Item 1. Business
Item 1. Business
OVERVIEW
We were incorporated as a Delaware
corporation in 2007. We are developing a next-generation enhanced ultrasound technology platform—Thermo- Acoustic Enhanced
Ultrasound, or TAEUS®.
Our initial focus for the development and
commercialization of TAEUS is a solution for the assessment of liver fat, a key biomarker associated with metabolic diseases,
including metabolic dysfunction-associated steatotic liver disease (“MASLD”) and metabolic dysfunction-associated
steatohepatitis
(“MASH”).
Our objective is to develop a scalable biomarker
solution for metabolic disease assessment and management through a non-invasive, point- of-care approach.
We have periodically evaluated and refined
our vision, purpose, and go-to-market strategy with respect to TAEUS in response to evolving market conditions and development
priorities.
To support adoption across targeted market segments,
we are focused on:
● Leveraging artificial intelligence and machine learning models to enhance measurement accuracy accuracy
and reproducibility;
● Integrating thermo-acoustic technology with conventional ultrasound to streamline workflows and reduce
operator variability; and
● Reducing system size and cost to improve accessibility across care settings.
For our go-to-market strategy, we intend to focus
on serving these four markets:
1. Pharmaceutical Companies and Clinical Research Organizations (“CROs”);
2. High-end Primary Care Networks (Concierge Medicine);
3. Bariatric and Metabolic Clinics; and
4. Primary and Internal Medicine Practices.
We plan to offer a multi-year,
subscription-based business model with recurring revenue, while continuing to support traditional capital equipment sales with
associated service and upgrade offerings.
In 2025, the Company expanded its business
strategy to include a Digital Asset Treasury (“DAT”) initiative, managed in collaboration with Arca Investment
Management (“Arca”), which seeks to optimize capital preservation and generate non-dilutive returns through investments
in decentralized finance (“DeFi”) assets. This financial strategy operates in tandem with the Company’s core
medical technology mission: the commercialization of the TAEUS platform via a recurring subscription model, with a specific focus on
the burgeoning GLP-1 and metabolic disease markets.
RECENT DEVELOPMENTS
We continue to examine the positioning
(need, cost, and technical considerations) of our TAEUS platform in the rapidly evolving market for point-of-care assessment of
liver fat disease against other opportunities for our platform, such as monitoring of thermo-ablative surgical procedures.
In 2026, we implemented cost reduction
measures, including a reduction in headcount and prioritization of development activities over clinical ones, to extend our
operating runway and focus resources on product improvements and regulatory strategy for our TAEUS liver application.
These actions are expected to impact the
timing of certain development activities, including delaying the timing of a future De Novo submission to the U.S. Food and Drug
Administration (“FDA”) relating to our TAEUS liver application. We are continuing to refine our clinical and regulatory
strategy based on prior FDA feedback and ongoing development efforts.
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On March 25, 2026, the Company announced that
its Board of Directors initiated a process to evaluate a range of strategic alternatives aimed at maximizing shareholder value. As a part
of this process, the Board will evaluate a range of potential alternatives, including, but not limited to strategic investments, mergers,
business combinations, in-licensing or collaboration arrangements, asset sales, or sale or merger of the Company. The Company has not
set a timetable for completion of the process, and there is no guarantee it will result in any transaction or other strategic outcome.
THE IMPORTANCE OF UNDERSTANDING LIVER FAT
The accumulation of fat in the liver, referred
to as steatotic liver disease (“SLD”), is a key biomarker of metabolic diseases, particularly MASH. MASH is a more severe
form of MASLD, characterized by liver inflammation and early fibrosis that can progress to cirrhosis, and even hepatocellular carcinoma,
and other life-threatening diseases. The presence of excess liver fat is strongly associated with metabolic disorders such as insulin
resistance, type 2 diabetes, and hypertension. Additionally, excess liver fat, particularly in the form of MASLD, is considered to be
a cardiometabolic risk factor, and studies show statistically significant correlation with increased incidence of kidney disease, cancer,
and neurodegenerative disease.
OPPORTUNITY
Rising SLD with No Reliable, Inexpensive,
Point-of-Care Test
SLD is a rapidly emerging global health
crisis, affecting over two billion people worldwide, including more than 100 million individuals in the United States. Despite its
prevalence and severe health implications, there remains a significant gap in reliable, affordable, and easily accessible
point-of-care tools to detect and monitor liver fat. As SLD continues to rise, its impact on public health and healthcare systems is
becoming more evident, particularly as it is strongly linked to metabolic syndrome and a range of chronic conditions such as
obesity, type 2 diabetes, cardiovascular disease, and even liver cancer.
Given its increasing prevalence, clinical
guidelines are now beginning to emphasize liver fat screening as a crucial component of metabolic disease management. Yet the lack
of an effective, widely available diagnostic tool remains a significant barrier to proper disease management and intervention.
Emerging Therapeutics for Liver Fat Reduction
Pharmaceutical advancements are opening new
doors for the treatment of SLD, particularly with the rise of GLP-1 receptor agonists. Originally developed for type 2 diabetes,
GLP-1 drugs have shown promise in treating a variety of conditions, including obesity, cardiovascular disease, kidney disease, and
liver disease.
Multiple pharmaceutical companies are
actively developing GLP-1 receptor agonists and related therapies, reflecting significant industry investment in metabolic disease
treatment. As new therapies emerge, the need for improved diagnostic methods to identify and monitor patients undergoing treatment
is critical.
Diagnostic Gaps: The Urgent Need for Improved
Liver Fat Detection
Current methods for assessing liver fat
include MRI-based techniques and liver biopsy. MRI-based methods are effective but expensive and resource- intensive, limiting
routine use. Liver biopsy is invasive and not suitable for widespread screening or monitoring.
Alternative approaches, including
conventional ultrasound and blood-based tests, may lack sufficient accuracy or do not directly quantify liver fat. As a result,
there remains a need for non-invasive, cost-effective, point-of-care tools capable of assessing liver fat.
The Future of Liver Fat Diagnosis and Management
With the increasing availability of promising
new treatments, the demand for reliable, non-invasive, and cost-effective liver fat diagnostics is greater than ever. The ability to
accurately detect and monitor liver fat will be essential in guiding treatment decisions, evaluating therapeutic efficacy, and preventing
disease progression. As the medical community continues to prioritize liver fat screening in clinical guidelines, innovation in diagnostic
technologies will be key to addressing this growing health crisis.
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CURRENT TECHNOLOGY FOR LIVER FAT MEASUREMENT
CT and MRI Technologies
Diagnostic imaging technologies such as computed
tomography (“CT”), MRI and ultrasound allow physicians to look inside a person’s body to guide treatment or gather
information about medical conditions such as broken bones, cancers, signs of heart disease or internal bleeding. The type of imaging
technology a physician uses depends on a patient’s symptoms and the part of the body being examined. CT technology is well suited
for viewing bone injuries, diagnosing lung and chest problems, and detecting cancers. MRI technology excels at examining soft tissue
in ligament and tendon injuries, spinal cord injuries, and brain tumors.
Unfortunately, while CT and MRI systems are
versatile and create high quality images, they are also expensive and not always accessible to patients. A CT system costs
approximately $1 million and an MRI system can cost $3 million. CT and MRI systems are large and can weigh several tons, typically
requiring significant modifications to existing healthcare facilities to safely install the CT and MRI equipment. Because of their
size and weight, CT and MRI systems are usually fixed-in-place at major medical facilities. As a result, they are less accessible to
primary care and rural clinics, economically developing markets, and patient bedsides.
While CT and MRI systems create high quality
images, their use is not always practical. For example, metabolic disease detection, therapies response monitoring, and the efficient
screening and monitoring of subjects for new GLP-1 clinical trials requires ongoing surveillance of the patients’ livers and the
use of CT and MRI systems to perform that ongoing surveillance is impractical due to the high cost of the scan and the limited availability
of CT and MRI systems. Additionally, patient exposure to the ionizing radiation generated by a CT system must be limited for safety reasons.
Similarly, because of the strong magnetic field created by an MRI machine, patients with metal joint replacements or cardiac pacemakers
may be limited for safety reasons in their use of an MRI system.
Ultrasound Technology
An ultrasound system transmits sound waves, which
bounce off tissues, organs and blood in the body. The ultrasound system captures these echoes and uses them to create an image. Ultrasound
technology excels at imaging the structure of internal organs, muscles, and bone surfaces. Due to its utility, cost- effectiveness and
safety profile, ultrasound imaging is frequently used in a physician’s examination room or at a patient’s bedside as a first-line
diagnostic tool, which has resulted in an overall increase in the number of ultrasound scans performed.
Ultrasound systems are more broadly available
to patients than either CT or MRI systems. There are an estimated 1.6 million diagnostic ultrasound systems globally in use today. Ultrasound
systems are relatively inexpensive compared to CT and MRI systems, with smaller portable ultrasound systems costing as little as $5,000
or less and new cart-based ultrasound systems costing between $50,000 and $200,000. Ultrasound systems are also more mobile than CT and
MRI systems and many are designed to be moved by an operator from room to room, or closer to patients. Ultrasound technology does not
present the same safety concerns as CT and MRI technology, since ultrasound does not emit ionizing radiation and ultrasound contrast
agents are generally considered to be safe.
However, ultrasound’s imaging capabilities
are more limited compared to CT and MRI technology. Currently, ultrasound systems cannot measure tissue temperature during thermal ablation
surgery or quantify fat levels accurately across the stages of SLD to make to be effective for metabolic diseases detection and therapies
response monitoring, or the efficient screening and monitoring of subjects for GLP-1 clinical trials, where CT and MRI systems are used.
OUR SOLUTION
TAEUS technology uses a pulsed energy
source—specifically, radio frequency (“RF”)—to transmit energy deep into tissue and generate ultrasonic
waves based on the tissue composition (or tissue chemistry), differentiating lean and fatty tissues. These waves are then detected
with ultrasound sensors at the skin surface and used to create high-contrast images (and other forms of data) using our proprietary
algorithms. Unlike conventional ultrasound, which creates images based on the scattering properties of tissue structure,
thermoacoustic imaging provides tissue absorption maps that differentiate lean and fatty tissues. Acoustic waves (ultrasound) are
only utilized to transmit the absorption signal to the imaging system outside of the body.
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Our TAEUS Technology Platform for Clinical
Applications
To increase the versatility of our thermoacoustic
technology, we are developing TAEUS technology as a platform for multiple applications. Unlike the near-infrared light pulses used in
our earlier photoacoustic systems, our TAEUS technology uses RF pulses to stimulate tissues, using a small fraction of the energy that
is typically transmitted into the body during an MRI scan. Using RF energy enables TAEUS technology to penetrate deep into tissue, enabling
tissue composition at clinically relevant depths. 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
can then be processed into ultrasound overlays or quantitative data that may be translated into clinically useful metrics using our proprietary
algorithms and displayed to complement conventional gray-scale ultrasound images.
After required regulatory approvals, our
TAEUS technology can be added as a standalone system or as an accessory to existing ultrasound systems, helping to improve clinical
decision-making on the front lines of patient care, without requiring substantially new clinical workflows or large capital
investments. We also intend to offer a license for our TAEUS technology to OEMs, such as ultrasound and thermoablative capital
equipment makers, for incorporation in their new products.
We believe that our TAEUS technology has the
potential to add a number of new capabilities to conventional ultrasound, CT or MRI Imaging systems In our ex-vivo and in-vivo
testing, we have demonstrated that the TAEUS platform has the following capabilities and potential clinical applications:
● Tissue composition assessment
● Temperature monitoring
● Vascular imaging
● Tissue perfusion analysis
TAEUS Liver Device
ENDRA’s first clinical product is
designed to interface with a conventional ultrasound scanner, utilizing the scanner’s B-mode imaging to guide the selected
region for assessment of liver fat content. The following sub-systems comprise ENDRA’s first generation product.
● Energy Generation : The RF source consists of a low power waveform generator and a high gain amplifier.
Together, these components generate the characteristic pulses of energy required to excite thermoacoustic signals in tissue.
● Energy Delivery into Tissue : The RF applicator transmits pulses of energy generated by the RF source
into tissue. The applicator is positioned at the skin surface
in proximity to the target region for measurement and is designed to efficiently couple pulsed RF energy into target tissues.
● Signal Detection : A “receive only” ultrasound transducer specifically designed and
optimized for thermoacoustic imaging. The transducer sub-system detects thermoacoustic signals
induced by the RF source within tissue. The transducer assembly is connected to high-speed electronics for signal amplification, digitization,
and processing.
● Computation and Display : The computer provides processing capability to both utilize the conventional
ultrasound data for navigation to the measurement site of interest, and the
calculations required to convert digitized thermoacoustic signals into estimates of fat content in liver tissue. The entire
sub-system will reside in a single enclosure, on wheels, and sit adjacent to the patient exam bed. A small digital touchscreen
display is used for both operator input and the display of data.
TAEUS platforms may provide two-dimensional
imaging with a transducer composed of multiple receive elements. ENDRA is currently developing an improved version of its
first-generation liver device. The RF source and applicator are similar to those in the first-generation product, but the
multi-element transducer would allow for multiple applications including reading tissue composition, response to thermoablative
procedures, vascular flow, tissue perfusion, and other potential applications.
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TARGET MARKETS
We intend to initially focus on four
potential markets for the TAEUS liver device: 1) Pharmaceutical Companies and CROs, 2) High-end Primary Care Networks, 3) Bariatric
and Metabolic Clinics and 4) Primary and Internal Medicine at large. We expect that there will also be minimal focus on Hepatology
and Radiology customers.
Pharmaceutical Companies and Clinical Research
Organizations (CROs)
A growing number of pharmaceutical companies
are engaged in the development of GLP-1 and related metabolic disease therapies and recruiting patients for Phase 3 clinical trials
remains one of the most critical and challenging aspects of drug development.
● GLP-1 Trials: The typical patient count for Phase 3 GLP-1 trials ranges between 1,000 and 3,000.
However, patient recruitment is complicated by screening failure rates, which can range between 20% and 50%. This means that to
secure 1,000 eligible participants, as many as 2,000 individuals must be screened.
● MASH Trials: Similarly, Phase 3 clinical trials for MASH drugs require between 1,000 and 2,000 participants.
Given the complexity of the disease and eligibility requirements,
the screening process must cover between 2,500 and 10,000 candidates to meet the required participation levels.
These high screening failure rates contribute
to increased costs and extended timelines for clinical trials.
The financial burden of conducting late-stage
clinical trials is substantial. One key component of the cost structure is the use of Magnetic Resonance Proton Density Fat Fraction
(“MR PDFF”), a diagnostic tool commonly used in metabolic disease studies. One in three Phase 2 or 3 GLP-1 studies incorporates
MR PDFF during the trials. The cost for CROs to conduct these exams typically falls between $1,500 and $2,500 per patient, with a minimum
of two to three exams of each patient required per trial. There is a partial reimbursement, but it’s minimal. These costs underscore
the financial considerations that pharmaceutical companies must account for when planning large-scale trials.
High-End Primary Care Networks (Concierge
Medicine)
High-End Primary Care Networks, also known as
concierge medicine, have expanded in recent years, reflecting increased demand for personalized and preventative care models.
One area where concierge medicine can
differentiate itself is through advanced metabolic health monitoring, particularly liver fat fraction assessment. Early detection
and proactive management of liver fat accumulation can provide significant health benefits, particularly for patients at risk of
metabolic disorders, obesity, and diabetes—conditions frequently encountered in concierge practices.
Concierge medicine thrives on offering
innovative health solutions that traditional primary care settings may not provide. New technologies are of high interest in this
sector, and cost is less of a concern, making our offering an attractive investment for concierge networks. By incorporating liver
fat fraction monitoring into routine patient assessments, it is possible that concierge physicians can:
● Offer personalized preventative care;
● Enhance cardiometabolic risk management;
● Strengthen patient engagement and retention; and
● Set a new standard in concierge medicine.
Bariatric and Metabolic Clinics
Bariatric and metabolic clinics are on the
front lines of tackling obesity and related metabolic diseases, providing critical care to thousands of patients across the U.S. A
substantial and growing number of clinics are expanding their scope beyond weight loss to treat a broad range of metabolic disorders
including the prescription of GLP-1 receptor agonists to help regulate appetite and blood sugar levels.
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While these clinics are leading the way in metabolic
disease management, one major challenge persists—the high cost of diagnosing and monitoring metabolic conditions. Traditional methods,
such as MRI-based liver fat fraction assessments, are expensive, time-consuming, and often impractical for routine use.
Clinics generally rely on basic biometric
markers such as Body Mass Index (“BMI”) and ultrasound exams. BMI and ultrasound are not accurate predictors of liver
fat. Given the inaccuracy of biometric markers and ultrasound liver fat assessments, bariatric and metabolic clinics need more
affordable, scalable solutions to monitor metabolic diseases effectively.
Primary and Internal Medicine Practices
Obesity, diabetes, and liver disease are on the
rise in the U.S., placing an increasing burden on healthcare providers. Primary care and internal medicine physicians are on the front
lines, responsible for screening patients and monitoring their response to lifestyle changes and drug therapies. However, the prevailing
approach to diagnosing and tracking metabolic conditions remains costly and inefficient, largely due to the reliance on ineffective ultrasound
or expensive MRI-based liver fat fraction assessments.
Imaging centers and diagnostic labs play a
crucial role in liver disease detection. They are essential for screening obesity, diabetes, and metabolic disorders at scale.
However, most of these laboratories focus on blood-based markers for diabetes and liver disease. While blood tests provide valuable
insights, they do not directly measure liver fat fraction or structural changes in the liver—critical indicators of metabolic
health.
CLINICAL STUDIES, REGULATORY APPROVALS,
AND COMMERCIALIZATION
Regulatory Market Access Approval Pathway
and Human Study
Each of our TAEUS platform 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 MRI, economic strength and applicable
regulatory requirements, we intend to seek approval of our liver device for sale in the European Union, and the United States and
may later seek approval in other markets.
We previously collaborated with certain
research hospitals in North America and Europe for the conduct of clinical studies comparing our TAEUS clinical system to MRI PDFF
in the measurement of liver fat. These agreements provided for clinical trials to collect data and user feedback to inform the
further development of our TAEUS clinical system.
FDA De Novo Request
In the third quarter of 2023, we submitted a
De Novo request to the FDA that included as support clinical data gathered from human studies comparing liver fat measurements by
our TAEUS liver device to measurements by MRI-PDFF. In the fourth quarter of 2023, the FDA sent an Additional Information request
related to our De Novo application. In order to fully respond to the FDA’s questions, we were required to compile additional
clinical data, provide additional device test data, and respond to cybersecurity related questions in a new De Novo submission. In
light of the need for additional clinical data, the original De Novo application was formally closed by the FDA on April 24, 2024 in
line with FDA internal procedures. In light of the cost reduction measures described above under “Recent Developments”,
we have halted the clinical activity necessary to support a new De Novo application and do not presently intend to restart such
activity unless and until we have increased resources available for such purpose.
Sales and Marketing
We previously established commercial
infrastructure in Europe; however, in connection with cost reduction initiatives, we have reduced certain commercial activities and
are prioritizing regulatory and clinical milestones, particularly in the United States.
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We expect to pursue commercialization
through a focused direct sales model, supplemented over time by partnerships and channel relationships, subject to regulatory
approvals and resource availability.
We plan to implement a new low barrier-to-entry,
multi-year, subscription-based business model with monthly recurring revenue.
Based on our assessment of the medical
capital equipment market, we intend to price our initial liver TAEUS system competitively taking into the consideration multiple
factors such as TAEUS’s clinical value, customer ROI and competitive differentiation compared to alternatives.
ENGINEERING, DESIGN AND MANUFACTURING
We use suppliers of components and contract
manufacturers to design, assemble and test the TAEUS liver system. Suppliers are vetted before engaging in work with the Company and
are reviewed annually, as part of our quality management system, to assure their performance meets our needs. We maintain internal
processes to monitor designs, inventory and supply of key components needed to manufacture our TAEUS liver system. We plan
production in accordance with anticipated commercialization and sales timelines and availability and lead times of needed
materials.
REGULATION
European Union
The primary regulatory environment in Europe
is the European Union. In the European Union, applications incorporating our TAEUS technology are regulated as Class IIa medical devices.
Our MASLD TAEUS application has received, and we expect our future applications will need to receive, certification from a Notified Body
required to CE mark our applications as a result of successful review of one or more submissions prepared by our contract engineering
and manufacturer(s), so that such applications can be marketed and distributed within the European Economic Area. Each of our applications
will be required to be regularly recertified for CE marking, which require period ISO audits and MDR conformity audits. The audit process,
which will include on-site visits at our facility, and possibly the contract manufacturer’s(s’) facility(ies), will require
us to provide the contract manufacturer(s) with information and documentation concerning our quality management system and all applicable
documents, policies, procedures, manuals, and other information. Additionally, in order to import our devices into various EU countries,
we must comply with the Restriction of Hazardous Substances Directive (“RoHS”) and the Registration, Evaluation, Authorisation
and Restriction of Chemicals (“REACH”). We have undertaken a number of steps that both we and our suppliers are compliant
with RoHS and REACH in order to do business in the European Union.
In the European Union, the manufacturer of medical
devices is subject to current Good Manufacturing Practice, specifically ISO 13485, as set forth in the relevant recognized standards,
laws and guidelines of the European Union and its member states. Compliance with ISO 13485 is assessed by a Notified Body accredited
by a Competent Authority under the MDR. For a Class IIa device, typically, quality system evaluation is performed by the Notified Body,
which also provides the certifications necessary to fix a CE mark to the products. The Notified Body may conduct inspections of relevant
facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining certification
for each application, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body. Further
inspections may occur over the life of the application.
We also must comply with data privacy
regulations in the European Union and the UK. The collection and use of health data and other personal data including data collected
in clinical trials is governed in the EU by the General Data Protection Regulation (“GDPR”), which imposes substantial
obligations upon companies and new rights for individuals. The GDPR also forms part of the law of Great Britain (England and Wales,
Scotland and Northern Ireland) by virtue of section 3 of the European Union (Withdrawal) Act 2018 and as amended by the Data
Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (“UK
GDPR”). Failure to comply with the GDPR may result in fines of the higher of (i) €20,000,000 or (ii) 4% of the preceding
fiscal year’s total annual global revenues of the noncompliant company, among other administrative penalties, depending on the
nature and severity of the violation. Although we do not expect to process any personal data from the operation of our products, the
GDPR has increased our responsibility and potential liability in relation to personal data involved in the operation of our
products, and we may be required to implement additional measures in order to comply with the GDPR and with other laws, rules,
regulations and standards in the EU and UK relating to privacy and data protection. This may be onerous and if our efforts to comply
with GDPR or other applicable laws, rules, regulations and standards are not successful, or are perceived to be unsuccessful, it
could adversely affect our business.
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FDA Regulation
Each of our products must be approved, granted
or cleared by the FDA before it is marketed in the United States. Before and after approval, grant or clearance in the United States,
our applications are subject to extensive regulation by the FDA under the Federal Food, Drug and Cosmetic Act (the “FD&C Act”)
and/or the Public Health Service Act, as well as by other regulatory bodies. The FDA regulations govern, among other things, the development,
testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and
export, marketing and sales, and distribution of medical devices and pharmaceutical products.
Section 513(f)(2) of the FD&C Act allows
manufacturers to submit a De Novo request to the FDA for devices “automatically” classified into Class III by operation
of section 513(f)(1). Pursuant to the Food and Drug Administration Modernization Act (the “FDAMA”), in order to submit a
De Novo request, a device first has to be found not substantially equivalent (“NSE”) to legally-marketed predicate
devices through a premarket notification (510(k)). Section 513(f)(2) was modified by section 607 of Food and Drug Administration
Safety and Innovation Act, which created an alternative mechanism for submitting a De Novo request that does not require that a
device be reviewed first under a 510(k) and found NSE prior to submission of a De Novo request. If a device manufacturer believes
their device is appropriate for classification into Class I or Class II and determines, based on currently available information,
there is no legally marketed predicate device, they may submit a De Novo request without a preceding 510(k).
We believe that our device is appropriate
for classification into Class II and, based on available information, that there is no legally marketed predicate device. Hence, we
expect that our device will require FDA De Novo grant prior to being legally marketed, and plan to submit any De Novo request
without a preceding 510(k).
ENVIRONMENTAL
Our manufacturing processes involve the use,
generation, and disposal of hazardous materials and wastes, including alcohol, adhesives, and cleaning materials. As such, we are subject
to stringent federal, state, and local laws relating to the protection of the environment, including those governing the use, handling,
and disposal of hazardous materials and wastes. We believe we are in material compliance; however, future regulatory changes may increase
costs.
COMPETITION
While we believe that we are the only
company developing RF-based thermoacoustic ultrasound products, we face direct and indirect competition from a number of
competitors, many of whom have greater financial, sales and marketing and other resources than we do, and offer alternatives to
RF-based thermoacoustic technology for measuring the fat content of liver with ultrasound machines.
Manufacturers of ultrasound and MRI systems include
multi-national corporations such as GE Healthcare, Royal Philips, Siemens Healthineers, Canon Corporation, and Fujifilm Corporation.
There is another smaller but emerging market of low-end hand-held ultrasound competitors that could pursue some liver-related applications.
In the SLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l. In the thermal
ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St. Jude Medical, Inc.
HUMAN CAPITAL
As of December 31, 2025, we had 11 employees,
9 of whom are employed on a full-time basis. Geographically, 10 people were in the United States and one was in Canada. Following the
cost reductions measures described under “Recent Developments” above, our number of employees has been reduced to 4, and 3
former employees have transitioned to contractor roles. None of our employees are covered by a collective bargaining agreement, and we
believe our relationship with our employees is good.
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We also engage contractors, technical and
scientific advisors and other experts, on an as-needed basis, to supplement existing staff. We believe that these advisors provide
us with necessary expertise in clinical ultrasound applications, ultrasound technology, and intellectual property.
OTHER POTENTIAL APPLICATIONS OF OUR TECHNOLOGY
We are exploring additional potential applications
of TAEUS technology, including thermal ablation monitoring, vascular imaging, and tissue perfusion analysis.
These applications remain under development and
there can be no assurance as to their technical feasibility, regulatory approval, or commercial viability.
INTELLECTUAL PROPERTY
We rely on a combination of patent, copyright,
trademark and trade secret laws and agreements with employees and third parties to establish and protect our proprietary intellectual
property rights. We require our officers, employees and consultants to enter into standard agreements containing provisions requiring
confidentiality of proprietary information and assignment to us of all inventions made during the course of their employment or consulting
relationship. We also enter into nondisclosure agreements with our commercial counterparties and limit access to, and distribution of,
our proprietary information.
We are committed to developing and
protecting our intellectual property and, where appropriate, filing patent applications to protect our technology. Our issued and
pending patents claims are directed at the following areas related to our technology:
● Methods to induce and enhance thermoacoustic signal generation;
● System configurations, devices and novel hardware for transmission of RF pulses into tissue and detection
of acoustic signals;
● Methods for integrating our devices with existing conventional ultrasound systems; and
● Methods and algorithms for signal processing, image formation and analysis.
As of December 31, 2025, we maintained a
patent portfolio consisting of 42 patents issued in the United States and 45 issued patents in foreign jurisdictions, 4 patent
applications pending in the United States and 14 patent applications pending internationally relating to our technology. These
patents and patent applications largely cover certain innovations relating to fat imaging, fat quantitation, and temperature
monitoring in the liver and other tissues.
Each of our utility patents generally has a term
of 20 years from its respective priority (earliest filing) date. Design patents have a term of 14 years from the filing date of the respective
application. Among our issued utility patents in the U.S., the first patent is set to expire in 2033 and the last patent is set to expire
in 2043.
DIGITAL ASSET TREASURY STRATEGY
The Company’s DAT strategy focuses on
cryptocurrency, and specifically a strategy of holding one to five decentralized finance digital assets, beginning with $HYPE, the
native digital asset of the Hyperliquid network (“HYPE”). Additionally, we intend to monitor ongoing developments in the
regulatory environment around cryptocurrencies, including pending federal legislation, and may modify or expand our DAT strategy to
the extent we determine compliant with federal rules and regulations and not giving rise to a requirement that the Company register
as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). While HYPE serves as our
initial primary treasury reserve asset, we intend to accumulate a long-term position in one to five decentralized finance digital
assets, including HYPE, that are intrinsically linked to a blockchain system, and the value of which is derived from or is
reasonably expected to be derived from the use of the blockchain system.
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Other than acquiring cryptocurrency with our
liquid assets that exceed working capital requirements, our DAT strategy may also involve issuing debt or equity securities or
engaging in other capital raising transactions with the objective of using the majority of proceeds to purchase cryptocurrency from
time to time, subject to market conditions. We have not set any specific target for the amount of cryptocurrency we seek to hold,
although under our DAT strategy we will maintain a majority of our holdings in one to five decentralized finance digital assets,
including HYPE and other blockchain-linked cyptocurrencies. We will continue to monitor market conditions in determining whether to
engage in financings to purchase additional cryptocurrency. This overall strategy also contemplates that we may
(i) periodically sell cryptocurrency for general corporate purposes, including to generate cash for treasury management (which
may include debt repayment, if appropriate at such time), for acquisitions, or for strategies that generate tax benefits in
accordance with applicable law, (ii) enter into additional capital raising transactions that are collateralized by our
cryptocurrency holdings, and (iii) pursue strategies to create income streams or otherwise generate funds using our
cryptocurrency holdings (for example, generating premium income by selling call options related to cryptocurrencies).
Asset Manager
In connection with the Company’s DAT strategy,
the Company entered into an Amended and Restated Investment Management Agreement (the
“Investment Management Agreement”)
with Arca, pursuant to which Arca provides active asset management services in accordance with the investment strategy and investment
objectives, policies, guidelines and restrictions as agreed to from time to time by the Company and Arca. Arca has discretion to manage
funds allocated to the Company’s DAT strategy, focusing on decentralized finance, including, without limitation, by purchasing
one to five decentralized finance digital assets, such as HYPE, directly or indirectly through the use of derivative instruments. The
Investment Management Agreement may be terminated by either the Company or Arca upon not more than sixty (60) days’ but not less
than thirty (30) days’ written notice to the other party.
Custody
The Company holds substantially all of its
DAT assets in custody accounts at Anchorage Digital Bank, N.A. (“Anchorage”), a U.S.-based, institutional- grade
custodian. As the Company develops its DAT strategy, it may expand its holdings to multiple similar custodians. In connection with
its DAT strategy, Company entered into a Master Custody Service Agreement with Anchorage (the “Custody Agreement”),
pursuant to which it will act as custodian of the Company’s digital assets it deposits with Anchorage. Services provided by
Anchorage will include storage of digital assets and related settlement and support services. Under the Custody Agreement, Anchorage
does not have the authority to assign, hypothecate, pledge, encumber or otherwise dispose of our digital assets, subject to a lien
to secure payment to Anchorage in respect of its services. The Custody Agreement has an initial term of one year, at which time it
will automatically renew for successive renewal terms unless either party provides no less than 30 days’ prior written
notice.