**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

| (Mark One)

 

 

[X]

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

 

For the quarterly period ended March 31, 2015.

 

 

[   ]

**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

 

For the transition period from _______ to _______.

Commission File Number: **333-176954**

**ENDONOVO THERAPEUTICS, INC.**

(Exact name of registrant as specified in its charter)

 

 

**Delaware**

**45-2552528**

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

**6320 Canoga Avenue, 15th Floor, Woodland Hills, CA 91367**

(Address of principal executive offices, zip code)

**(800) 489-4774**

(Registrant’s telephone number, including area code)

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 [X ]

 

Indicate by check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).  Yes [   ]   No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [   ]

 Accelerated filer [   ]

  

  

Non-accelerated filer [   ]

(do not check if smaller reporting company)

 Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ]  No [X]

As of May 18, 2014, there were 98,497,026 shares of common stock, $0.0001 par value issued and outstanding.

2

**ENDONOVO THERAPEUTICS, INC.**

**TABLE OF CONTENTS**

**FORM 10-Q REPORT**

**March 31, 2015**

 

  

 

**Page**

**Number**

 

**PART I - FINANCIAL INFORMATION**

 

 

 

  

 

 

 

Item 1.  

Financial Statements.

 

4

 

Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

12

 

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk.

 

16

 

Item 4.  

Controls and Procedures.

 

16

 

  

  

 

 

 

**PART II - OTHER INFORMATION**

 

 

 

  

 

 

 

Item 1.  

Legal Proceedings.

 

17

 

Item 1A.

Risk Factors.

 

17

 

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds.

 

18

 

Item 3.  

Defaults Upon Senior Securities.

 

18

 

Item 4.  

Mine Safety Disclosures

 

19

 

Item 5.  

Other Information.

 

19

 

Item 6.  

Exhibits.

 

19

 

  

  

 

 

 

**SIGNATURES**

 

19

 

3

**PART I - FINANCIAL INFORMATION**

**Item 1.  Financial Statements.**

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Condensed Consolidated Balance Sheets**

 

 

 

**March 31,**

 

 

**December 31,**

 

 

 

**2015**

 

 

**2014**

 

 

 

**(Unaudited)**

 

 

**(Audited)**

 

 

 

 

 

 

 

 ASSETS 

 

 

 

 

 

 Current assets: 

 

 

 

 

 

 

 Cash 

$ 

25,648 

 

$ 

988 

 

 Other current assets 

 

- 

 

 

2,000 

 Total current assets 

 

25,648 

 

 

2,988 

 

 

 

 

 

 

 

 Property Plant and Equipment, net 

 

38,961 

 

 

42,601 

 

 

 

 

 

 

 

 

 

$ 

64,609 

 

$ 

45,589 

 

 

 

 

 

 

 

 LIABILITIES AND SHAREHOLDERS' DEFICIT 

 

 

 

 

 

 Current Liabilities 

 

 

 

 

 

 

 Accounts payable and accrued expenses 

$ 

3,411,732 

 

$ 

3,167,346 

 

 Related party advances 

 

8,655 

 

 

900 

 

 Notes payable 

 

953,001 

 

 

1,084,025 

 

 Notes payable - related party 

 

341,000 

 

 

291,000 

 

 Current portion of long term loan 

 

11,764 

 

 

11,677 

 

 

 

 

 

 

 

 Total current liabilities 

 

4,726,152 

 

 

4,554,948 

 

 

 

 

 

 

 

 Long term loan 

 

25,673 

 

 

28,646 

 Acquisition payable 

 

155,000 

 

 

155,000 

 Total liabilities 

 

4,906,825 

 

 

4,738,594 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 Shareholders' deficit 

 

 

 

 

 

 

Common stock, $.0001 par value; 

 

 

 

 

 

 

  250,000,000 shares authorized; 96,433,466 and 81,425,957 shares issued 

 

 

 

 

 

 

  and outstanding as of March 31, 2015 and December 31, 2014 

 

9,644 

 

 

8,143 

 

 Additional paid-in capital 

 

1,922,740 

 

 

1,593,297 

 

 Stock subscriptions 

 

(1,570)

 

 

(1,570)

 

 Accumulated deficit 

 

(6,773,030)

 

 

(6,292,875)

 Total shareholders' deficit 

 

(4,842,216)

 

 

(4,693,005)

 

 

$ 

64,609 

 

$ 

45,589 

 

 

 

 

 

 

 

*See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.*

4

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Condensed Consolidated Statement of Operations**

** (Unaudited)**

 

 

**Three Months Ended**

 

 

**March 31,**

 

 

 

**2015**

 

 

**2014**

 

 

 

 

 

 

 

 Revenues, net 

$ 

2,745 

 

$ 

17,759 

 Cost of goods sold 

 

824 

 

 

8,448 

 Gross profit 

 

1,921 

 

 

9,311 

 

 

 

 

 

 

 

 Operating expenses 

 

433,554 

 

 

576,434 

 Loss from operations 

 

(431,633)

 

 

(567,123)

 

 

 

 

 

 

 

 Other income (expense) 

 

 

 

 

 

 

 Other income 

 

- 

 

 

535 

 

 Interest expense, net 

 

(48,522)

 

 

(61,927)

   

 

 

(48,522)

 

 

(61,392)

 

 

 

 

 

 

 

 Loss before income taxes 

 

(480,155)

 

 

(628,515)

 

 

 

 

 

 

 

 Provision for income taxes 

 

- 

 

 

- 

 

 

 

 

 

 

 

 Net loss 

$ 

(480,155)

 

$ 

(628,515)

 

 

 

 

 

 

 

 Basic and diluted loss per share 

$ 

(0.01)

 

$ 

(0.01)

 Weighted average common share outstanding: 

 

 

 

 

 

 

 Basic and diluted 

 

84,824,577 

 

 

85,996,385 

 

 

 

 

 

 

 

*See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.*

5

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Condensed Consolidated Statement of Cash Flows**

**(Unaudited)**

 

 

 

 

** Three Months ended March 31,  **

 

 

 

 

 

**2015**

 

 

**2014**

 Operating activities: 

 

 

 

 

 

 

 Net loss 

 

$ 

(480,155)

 

$ 

(628,515)

 

 Adjustments to reconcile net loss to cash  

 

 

 

 

 

 

 

 used in operating activities: 

 

 

 

 

 

 

 

 Depreciation and amortization expense 

 

3,640 

 

 

3,175 

 

 

 Fair value of equity issued for services 

 

2,304 

 

 

4,715 

 

 

 Non-cash amortization of interest 

 

1,766 

 

 

10,330 

 

 

 Changes in assets and liabilities: 

 

 

 

 

 

 

 

 

 Other current assets 

 

2,000 

 

 

- 

 

 

 

 Inventory 

 

- 

 

 

(39,200)

 

 

 

 Accounts payable and accrued expenses 

 

276,609 

 

 

453,565 

 Net cash used in operating activities 

 

(193,836)

 

 

(195,930)

 

 

 

 

 

 

 

 

 

 Investing activities: 

 

 

 

 

 

 

 Net cash used in investing activities 

 

- 

 

 

- 

 

 

 

 

 

 

 

 

 

 Financing activities: 

 

 

 

 

 

 

 Proceeds from the issuance of notes payable 

 

212,500 

 

 

287,000 

 

 Proceeds from related party advances 

 

7,755 

 

 

- 

 

 Proceeds from issuance of common stock 

 

177 

 

 

- 

 

 Payment against long term loan 

 

(1,936)

 

 

(3,399)

 

 Payment against notes payable- related party 

 

- 

 

 

(11,280)

 Net cash provided by financing activities 

 

218,496 

 

 

272,321 

 

 

 

 

 

 

 

 

 

 Net increase in cash 

 

24,660 

 

 

76,391 

 Cash, beginning of year 

 

988 

 

 

3,255 

 Cash, end of period 

$ 

25,648 

 

$ 

79,646 

 

 

 

 

 

 

 

 

 

 Supplemental disclosure of cash flow information: 

 

 

 

 

 

 Cash paid for interest 

$ 

- 

 

$ 

219 

 Cash paid for income taxes 

$ 

- 

 

$ 

532 

 

 

 

 

 

 

 

 

 

Non Cash Investing and Financing Activities:

 

 

 

 

 

 

Conversion of notes payable and accrued 

 

 

 

 

 

 

 

 interest to common stock 

$ 

328,138 

 

$

- 

 

 

 

 

 

 

 

 

 

*See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.*

6

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Condensed Consolidated Statement of Shareholders’ Deficit**

**(Unaudited)**

 

 

 

 

 

 

 

** Additional**

 

 

** Common Stock  **

 

 

 

 

 

** Total**

 

** Common Stock**

 

 

** Paid-in**

 

 

** Subscription**

 

 

** Retained  **

 

 

** Shareholder's**

 

** Shares**

 

 

** Amount**

 

 

** Capital**

 

 

** Receivable**

 

 

** Earnings**

 

 

** Deficit**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance December 31, 2014 

81,425,957

 

 $ 

8,143

 

 $ 

1,593,297

 

 $ 

(1,570)

 

 $ 

(6,292,875)

 

 $ 

(4,693,005)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Shares issued for cash 

177,631

 

 

18

 

 

159

 

 

- 

 

 

- 

 

 

177 

 Share issued for services 

2,304,286

 

 

230

 

 

2,074

 

 

- 

 

 

- 

 

 

2,304 

 Shares issued with notes payable 

325,000

 

 

33

 

 

292

 

 

- 

 

 

- 

 

 

325 

 Share issued for conversion of notes

payable and accrued interest 

12,200,592

 

 

1,220

 

 

326,918

 

 

- 

 

 

- 

 

 

328,138 

 Net loss  

-

 

 

-

 

 

-

 

 

- 

 

 

(480,155)

 

 

(480,155)

 Balance March 31, 2015 

96,433,466

 

 $ 

9,644

 

 $ 

1,922,740

 

 $ 

(1,570)

 

 $ 

(6,773,030)

 

 $ 

(4,842,216)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.*

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Notes to Condensed Consolidated Financial Statements**

**Note 1 - Organization and Nature of Business**

Endonovo Therapeutics, Inc. and Subsidiaries (the “Company” or “ETI”) operates in two business segments: 1) intellectual property licensing and commercialization; and 2) biomedical research and development which has included the development of the TVEMF device which has been the source of all revenues in the current year.  

 

*Basis of Presentation and Principles of Consolidation*

The accompanying unaudited interim condensed consolidated financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The condensed consolidated financial statements as of March 31, 2015, and 2014 are unaudited; however, in the opinion of management such interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the period presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.

The consolidated financial statements of the Company include the accounts of ETI and IPR as of March 14, 2012; Aviva as of April 2, 2013; and WeHealAnimals as of November 16, 2013. All significant intercompany accounts and transactions are eliminated in consolidation.

*Going Concern*

These accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for a period following the date of these consolidated financial statements.  The Company has raised approximately $212,500 in debt financing for the period January 1, 2015 to March 31, 2015.  The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations.  However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern.  No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from it license agreements, has initiated a private placement offering to raise capital through the sale of its common stock and is seeking out profitable companies.  Although, uncertainty exists as to whether the Company will be able generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

*Recent Accounting Standard Updates*

The Company is not aware of any recently issued accounting pronouncements that when adopted will have a material effect on the Company’s financial position or result of its operations.

*Reclassification*

The 2014 financial statements have been reclassified to conform to the current year presentation.

**Note 2 - Property and Equipment**

The following is a summary of equipment, at cost, less accumulated depreciation at March 31, 2015 and December 31, 2014:

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Notes to Condensed Consolidated Financial Statements (continued)**

 

 

 

**March**

**31,**

 

 

**December 31,**

 

 

 

**2015**

 

 

**2014**

 

 

 

 

 

 

 

Autos

 

$

64,458

 

$

64,458

Medical equipment

 

 

5,000

 

 

5,000

Other equipment

 

 

4,945

 

 

4,945

 

 

 

74,403

 

 

74,403

Less accumulated depreciation 

 

 

35,442

 

 

31,802

 

 

$

38,961

 

$

42,601

**Note 3 - Notes Payable and Long Term Loan**

*Notes Payable*

In October 2013, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance.  Also, the Company agreed to issue 125,000 shares of its common stock for each unit. In July 2014, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance.  Also, the Company agreed to issue 50,000 shares of its common stock for each unit. In October 2014, the Company initiated a private placement for up to $500,000 of financing by the issuance of notes payable at a minimum of $25,000. The notes bear interest at 10% per annum and are due and payable with accrued interest one year from issuance.  Also, the Company agreed to issue 50,000 shares of its common stock for each unit. From January 1, 2014 to March 31, 2015, the company has issued promissory notes for an aggregate principal of approximately $1,158,000.

 

 

**As of**

 

 

 

**March 31, 2015**

 

 

**December 31, 2014**

Notes payable at beginning of period

 

$

1,377,416 

 

$

710,072 

Notes payable issued for cash

 

 

212,500 

 

 

935,500 

Less amounts converted to stock

 

 

(295,915)

 

 

(268,156)

Notes payable at end of period

 

 

1,294,001 

 

 

1,377,416 

Less debt discount

 

 

- 

 

 

(2,391)

 

 

$

1,294,001 

 

$

1,375,025 

 

 

 

 

 

 

 

Notes payable issued to related parties

 

$

341,000 

 

$

291,000 

Notes payable issued to non-related parties

 

$

953,001 

 

$

1,086,416 

*Long Term Loan*

The Company has financed the purchase of an automobile.  The maturity dates on the loan are as follows:

9

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Notes to Condensed Consolidated Financial Statements (continued)**

 

Twelve months ending,

 

 

 

 

March 31, 2016

 

$

11,764

 

March 31, 2017

 

$

12,121

 

March 31, 2018

 

$

12,488

 

March 31, 2019

 

$

1,064

 

 

 

$

37,437

 

 

 

 

 

 

Current portion

 

$

11,764

 

Long term portion

 

$

25,673

**Note 4 - Shareholders’ Deficit**

*Reverse Spilt*

On April 28, 2014, we concluded the process of changing our corporate name to Endonovo Therapeutics, Inc. and began trading under the symbol ENDV.  The Company enacted a reverse stock split effective May 15, 2014.  All share and per share numbers in this report have been adjusted for the reverse stock split.

*Common Stock*

The Company has entered into consulting agreements with various consultants for service to be provided to the Company. The agreements stipulate a monthly fee and a certain number of shares that the consultant vests in over the term of the contract. The consultant is issued a prorated number of shares of common stock at the beginning of the contract, which the consultant earns over a three-month period. At the anniversary of each quarter, the consultant is issued a new allotment of common stock. In accordance with ASC 505-50 – Equity-Based Payment to Non-Employees, the common stock shares issued to the consultant are valued upon their vesting, with interim estimates of value as appropriate during the vesting period.

The shares of common stock that have vested through January 2013 were valued based on a valuation performed by an independent valuation firm as the Company had no active market for its shares prior to that time. The Company’s shares began trading in January 2013; as a result the Company utilized market value for its stock when valuing its common stock for the three months ended March 31, 2013. During the second quarter of 2013, the Company revalued the shares based on low trading volume to $0.001. During the three months ended March 31, 2015, the Company granted 2,304,286 shares for services performed by consultants and recorded expense of $2,304.  

During the three months ended March 31, 2015, the Company issued 325,000 shares of common stock to the purchasers of notes.  The share issuance was valued at $325.

In addition, during the three months ended March 31, 2015, the Company issued 12,200,592 shares of common stock on the conversion of notes in an amount of $295,915 and accrued interest of $32,223.

10

**Endonovo Therapeutics, Inc. and Subsidiaries**

**Notes to Condensed Consolidated Financial Statements (continued)**

**Note 5 – Related Party Transactions**

From time-to-time officers of the Company advance monies t the Company to cover costs.  During the three months ended March 31, 2015, officers advanced $7,755 of funds to the Company.  No repayments were made during the period.

As further illustrated in Note 3, officers of the Company have entered into note payable agreements with the Company.  During the quarter ended March 31, 2015, the Company received $50,000 from an officer.  The balance of notes payable from related parties at March 31, 2015 is $341,000. 

**Note 6 – Subsequent Events**

From April 1, 2015 through May 12, 2015 an aggregate of 1,695,000 shares of restricted common stock were issued as compensation to independent contractors.

From April 1, 2015 through May 12, 2015, the Company issued $37,500 in notes payable and issued 75,000 shares of its restricted common stock pursuant to a Private Placement Memorandum and private offerings.

From April 1, 2015 through May 12, 2015, the Company issued an aggregate of 43,500 shares of its restricted common stock pursuant to Securities Purchase Agreements.

On May 16, 2015 the Company issued 250,000 shares as part of an extension agreement to Donnie Rudd’s $96,000 Note Payable, which was due and payable on May 15, 2015. As part of the extension, the new due date of the Note is August 15, 2015.

As a result of these issuances the total number of shares outstanding is 98,497,026.

11

**Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations**

**Cautionary Notice Regarding Forward Looking Statements**

 

The information contained in Item 2 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. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

 

This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

 

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

**Overview**

Endonovo Therapeutics, Inc.  (the “Company” or “END”) is comprised of two business segments: (1) a debt portfolio management company and (2) an intellectual property management and commercialization company.

Our intellectual property management and commercialization segment is operated through our wholly-owned subsidiary, IP Resources International, Inc. (“IPR”).  IPR focuses primarily on licensing various commercially desirable technologies and patents from companies that need operating capital or that need help commercializing their technology and sublicense such technology in designated territories.  This segment acquires exclusive licenses for marketable technology normally without the payment of any upfront license fee to the licensor and thereafter, to sub-license the technology in the designated markets, including Asia, Europe, and Brazil.  Our results depend upon our ability to locate available, licensable, and readily marketable technology, to negotiate favorable licenses for such technology, and to sub-license the technology in the designated markets at a sufficient level of volume in an effort to generate maximum revenues.

Our medical device business, which is our present primary focus, is primarily engaged in the development, patenting and regulatory approval of our proprietary square wave form device and therapies.

**Going Concern**

Our independent registered auditors included an explanatory paragraph in their opinion on our consolidated financial statements as of and for the fiscal year ended December 31, 2014 that states that our ongoing losses and lack of resources causes substantial doubt about our ability to continue as a going concern.

12

**Critical Accounting Policies and Estimates**

We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below.

*Use of estimates*

In the opinion of management, the accompanying condensed consolidated balance sheets and related interim statements of operations, cash flows, and shareholders' deficit include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. The significant estimates were made for the fair value of common stock issued for services and depreciation and amortization of our long-lived assets. Actual results and outcomes may differ from management's estimates and assumptions.

*Revenue recognition*

The Company recognizes revenue from its technology licensing and commercialization activities in accordance with paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.

The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer and accepted by the customer as completed pursuant to Company’s Licensing Agreements, (iii) collectability is reasonably assured. The Company has yet to realize any revenues from its licensing agreements.  All of our revenues in the current year are from the sale of the TVEMF device.

**Recently Issued Accounting Pronouncements**

The Company is not aware of any recently issued accounting pronouncements that when adopted will have a material effect on the Company’s financial position or result of its operations.

13

**Results of Operations Three Months ended March 31, 2015 and March 31, 2014**

 

 

 

 

**Three Months Ended March 31,**

 

 

**Favorable**

 

 

 

 

 

 

** 2015**

 

 

** 2014**

 

 

**(Unfavorable)**

 

**%**

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,745 

 

$

17,759 

 

$

(15,014)

 

-84.5%

Cost of revenue

 

 

824 

 

 

8,448 

 

 

7,624 

 

90.2%

Gross profit

 

 

1,921 

 

 

9,311 

 

 

(7,390)

 

-79.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

433,554 

 

 

576,434 

 

 

(142,880)

 

-24.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(431,633)

 

 

(567,123)

 

 

135,490 

 

23.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

(48,522)

 

 

(61,392)

 

 

12,870 

 

21.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(480,155)

 

$

(628,515)

 

$

148,360 

 

23.6%

*Revenues*

We had $2,745 in net revenues for the three months ended March 31, 2015 compared to $17,759 for the three months ended March 31, 2014. We are in an early stage and our revenues will be small and erratic until our operations develop.  The growth of our business is dependent on successfully raising additional capital to fund our growth 

*Operating Expenses*

Our operating expenses for the three months ended March 31, 2015 were approximately $434,000. The operating expenses were comprised primarily from consulting and professional fees for the development of our intellectual property management and licensing activities and expenses related to being a public company. Interest expenses for our debt were approximately $49,000. 

 

14

*Liquidity and Capital Resources  *

 

 

 

 

 As of 

 

 

Increase

 

 

 

 

 March 31,

2015 

 

 

December 31, 2014 

 

 

(Decrease)

Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

25,648 

 

$

2,988 

 

$

22,660 

Current liabilities

 

 

4,726,152 

 

 

4,554,948 

 

 

171,204 

  Working capital deficit

$

(4,700,504)

 

$

(4,551,960)

 

$

148,544 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

180,673 

 

$

183,646 

 

$

(2,973)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

$

(4,842,216)

 

$

(4,693,005)

 

$

149,211 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three Months Ended March 31,  

 

 

Increase

 

 

 

 

2015

 

 

2014

 

 

(Decrease)

Statements of Cash Flows Select Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by:

 

 

 

 

 

 

 

 

   Operating activities

 

$

(193,836)

 

$

(195,930)

 

$

(2,094)

   Investing activities

 

$

- 

 

$

- 

 

$

- 

   Financing activities

 

$

218,496 

 

$

272,321 

 

$

(53,825)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 As of 

 

 

Increase

 

 

 

 

 March 31,

2015 

 

 

 December 31, 2014 

 

 

(Decrease)

Balance Sheet Select Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Cash 

 

 

$

25,648

 

$

988

 

$

24,660 

 

 

 

 

 

 

 

 

 

 

 

  Accounts payable and accrued expenses

$

3,411,732

 

$

3,167,346

 

$

244,386 

Since inception and through March 31, 2015, the Company has raised approximately $1,600,000 in equity and debt transactions. These funds have been used to commence the operations of the Company to acquire and begin the development of its license portfolio. These activities include attending trade shows, marketing our licenses and corporate development.  Our accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these condensed consolidated financial statements. The Company has incurred substantial losses since inception.  Its current liabilities exceed its current assets and available cash is not sufficient to fund expected future operations.  The Company is raising additional capital through debt and equity securities in order to continue the funding of its 

15

operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. To reduce the risk of not being able to continue as a going concern, management has implemented its business plan to materialize revenues from it license agreements and has initiated a private placement offering to raise capital through the sale of its common stock.  Although, uncertainty exists as to whether the Company will be able generate enough cash from operations to fund the Company’s working capital needs or raise sufficient capital to meet the Company’s obligations as they become due, no adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.  Our cash on hand at March 31, 2015 was approximately $25,600.  This will only fund operations for a few months if additional capital is not raised.  The Company raised an aggregate of approximately $212,500 through the sale of equity and debt securities during the quarter ended March 31, 2015.

The Company is not aware of any recently issued accounting pronouncements that when adopted will have a material effect on the Company’s financial position or result of its operation.

**Off-Balance Sheet Arrangements**

 

We have no off-balance sheet arrangements.

 

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk.**

We are a Smaller Reporting Company and are not required to provide the information under this item.

**Item 4.  Controls and Procedures.**

*Disclosure of controls and procedures.*

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below. 

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or 

16

detected.  Management has identified the following two material weaknesses which have caused management to conclude that as of March 31, 2015 our disclosure controls and procedures were not effective at the reasonable assurance level:

1.  We do not have written documentation of our internal control policies and procedures.  Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ended March 31, 2015.  Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.  We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

**Changes in internal controls over financial reporting.**

 

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

**PART II - OTHER INFORMATION**

**Item 1.  Legal Proceedings.**

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

**Item 1A.  Risk Factors.**

 

We are a Smaller Reporting Company (as defined in Rule 12b-2 of the Exchange Act) and are not required to provide the information under this item.

 

**Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.**

Number of

 

 

 

 

Common Shares

 

Source of 

 

 

Issued

 

Payment

 

Amount

 2,304,286 

 

Services

 

 $2,304 

 325,000 

 

Note issuance

 

 $325 

 177,631 

 

Cash

 

 $177 

 12,200,592 

 

Conversion of note

 

 $328,138 

17

The above issuances of securities during the three months ended March 31, 2015 were exempt from registration pursuant to Section 4(2), and/or Regulation D promulgated under the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

**Item 3.  Defaults Upon Senior Securities.**

 

None

 

**Item 4.**  **Mine Safety Disclosures.**

 

Not applicable

**Item 5.  Other Information**

 

None

I**tem 6.  Exhibits**

**Exhibit**

**Number**

 

**Exhibit Title**

 

 

 

3.1

 

Certificate of Amendment to the Certificate of Incorporation affecting a 100 for one reverse stock split.

 

 

31.1

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32.1

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.INS *

XBRL Instance Document

  

  

101.SCH *

XBRL Taxonomy Schema

  

  

101.CAL *

XBRL Taxonomy Calculation Linkbase

  

  

101.DEF *

XBRL Taxonomy Definition Linkbase

  

  

101.LAB *

XBRL Taxonomy Label Linkbase

  

  

101.PRE *

XBRL Taxonomy Presentation Linkbase

 

 

In accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.

 

 

* To be furnished by amendment. XBRL (Extensible Business Reporting Language) information        is         furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of        the         Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act        of 1934, as         amended, and otherwise is not subject to liability under these sections.

  

18

**7.  Subsequent Events**

From April 1, 2015 through May 12, 2015 an aggregate of 1,695,000 shares of restricted common stock were issued as compensation to independent contractors.

From April 1, 2015 through May 12, 2015, the Company issued $37,500 in notes payable and issued 75,000 shares of its restricted common stock pursuant to a Private Placement Memorandum and private offerings.

From April 1, 2015 through May 12, 2015, the Company issued an aggregate of 43,500 shares of its restricted common stock pursuant to Securities Purchase Agreements.

On May 16, 2015 the Company issued 250,000 shares as part of an extension agreement to Donnie Rudd’s $96,000 Note Payable, which was due and payable on May 15, 2015. As part of the extension, the new due date of the Note is August 15, 2015.

As a result of these issuances the total number of shares outstanding is 98,497,026.

**SIGNATURES**

Pursuant to the requirements 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.

 

Dated: May 19, 2014

**Endonovo Therapeutics, Inc.**

  

  

  

  

  

By:

/s/  *Alan Collier*

  

  

  

Alan Collier

  

  

  

Chief Executive Officer

(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)

  

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