What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-19 compared with 2024-08-14 · 52 added, 49 removed, 137 unchanged (42% of the section changed)

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Available Information

From time to time, we use press releases, Twitter (@endralifesci) and LinkedIn (www.linkedin.com/company/endra-inc) to distribute material information.

From time to time, we use press releases, X (formerly) 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.

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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.

Information that is contained in and can be accessed through our website, X 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.

We are leveraging experience with pre-clinical enhanced ultrasound devices to develop technology for increasing the capabilities of clinical diagnostic ultrasound and other types of capital equipment, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray CT and MRI technology, or other diagnostic technologies such as surgical biopsy, are unavailable or impractical.

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In March 2020, we received CE mark approval for our TAEUS FLIP (“Fatty Liver Imaging Probe”) System, enabling its marketing and sales 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 Fatty Live Imaging Probe (“FLIP”) System.

In June 2020, we submitted a 510(k) Application to the FDA for our TAEUS Fatty Liver Imaging Probe (“FLIP”) System.

In February 2022, we announced that we would pursue FDA reclassification and clearance of our TAEUS FLIP System through the FDA’s “de novo” process.

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Financial Operations Overview

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of June 30, 2024.

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of September 30, 2024.

Research and Development Expenses

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Currently, our marketing efforts are through our website and attendance of key industry meetings and conferences.

In connection with the commercialization of our TAEUS applications, we are building a small sales and marketing team to train and support global ultrasound distributors and expect to execute traditional marketing activities such as promotional materials, electronic media and participation in industry events and conferences.

During the quarter, we restructured our European sales operations to better align with the Company’s near-term sales prospects.

We expect to add to our sales representation and support headcount for operations in the EU as resources permit in the future, and plan to begin staffing our sales efforts in the United States once we have obtained FDA approval for the sale of the NAFLD TAEUS device in that region.

During the second quarter, we restructured our European sales operations to better align with the Company’s near-term sales prospects.

We expect to add to our sales representation and support headcount for operations in the EU as demand and resources permit in the future, and plan to begin staffing our sales efforts in the United States once we have obtained FDA approval for the sale of the NAFLD TAEUS device in that region.

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 services.

We anticipate that our general and administrative expenses will increase in the future as we support our continued research and development activities, expand our sales and marketing operations, and continue as a public company.

These increases would likely include increased costs related to the hiring of personnel, including compensation and employee-related expenses, including stock-based compensation, and fees to outside consultants, lawyers and accountants, among other expenses.

Additionally, we anticipate continued costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors and officers insurance, increased legal and accounting costs and investor relations costs.

We anticipate continued costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors and officers insurance, increased legal and accounting costs and investor relations costs.

Critical Accounting Policies and Estimates

Warrant Liability

The Company accounts for the liability classified warrants in accordance with the guidance contained in ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging.

Such guidance provides criteria for instruments do not meet the criteria for equity treatment thereunder.

This liability is subject to re-measurement at each balance sheet date.

With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

Use of Estimates

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On January 1, 2024, the pool of shares issuable under the Omnibus Plan automatically increased by 982 shares from 756 shares to 1,737 shares.

As of June 30, 2024, there were 2,360,765 shares of common stock remaining available for issuance under the Omnibus Plan.

As of September 30, 2024, there were 1,458 shares of common 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.

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Results of Operations

Three months ended June 30, 2024 and 2023

We had no revenue during the three months ended June 30, 2024 and 2023.

Three months ended September 30, 2024 and 2023

We had no revenue during the three months ended September 30, 2024 and 2023.

Cost of Goods Sold

We had no cost of goods sold during the three months ended June 30, 2024 and 2023.

We had no cost of goods sold during the three months ended September 30, 2024 and 2023.

Research and Development

Research and development expenses were $716,366 for the three months ended June 30, 2024, as compared to $1,400,182 for the three months ended June 30, 2023, a decrease of $683,816 or 49%.

The costs include primarily wages, fees and equipment for the development of our TAEUS product line.

Research and development expenses were $794,444 for the three months ended September 30, 2024, as compared to $1,632,849 for the three months ended September 30, 2023, a decrease of $838,405 or 51%.

The costs include primarily wages, fees, equipment and third-party costs for the development of our TAEUS product line.

Research and development expenses decreased from the prior year as we complete development of our initial TAEUS product and began focusing our spending on clinical trials and commercialization of the product that has been developed.

Sales and Marketing

Sales and marketing expenses were $162,952 for the three months ended June 30, 2024, as compared to $247,773 for the three months ended June 30, 2023, a decrease of $84,821, or 34%.

Sales and marketing expenses were $83,157 for the three months ended September 30, 2024, as compared to $243,332 for the three months ended September 30, 2023, a decrease of $160,175, or 66%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

Sales and marketing expenses decreased largely due to the decrease in consulting fees.

Sales and marketing expenses decreased largely due to our restructuring in the second quarter.

Currently, our marketing efforts are through our website and attendance of key industry meetings.

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2024 were $1,351,535, compared to $1,346,610 for the three months ended June 30, 2023, an increase of $4,925, or 0%.

Our wage and related expenses for the three months ended June 30, 2024 were $581,096, compared to $558,068 for the three months ended June 30, 2023.

Wage and related expenses in the three months ended June 30, 2024 included $72,869 of stock compensation expense related to the issuance and vesting of options, compared to $88,200 of stock compensation expense related to the issuance and vesting of options, for the three months ended June 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the three months ended June 30, 2024 were $582,327, compared to $503,697 for the three months ended June 30, 2023.

Other income was $1,700 for the three months ended June 30, 2024, as compared to $437,433 for the three months ended June 30, 2023.

Other income for the three months ended June 30, 2023, resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $ 413,844.

As a result of the foregoing, for the three months ended June 30, 2024, we recorded a net loss of $2,229,153, compared to a net loss of $2,557,132 for the three months ended June 30, 2023.

Six months ended June 30, 2024 and 2023

We had no revenue during the six months ended June 30, 2024 and 2023.

Our general and administrative expenses for the three months ended September 30, 2024 were $631,413, compared to $1,252,881 for the three months ended September 30, 2023, a decrease of $621,468, or 49%.

Our wage and related expenses for the three months ended September 30, 2024 were $(142,536), compared to $565,639 for the three months ended September 30, 2023.

Wage and related expenses in the three months ended September 30, 2024 included $(144,445) of cancellation of equity awards in connection with the departure of an executive officer, compared to $67,932 of stock compensation expense related to the issuance and vesting of options for the three months ended September 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the three months ended September 30, 2024 were $598,255, compared to $447,515 for the three months ended September 30, 2023.

Other income (expense) was $(845,076) for the three months ended September 30, 2024 was primarily due to accounting for warrants.

Other income was $28,226 for the three months ended September 30, 2023, a decrease of $873,302 or 3,094%.

As a result of the foregoing, for the three months ended September 30, 2024, we recorded a net loss of $2,354,090, compared to a net loss of $3,100,836 for the three months ended September 30, 2023.

Nine months ended September 30, 2024 and 2023

We had no revenue during the nine months ended September 30, 2024 and 2023.

Cost of Goods Sold

We had no cost of goods sold during the six months ended June 30, 2024 and 2023.

We had no cost of goods sold during the nine months ended September 30, 2024 and 2023.

Research and Development

Research and development expenses were $1,757,892 for the six months ended June 30, 2024, as compared to $2,791,496 for the six months ended June 30, 2023, a decrease of $1,033,604 or 37%.

The costs include primarily wages, fees and equipment for the development of our TAEUS product line.

Research and development expenses were $2,552,336 for the nine months ended September 30, 2024, as compared to $4,424,345 for the nine months ended September 30, 2023, a decrease of $1,872,009 or 42%.

The costs include primarily wages, fees, equipment and third-party costs for the development of our TAEUS product line.

Research and development expenses decreased from the prior year as we completed development of our initial TAEUS product and began focusing our spending on commercialization of the product that has been developed.

Sales and Marketing

Sales and marketing expenses were $401,612 for the six months ended June 30, 2024, as compared to $429,389 for the six months ended June 30, 2023, a decrease of $27,777, or 6%.

Sales and marketing expenses were $484,769 for the nine months ended September 30, 2024, as compared to $672,721 for the nine months ended September 30, 2023, a decrease of $187,952, or 28%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

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General and Administrative

Our general and administrative expenses for the six months ended June 30, 2024 were $2,851,890, compared to $2,713,008 for the six months ended June 30, 2023, an increase of $138,882, or 5%.

Our wage and related expenses for the six months ended June 30, 2024 were $1,222,478, compared to $1,169,887 for the six months ended June 30, 2023.

Wage and related expenses in the six months ended June 30, 2024 included $237,990 of stock compensation expense related to the issuance and vesting of options, compared to $166,065 of stock compensation expense related to the issuance and vesting of options, for the six months ended June 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the six months ended June 30, 2024 were $1,222,199, compared to $1,024,335 for the six months ended June 30, 2023.

Other income was $6,541 for the six months ended June 30, 2024, as compared to $434,015 for the six months ended June 30, 2023.

Other income for the six months ended June 30, 2023, resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $413,844.

As a result of the foregoing, for the six months ended June 30, 2024, we recorded a net loss of $5,004,853, compared to a net loss of $5,499,878 for the six months ended June 30, 2023.

Our general and administrative expenses for the nine months ended September 30, 2024 were $3,483,303 compared to $3,965,889 for the nine months ended September 30, 2023, a decrease of $482,586, or 12%.

Our wage and related expenses for the nine months ended September 30, 2024 were $1,079,942, compared to $1,735,526 for the nine months ended September 30, 2023.

Wage and related expenses in the nine months ended September 30, 2024 included $93,545 of stock compensation expense related to the issuance and vesting of options, compared to $252,948 of stock compensation expense related to the issuance and vesting of options, for the nine months ended September 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the nine months ended September 30, 2024 were $1,820,454, compared to $1,471,850 for the nine months ended September 30, 2023.

Other income (expense) was $(838,535) for the nine months ended September 30, 2024 was primarily due to accounting for warrants.

Other income was $462,241 for the nine months ended September 30, 2023 and resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $413,844.

Other income (expense) decreased $1,300,776 or 281% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

As a result of the foregoing, for the nine months ended September 30, 2024, we recorded a net loss of $7,358,943, compared to a net loss of $8,600,714 for the nine months ended September 30, 2023.

Near-Term Liquidity and Capital Resources

We are experiencing financial and operating challenges.

As of June 30, 2024, we had an accumulated deficit of $96,935,005 and had $6,400,732 in cash.

As of September 30, 2024, we had an accumulated deficit of $99,289,095 and had $4,745,187 in cash.

To date we have funded our operations through private and public sales of our securities and will need to raise additional funds in order to execute on our business plan, fully commercialize our TAEUS technology, and generate revenues.

We need additional capital to allow us to continue to execute our commercialization plans.

We are considering potential financing options that may be available to us, such as sales of our common stock, including through our at-the-market sales program with Ascendiant Capital Markets, LLC.

We are considering potential financing options that may be available to us, such as sales of our common stock, including through our at-the-market sales program.

Except for the at-the-market sales program, we have no commitments to obtain any additional funds, and there can be no assurance funds will be available in sufficient amounts or on acceptable terms.

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The consolidated financial statements included in this Form 10-Q have been prepared assuming we 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 six months ended June 30, 2024, we incurred net losses of $5,004,853 and used cash in operations of $4,227,613.

In light of our cash balance as of June 30, 2024, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

As reflected in the accompanying consolidated financial statements, during the nine months ended September 30, 2024, we incurred net losses of $7,358,943 and used cash in operations of $5,884,842.

In light of our cash balance as of September 30, 2024, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

Operating Activities

During the six months ended June 30, 2024, we used $4,227,613 of cash in operating activities primarily as a result of our net loss of $5,004,853, offset by share-based compensation of $504,087, amortization of right of use assets of $81,807, inventory reserve of $4,687, depreciation expense of $23,993, fixed assets write-off of $8,808, and net changes in operating assets and liabilities of $153,858.

During the six months ended June 30, 2023, we used $4,775,442 of cash in operating activities primarily as a result of our net loss of $5,499,878, offset by share-based compensation of $493,134, depreciation expense of $69,781, amortization of right of use assets of $73,974, and net changes in operating assets and liabilities of $87,547.

During the nine months ended September 30, 2024, we used $5,884,842 of cash in operating activities primarily as a result of our net loss of $7,358,943, offset by share-based compensation of $467,240, amortization of right of use assets of $124,320, inventory reserve of $4,687, depreciation expense of $35,489, fixed assets write-off of $8,808, warrant expense of $7,323,685, change in fair value of warrant liability of $(3,341,829), gain on settlement of warrant exercises of $(3,071,252), and net in operating assets and liabilities of $77,047.

During the nine months ended September 30, 2023, we used $7,374,197 of cash in operating activities primarily as a result of our net loss of $8,600,714, offset by share-based compensation of $745,873, depreciation expense of $101,839, amortization of right of use assets of $112,365, and net changes in operating assets and liabilities of $266,440.

Investing Activities

During the six months ended June 30, 2024, we used $16,000 in investing activities related to purchases of fixed assets, and received $3,204 in proceeds from sale of fixed assets.

During the six months ended June 30, 2023, we used $27,000 in investing activities related to purchases of fixed assets.

During the nine months ended September 30, 2024, we used $16,000 in investing activities related to purchases of fixed assets, and received $3,204 in proceeds from sale of fixed assets.

During the nine months ended September 30, 2023, we used $27,000 in investing activities related to purchases of fixed assets.

Financing Activities

During the six months ended June 30, 2024, our financing activities provided $1,148,470 in proceeds from issuances of common stock, $6,687,248 in proceeds from warrant exercises.

During the nine months ended September 30, 2024, our financing activities provided $1,148,470 in proceeds from issuances of common stock,$5,368,363 in proceeds from issuance of warrants, and $1,320,568 in proceeds from the issuance of cashless warrants.

We also used $28,484 to repay a loan from TD Bank under the Canadian Emergency Business Account.

During the six months ended June 30, 2023, our financing activities provided $4,732,803 in proceeds from issuances of common stock and warrants.

During the nine months ended September 30, 2023, our financing activities provided $5,846,635 in proceeds from issuances of common stock and warrants.

Long-Term Liquidity

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Off-Balance Sheet Transactions

At June 30, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

At September 30, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Quantitative and Qualitative Disclosure About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis