 30, 2016, the Company2020, we used $769,459$8,673,489 of cash in operating activities primarily as a result of itsour net loss of $2,086,490,$9,474,740, offset in part by share-based compensation of $1,559,232, amortization of debt discount of $232,426, depreciation expense of $45,114, amortization of right of use assets of $48,859, and net changes in operating assets and liabilities of $(114,513), $48,612 in depreciation and amortization expense, $199,723 in non-cash stock compensation expense, amortization of discount of convertible debt of $561,812, and additional warrants of $5,823 issued during the warrant exchange program, pursuant to which the Company issued warrants to participating warrant holders in exchange for such participants’ exercising their then-held warrants.
Investing Activities
During the nine months ended September 30, 2017, the Company2021, we used $7,862$45,000 in investing activities related to purchasepurchases of equipment. There were no investing activities for the nine months ended September 30, 2016.
During the nine months ended September 30, 2017, financing2020, we used $10,483 in investing activities provided $8,590,700 in proceeds from the IPO and $225,000 in proceeds from convertible notes. The Company used $50,000 in repaymentsrelated to purchases of notes payable.
Financing Activities
During the nine months ended September 30, 2016,2021, our financing activities provided $1,441,448,$13,080,526, including $5,000 from common stock issued for cash, $50,000$10,294,899 in proceeds from notes payable,issuance of common stock, and $1,386,448$2,785,627 in proceeds from convertible notes.
During the nine months ended September 30, 2020, financing activities provided $6,303,058, including $4,644,084 in proceeds from warrant exercises, $337,084 in proceeds from loans, and $1,321,890 in proceeds from issuance of common stock.
Funding Requirements
We have not completed developmentthe commercialization of any of our TAEUS technology platform applications. We expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses will increase substantially as we:
● | advance the engineering design and development of our NAFLD TAEUS application; | |
● | acquire parts and build finished goods inventory of the TAEUS FLIP system; | |
● | complete regulatory filings required for marketing approval of our NAFLD TAEUS application in the United States; | |
● | seek to hire a small internal marketing team to engage and support channel partners and clinical customers for our NAFLD TAEUS application; | |
● | expand marketing of our NAFLD TAEUS application; | |
● | advance development of our other TAEUS applications; and | |
● | add operational, financial and management information systems and personnel, including personnel to support our product development, planned commercialization efforts and our operation as a public company. |
It is possible that we will not achieve the progress that we expect because the actual costs and timing of completing the development and regulatory approvals for a new medical device are difficult to predict and are subject to substantial risks and delays. We have no committed external sources of funds. We do not expect that our existing cash will be sufficient for us to complete the commercialization of our NAFLD TAEUS application or to complete the development of any other TAEUS application and we will need to raise substantial additional capital for those purposes. As a result, we will need to finance our future cash needs through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed in the section of our QuarterlyAnnual Report on Form 10-Q10-K for the periodyear ended December 31, 2020, filed with the SEC on March 31, 201725, 2021 entitled “Risk Factors” and elsewhere in this Form 10-Q.. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
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Until we can generate a sufficient amount of revenue from our TAEUS platform applications, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaborations and licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. As described below, the COVID-19 pandemic has impacted our business operations to some extent and is expected to continue to do so and, in light of the effect of such pandemic on financial markets, these impacts may include reduced access to capital. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts.efforts or perhaps even cease the operation of our business. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to our technologies or applications or grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.
Coronavirus (“COVID-19”) Pandemic
The COVID-19 pandemic has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel.
Beginning in March 2020, we undertook precautionary measures intended to help minimize the risk of the virus to our employees, including requiring most employees to work remotely, pausing all non-essential travel worldwide for our employees, and limiting employee attendance at industry events and in-person work-related meetings, to the extent those events and meetings are continuing. As a cash-conserving measure taken in light of the adverse economic conditions caused by the COVID-19 pandemic, in April 2020 we reduced the cash salaries of members of management by 33% for the remainder of 2020, including the salaries of our executive officers. In lieu of cash, the Company paid this portion of management salaries in the form of restricted stock units that vested over the remainder of the year. Additionally, we amended our Non-Employee Director Compensation Policy to provide that our non-employee directors’ annual retainers for the second, third and fourth fiscal quarters of 2020 would be paid in in the form of restricted stock units rather than cash. To date we do not believe these actions have had a significant negative impact on our operations. However, these actions or additional measures we may undertake may ultimately delay progress on our developmental goals or otherwise negatively affect our business. In addition, third-party actions taken to contain its spread and mitigate its public health effects of COVID-19 may negatively affect our business.
The COVID-19 pandemic has impacted our clinical trial activities. Patient visits in ongoing clinical trials have been delayed, for example, due to prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions imposed by governments, and the inability to access sites for initiation and monitoring. COVID-19 has also had an effect on the business at the FDA and other health authorities by causing them to reallocate resources to addressing the pandemic, which has resulted in delays of reviews and approvals, including with respect to our NAFLD TAEUS application.
Off-Balance Sheet Transactions
At September 30, 2021, the Company did not have any off balancetransactions, obligations or relationships that could be considered off-balance sheet transactions.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item 3 is not required to be provided by issuers that satisfy the definition of “smaller reporting company” under Securities and Exchange Commission rules.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2017,2021, our disclosure controls and procedures were not effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified the following material weakness as of September 30, 2017:2021: insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting.
To remediate our internal control weaknesses, management intends to implement the following measures, as finances allow:
● | Adding sufficient accounting personnel or outside consultants to properly segregate duties and to effect a timely, accurate preparation of the financial statements. In October 2020, we engaged a contractor to assist us with certain accounting tasks, including preparation of financial statements and periodic reports filed with the Securities and Exchange Commission. | |
● | Upon the hiring of additional accounting personnel or outside consultants, develop and maintain adequate written accounting policies and procedures. |
The additional hiring is contingent upon our efforts to obtain additional funding and the results of our operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
Changes in Internal Control over Financial Reporting
There waswere no changechanges to our internal controlscontrol over financial reporting or in other factors that could affect these controls during the three month periodmonths ended September 30, 20172021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, our management is currently seeking resolutions to improve our controls and procedures in an effort to remediate the deficiency described above.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any pending legal proceedings that we believe will have a material adverse effect on our business or financial conditions.condition. We may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Risk Factors” in our QuarterlyAnnual Report on Form 10-Q10-K for the period ended MarchDecember 31, 2017,2020, as filed with the Securities and Exchange Commission on June 21, 2017.March 25, 2021. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this report.
Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits
Exhibit Number | Description | |
101.INS | XBRL Instance Document (filed herewith) | |
101.SCH | XBRL Taxonomy Schema (filed herewith) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase (filed herewith) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase (filed herewith) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase (filed herewith) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase (filed herewith) |
_____________
* Indicates management compensatory plan, contract or arrangement
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ENDRA LIFE SCIENCES INC. | |||
Date: November 15, 2021 | By: | /s/ Francois Michelon | |
Francois Michelon | |||
Chief Executive Officer and Chairman (Principal Executive Officer) | |||
ENDRA LIFE SCIENCES INC. | |||
Date: November 15, 2021 | By: | /s/ Irina Pestrikova | |
Irina Pestrikova | |||
Senior Director, Finance (Principal Financial and Accounting Officer) | |||
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