What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-30 · 101 added, 75 removed, 278 unchanged (39% of the section changed)

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The detected ultrasound is processed into images and other forms of data using our proprietary algorithms and displayed to complement conventional gray-scale ultrasound images.

ENDRA uses suppliers of components, such as Blatek Industries, Inc.

and Elite RF, LLC, and contract manufacturers, such as Starfish Product Engineering, Inc., to assemble and test ENDRA's TAEUS® liver system for commercial sale.

Suppliers are vetted before engaging in work with ENDRA and reviewed annually, as part of ENDRA’s quality management system, to assure their performance meets ENDRA's needs.

ENDRA has implemented internal processes to monitor designs, inventory and supply of key components needed to manufacture its TAEUS® liver system.

ENDRA plans its production in accordance with anticipated market demand and availability and lead times of needed materials.

As described below, our first TAEUS platform application focuses on quantifying fat in the liver and stage progression of nonalcoholic fatty liver disease (“NAFLD”) which, untreated, can progress to Nonalcoholic Steatohepatitis (“NASH”), fibrosis, cirrhosis and liver cancer.

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In October 2018, we received an Investigational Testing Authorization (“ITA”) from Health Canada to commence the first human studies in healthy volunteers with our TAEUS clinical system targeting NAFLD, guiding our algorithm development, and comparing our technology to MRI.

The feasibility study was conducted in collaboration with the widely respected Robarts Research Institute in London, Ontario, Canada.

The feasibility study was conducted in collaboration with Robarts Research Institute in London, Ontario, Canada.

We reported the completion and top-level findings of this study in September 2019.

The data collected from the study, including additional usability inputs, was included in our TAEUS liver device technical file submission for device CE mark, which we received for our NAFLD TAEUS application in March 2020.

ENDRA now has eight clinical research partnerships with research hospitals in North America, Europe and Asia for the conduct of clinical studies comparing our TAEUS clinical system to MRI-PDFF in the measurement of liver fat.

ENDRA has eight current or completed clinical research partnerships with research hospitals in North America, Europe and Asia for the conduct of clinical studies comparing our TAEUS clinical system to MRI-Proton Density Fat Fraction (“MRI-PDFF”) in the measurement of liver fat.

In June 2020, we completed a 510(k) Premarket Notification submission to the FDA for the NAFLD TAEUS application.

Following meetings with the FDA in connection with its review of our application, we determined that the 510(k) pathway was not the optimal option due to the novel nature of our NAFLD TAEUS application and, in February 2022, announced that we would pursue the de novo pathway for FDA approval of our NAFLD TAEUS application.

Each of our TAEUS platform applications will require regulatory approvals before we are able to sell or license the application.

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For example, the diagnosis and treatment of the estimated 1.8 billion people suffering from NAFLD requires ongoing surveillance of the patients’ livers to assess the progression of the disease and the efficacy of treatment.

However, the use of CT and MRI systems to perform that surveillance is impractical for a number of reasons, including the high cost of the scan, the limited availability of CT and MRI systems and the required use of contrast agents, including those containing radioactive substances that can cause allergic reactions and reduced kidney functions.

However, the use of CT and MRI systems to perform that surveillance is impractical for a number of reasons, including the high cost of the scan and the limited availability of CT and MRI systems.

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 cannot be imaged with an MRI system.

Because of CT and MRI’s limited availability and practical limitations, a patient who would otherwise be a candidate for CT or MRI scanning must often rely on less effective or less practical methods.

For example, MRI scans are not typically used to measure tissue temperature during thermoablative (temperature-based) surgery.

Instead, physicians use printed manufacturer guidelines to time the thermal surgery or insert surgical temperature probes in an attempt to guide treatment.

As a result, the treatment is often imprecise or comes with additional risks, such as infection.

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

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Ultrasound systems are more broadly available to patients than either CT or MRI systems.

There are an estimated one million ultrasound systems globally in use today.

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 $10,000 and new cart-based ultrasound systems costing between $75,000 and $200,000.

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Ultrasound Market

Sales of ultrasound diagnostic equipment were approximately $4.4 billion globally in 2017 and are expected to grow at approximately 4.4% annually.

There are an estimated one million installed systems generating over 400 million annual diagnostic ultrasound procedures globally.

Additionally, an estimated 30,000 to 50,000 new and replacement systems are sold into the market each year.

The global diagnostic ultrasound device market size was valued at $7.3 billion in 2022 and is anticipated to expand at a CAGR of 4.07% from 2022 to 2030.

There are an estimated 1.6 million diagnostic ultrasound systems in global use in 2022.

These numbers include both portable and cart-based ultrasound systems, and cover all types of diagnostic ultrasound procedures, including systems intended for cardiology, prenatal and abdominal use.

We do not currently intend to address ultrasound systems focused on applications in prenatal care, where we believe our TAEUS technology will not substantially impact patient care.

Accordingly, we define our addressable market for one or more of our TAEUS applications at approximately 365,000 cart-based ultrasound systems currently in use throughout the world.

We do not currently intend to address cart-based ultrasound systems focused on applications in prenatal care, nor certain portable ultrasound applications such as emergency room medicine, where we believe our TAEUS technology may not substantially impact patient care.

Accordingly, we estimate our addressable market for one or more of our current or future TAEUS applications as approximately 700,000 ultrasound systems currently in use throughout the world.

We believe that demand for ultrasound systems is driven primarily by the following factors:

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We believe that the limited availability of high-utility and cost-effective imaging technology represents a significant unmet medical need.

We believe that expanding the capability of ultrasound technology to perform more of the imaging tasks presently available only on expensive CT and MRI systems will satisfy this unmet need.

We believe that expanding the capability of ultrasound technology to perform more of the imaging tasks presently available only on expensive CT and MRI systems will help to satisfy this unmet need.

Our Solutions

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Our TAEUS technology enables traditional ultrasound to visualize changes in tissue temperature, in real time.

This capability would enable the use of TAEUS-enhanced ultrasound to guide thermoablative therapy, which uses heat or cold to remove tissue, such as in the treatment of cardiac atrial fibrillation, or removal of cancerous liver and kidney lesions, with greater accuracy.

This capability would enable the use of TAEUS-enhanced ultrasound to guide thermoablative therapy, which uses heat or cold to affect tissue, such as in the treatment of cardiac atrial fibrillation, or removal of cancerous liver and kidney lesions, with greater accuracy, and perform cosmetology procedures such as lipolysis of abdominal fat.

Vascular Imaging:

Our TAEUS technology enables ultrasound to view blood vessels from any angle, using only a saline solution contrasting agent, unlike Doppler ultrasound, which requires precise viewing angles.

This capability would enable the use of TAEUS-enhanced ultrasound to easily identify arterial plaque or malformed vessels.

Our TAEUS technology has the potential to enable visualization of blood vessels from any angle, using only a saline solution contrasting agent, unlike Doppler ultrasound, which requires precise viewing angles.

This capability would enable the use of TAEUS-enhanced ultrasound to assist in identifying arterial plaques or malformed vessels.

Tissue Perfusion:

Our TAEUS technology enables ultrasound to image blood flow at the capillary level in a region, organ or tissue.

This capability could be used to assist physicians in characterizing microvasculature fluid flows symptomatic of damaged tissue, such as internal bleeding from trauma, or diseased tissue, such as certain cancers.

Our TAEUS technology has the potential to image blood flow at the capillary level in a region, organ or tissue.

This capability could be used to assist physicians in characterizing abnormalities in tissue perfusion symptomatic of damaged tissue, such as internal bleeding from trauma, or diseased tissue, such as certain cancers.

Because of the large number of traditional ultrasound systems currently in global use, we are first developing our TAEUS technology for sale as an aftermarket accessory that works with existing ultrasound systems.

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The transducer assembly includes electronics for signal amplification, digitization, and signal processing.

The specialized transducer will attach to the conventional ultrasound probe used for liver imaging.

The specialized transducer will work in concert with the conventional ultrasound probe used for liver imaging.

RF Applicator:

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The applicator is positioned in proximity to the target region for measurement.

A second generation product is expected to provide two dimensional imaging with a transducer composed of multiple receive elements.

Future TAEUS platforms are expected to provide two dimensional imaging with a transducer composed of multiple receive elements.

The RF source and applicator would be similar to those in the first generation product but the multi-element transducer would allow for multiple applications including:

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Our first TAEUS platform application focuses on quantifying fat in the liver and stage progression of NAFLD which, untreated, can progress to NASH, fibrosis, cirrhosis and liver cancer.

In 2015, over 1.8 billion people were affected by NAFLD/NASH.

In 2022, over 2 billion people globally were estimated to be affected by NAFLD.

The World Gastroenterology Organisation considers NAFLD/NASH a global pandemic affecting rich and poor countries alike.

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Left untreated, an estimated 30% of NAFLD cases progress to NASH, a condition in which liver fat causes inflammation and decreased liver function, possibly resulting in fatigue, weight loss, muscle pain and abdominal pain.

Excess liver fat remains a root cause of and key clinical concern for both of NASH and NAFLD.

Excess liver fat remains a root cause of and key clinical concern for both NASH and NAFLD.

Approximately 25% of NASH cases progress to liver fibrosis, in which liver inflammation causes scar tissue which eventually prevents the liver from functioning properly.

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Additionally, cirrhosis patients may develop liver cancer.

In 2018, the World Health Organization estimated that liver cancer kills 782,000 people annually.

In January 2023, the American Cancer Society estimated that liver cancer kills over 700,000 people annually.

Because of the increased incidence of obesity, hepatitis and diabetes throughout the world, NAFLD has become the most common chronic liver disease and an important cause of cirrhosis and liver cancer worldwide.

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We believe these limitations negatively impact the diagnosis and treatment of patients with NAFLD.

Billions of dollars are spent annually on the diagnosis and treatment of NAFLD and related liver diseases.

In the United States alone, the median Medicare inpatient charge per NAFLD patient is estimated to be $36,000 and the total annual direct medical costs for NAFLD are estimated to be $103 billion.

Patients diagnosed with NAFLD and related liver diseases are typically treated with therapies such as statins, insulin sensitizers and other compounds and are encouraged to adopt lifestyle changes to improve their overall health.

Identification and staging of NAFLD is central to determining the course of treatment.

Billions of dollars are spent annually on the global diagnosis and treatment of NAFLD and related liver diseases.

In the United States, annual direct medical costs for NAFLD were estimated in 2016 to be $103 billion, and in the Europe-4 countries (Germany, France, Italy, and United Kingdom), about €35 billion.

Patients diagnosed with NAFLD and related liver diseases are typically treated with available therapies such as statins, insulin sensitizers and other compounds and are encouraged to adopt lifestyle changes to reduce their weight and improve their overall health.

In addition, patients receiving treatment for NAFLD-spectrum liver diseases must continue to be monitored to assess disease progression and the efficacy of treatment.

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We believe our TAEUS technology will enable primary care physicians, radiologists and hepatologists to diagnose NAFLD earlier and monitor patients with NAFLD-spectrum liver diseases more accurately and cost-effectively than is possible with existing technology.

A significant number of pharmaceutical compounds targeting liver disease are in development by companies such as Pfizer, Viking Theraputics, Inventiva, Madrigal Pharmaceuticals, Inc.

and Galmed Pharmaceuticals.

A pipeline of 30+ pharmaceutical compounds targeting liver disease are in development by companies such as Viking Therapeutics, Inventiva, Madrigal Pharmaceuticals, Inc., Akero Therapeutics and Regeneron Pharmaceuticals.

The pharmaceutical industry’s increased presence in the liver disease space represents a synergistic opportunity for ENDRA, as early detection of NAFLD could enable prescription of drug treatment at the most advantageous time for patients.

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In 2018, we received authorization to commence the first human studies in healthy volunteers with our TAEUS clinical system targeting NAFLD, guiding our algorithm development, and comparing our technology to MRI.

The feasibility study was conducted in collaboration with the widely respected Robarts Research Institute in London, Canada.

The feasibility study was conducted in collaboration with the Robarts Research Institute in London, Canada.

We reported the completion of this 50-subject study and top-level findings in September 2019.

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Additionally, in 2019 we entered into clinical evaluation agreements with Rocky Vista University College of Osteopathic Medicine (RVUCOM) and the University of Pittsburgh Medical Center (UPMC) and in 2020 with the Medical College of Wisconsin (MCW), Universitätsmedizin der Johannes Gutenberg-Universität Mainz and Centre Hospitalier Universitaire d'Angers, France (CHU Angers).

In 2021 we established clinical evaluation agreements with Inselspital University Hospital in Bern, Switzerland, and King's College Hospital - London, in the United Kingdom.

In 2022 we established a clinical collaboration with Shanghai General Hospital (China).

In 2022 we established a research collaboration agreement with Ludwig Maximilian University of Munich, Germany.

We received CE mark approval for our TAEUS FLIP (Fatty Liver Imaging Probe) system in March 2020, indicating that the TAEUS FLIP system complies with all applicable European Directives and Regulations in the European Union (“EU”) and other CE mark geographies, including the 27 EU member states.

In support of our commercialization efforts in the EU, we have contracted 4 sales representatives in France, the United Kingdom, and Germany and expect to expand marketing efforts into Scandinavia and other European markets.

In support of our commercialization efforts in the EU, we have 4 sales representatives in France, the United Kingdom, and Germany and expect to expand marketing efforts into other CE markets as we grow.

We actively attend various trade shows and clinical conferences across the UK and EU to drive our marketing presence amongst medical professionals that constitute our target market.

We have also entered into agreements with clinical evaluation sites in Switzerland, Germany, UK and France to collect clinical evidence with aim to underscore clinical utility of the TAEUS device for assessing NAFLD.

We are pursuing FDA approval of our TAEUS FLIP system to enable sales in the United States.

We have also entered into agreements with clinical evaluation sites in Switzerland, Germany, UK and France to collect clinical evidence with the aim to underscore the clinical utility of the TAEUS device for assessing NAFLD.

We are pursuing FDA premarket clearance of our TAEUS FLIP system to enable sales in the United States.

We submitted a 510(k) Premarket Notification application to the FDA in June 2020.

Following meetings with the FDA in connection with its review of our application, we determined that the 510(k) pathway was not the optimal option due to the novel nature of our TAEUS system and, in February 2022, announced that we would pursue the de novo pathway for FDA approval of our NAFLD TAEUS application.

Our submission happened to coincide with the onset of the COVID-19 pandemic, which strained the FDA’s resources, causing it to prioritize COVID-19 related work and resulting in a backlog of non-COVID-19 premarket files pending review.

Following meetings with the FDA in connection with its review of our application, in February 2022 we determined that the 510(k) pathway was not the optimal option for our TAEUS FLIP system due to its novel nature and announced that we would pursue the de novo pathway for FDA reclassification and clearance of our NAFLD TAEUS application.

Other Potential Clinical Applications for our TAEUS Technology

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We plan to target clinical users of thermoablative technology, including interventional radiologists, cardiologists, gynecologists and surgical oncologists.

Thermoablation involves the use of heat or cold to remove malfunctioning or diseased tissue in surgical oncology, cardiology, neurology, gynecology, and urology applications.

Thermoablation involves the use of heat or cold to remove malfunctioning or diseased tissue in surgical oncology, cardiology, neurology, gynecology, urology and cosmetology applications.

Thermoablative technologies include RF, microwave, laser and cryogenic ablation.

The worldwide market for RF surgical ablation procedures alone was estimated in 2015 to be $3.7 billion per annum, generating over 5 million annual RF ablation procedures and growing at approximately 18% annually.

We believe that the growth of this market is driven primarily by the aging global population requiring more cardiac and cancer procedures, as well as the relative ease-of-use and low cost of thermoablative technologies when compared to open surgery.

The global radiofrequency ablation devices market size was valued at $3.59 billion in 2021 and is expected to surpass $10.21 billion by 2030, representing a CAGR of 11% during the forecast period (2022- 2030).

However, RF and other thermoablative surgery technologies pose risks, including under-treatment of diseased tissue and unintended thermal damage to areas outside the treatment area.

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Methods and algorithms for signal processing, image formation and analysis.

As of the date of this Annual Report, we maintain a patent portfolio consisting of twenty-three (23) patents issued in the United States and sixteen (16) issued patents in foreign jurisdictions, fourteen (14) patent applications pending in the United States and thirty-four (34) patent applications pending in foreign jurisdictions relating to our technology.

These patents and patent applications mostly cover certain innovations relating to fat imaging, fat quantitation, and temperature monitoring in the liver and other tissues.

As of December 31, 2022, we maintained a patent portfolio consisting of thirty-three (33) patents issued in the United States and twenty-three (23) issued patents in foreign jurisdictions, five (5) patent applications pending in the United States and thirty-one (31) patent applications pending in foreign jurisdictions 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.

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Sales and Marketing

During 2019 we hired our Chief Commercial Officer and began planning to build a sales and marketing team dedicated to our TAEUS clinical applications.

In parallel to securing all necessary government marketing approvals, we have begun to hire a small internal sales and marketing team to engage and support channel partners and clinical customers.

As we previously did with our Nexus 128 system, we intend to partner with several geographically-focused independent clinical ultrasound equipment distributors to market and sell our TAEUS applications.

In parallel to securing all necessary government marketing approvals, we have hired a small sales and marketing team to engage and support channel partners and clinical customers in primary geographic markets – initially in France, the UK, and Germany, expected to be followed in the U.S.

after FDA approval.

As we previously did with our Nexus 128 system, we also intend to partner with several geographically-focused independent medical device equipment distributors to market and sell our TAEUS applications in secondary markets.

For instance, we have entered into a distribution agreement with a third-party covering future sales in Vietnam.

We believe that these distributors have existing customer relationships, a strong knowledge of diagnostic imaging technology and the capabilities to support the installation, customer training and post-sale service of capital equipment and software.

We also intend to work with original equipment manufacturers, or OEMs, of ultrasound and thermal ablation equipment to sell our TAEUS applications alongside their own new systems and into their existing installed base systems.

We believe that these OEMs will find our applications attractive as the applications would enable them to generate additional revenue from their installed systems – as they currently do with aftermarket accessory portfolios.

We also intend to work with original equipment manufacturers, or OEMs, of capital medical equipment ( e.g ., ultrasound equipment and thermal ablation equipment) to sell our TAEUS technology alongside their own new systems and into their existing installed base systems.

We believe that these OEMs will find our applications attractive as the applications could enable them to generate additional revenue from their installed systems - as they currently do with aftermarket accessory portfolios.

We believe our relationship with GE Healthcare will facilitate this strategy.

Based on our design work and our understanding of the ultrasound accessory market, we intend to price our initial NAFLD TAEUS application at a price point approximating $35,000 to $55,000, which should enable purchasers to recoup their investment in less than one year by performing a relatively small number of additional ultrasound procedures.

Based on our design work and our understanding of the ultrasound accessory market, we intend to price our initial NAFLD TAEUS application at a price point approximating $35,000 to $55,000, which should enable clinical purchasers to recoup their investment in less than one year by performing a relatively small number of additional ultrasound procedures.

Some of our future TAEUS offerings are expected to be implemented via a hardware platform that can run multiple individual software applications that we plan to offer TAEUS users for a one-time licensing fee, enabling users to perform more procedures with their existing ultrasound equipment and retaining more patients in their clinics rather than referring them out to a regional imaging medical center for a CT or MRI scan.

We also intend to offer a license for our TAEUS technology to OEMs, such as GE Healthcare, for incorporation in their new ultrasound systems.

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 capital equipment systems.

Engineering, Design and Manufacturing

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(“StarFish”), a medical device contract manufacturing company, to develop ENDRA’s prototype TAEUS device into a clinical product that met CE regulatory requirements required for commercial launch.

We leveraged StarFish’s expertise in the preparation and submission of our CE Technical File documentation, submitted in December 2019, which enabled us to secure the European Union CE Mark for the TAEUS liver application in March 2020.

We also leveraged StarFish’s expertise in preparation of documentation for the 510(k) submission made to the FDA in June 2020.

We believe that our contract manufacturers will either supply necessary components internally or obtain them from third-party sources.

At this time, we do not know whether any components are or will be single sourced.

We leveraged StarFish’s expertise for the preparation and submission of our CE Technical File documentation, submitted in December 2019, which enabled us to secure the CE Mark for the TAEUS liver application in March 2020.

We also leveraged StarFish’s expertise for preparation of documentation for the 510(k) submission made to the FDA in June 2020.

The relation with StarFish has expanded to include the contract manufacture of the TAEUS® liver system.

As the contract manufacturer, StarFish sources components internally or via third party suppliers.

Regulatory Approval Pathway and Human Study

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We received CE mark approval for our NAFLD TAEUS application in March 2020.

We are now in the process of notifying the competent authorities that we have received the CE mark and registering the product in each of the initial target markets.

In 2021, Regulation (EU)2017/745 on medical devices (the “Medical Device Regulation” or “MDR”) came into effect.

The MDR imposes significant additional obligations on medical device-related companies.

Changes imposed by the MDR include more restrictive requirements for clinical evidence and pre-market assessment of safety and performance, revised classifications to indicate risk levels, stricter requirements for third party testing by government accredited groups for some types of medical devices, and tightened and streamlined quality management system assessment procedures.

These new rules could impose additional requirements on our business, such as a requirement to conduct clinical trials to maintain our existing and obtain additional CE mark applications for existing and new products.

We have registered the product in each target EU market.

In May 2021, Regulation (EU)2017/745 on medical devices (the “Medical Device Regulation” or “MDR”) came into effect.

The MDR amended the prior existing regulatory framework in the EU and imposes significant additional obligations on medical device-related companies.

These new rules also impose additional requirements on our business, such as a requirement to conduct clinical trials to maintain our existing and obtain new or renewed conformity assessment certification for existing and new products.

Also, the MDR provides for additional post-market surveillance obligations, and further requirements for the traceability of products, transparency, refined responsibilities for economic operators (including manufacturer, distributors and importers) as well as a tightened and more comprehensive quality management system.

In June 2020, we submitted to the FDA our application under the Food, Drug and Cosmetic Act (the “FD&C Act”) to sell our NAFLD TAEUS application in the U.S.

In March 2020 we received a positive certification from a government-accredited group (“Notified Body”) for our NAFLD TAEUS application, enabling us to market this application in the EU with the necessary CE Mark.

The certification, which has been issued under the then applicable framework of the Medical Device Directive but taking into consideration the transitionary provisions of the MDR, will expire in May 2024 and re-certification under the MDR will be required in order to continue marketing of the application in the EU.

There is currently a significant lag for recertification of medical devices under the MDR, due to the requirement to have the competent Notified Bodies be re-designated for purposes of the MDR, as there is a shortage of available Notified Bodies that have already been re-designated for all the medical devices requiring (re-)certification.

In light of this development, in February 2023, the European Parliament adopted a Regulation to amend the MDR transition period and to remove the sell-off provisions in the MDR.

Specifically, through the newly adopted Regulation the validity of the CE certification for Class I, Class IIa and certain Class IIb devices (which includes ENDRA’s Class IIa device) has been extended until December 31, 2028, subject to certain conditions (including, among others, continued compliance with the MDR, no significant changes to design or intended purpose, a quality management system, and engagement with a Notified Body to obtain conformity assessment).

ENDRA is working with its Notified Body to ensure a timely MDR CE Mark transition, while aligning to the extended transition deadline.

In June 2020, we submitted to the FDA our application under the Federal Food, Drug and Cosmetic Act (the “FD&C Act”) to sell our NAFLD TAEUS application in the United States.

The application was submitted for clearance under Section 510(k) of the FD&C Act.

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We are currently in the process of preparing a submission for the classification of our NAFLD TAEUS application as a Class II device under a de novo review, which process is described below under “ FDA Approval or Clearance of Medical Devices ”.

This de novo submission will include as support clinical data gathered from a new human study comparing liver fat measurements by our TAEUS device to measurements by MRI-PDFF.

This de novo submission will include as support clinical data gathered from human studies comparing liver fat measurements by our TAEUS device to measurements by MRI-PDFF.

We expect that the FDA’s grant of our initial de novo request will allow us to sell the NAFLD TAEUS application in the U.S.

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In the European Union, applications incorporating our TAEUS technology are regulated as Class IIa medical devices by the European Medicines Agency (the “EMA”) and the European Union Commission.

As described above, our NAFLD TAEUS application has received, and we expect our future applications will need to receive, a CE mark from an appropriate Competent Authority or government-accredited group (a “Notified Body”), as the case may be, 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.

As described above, our NAFLD TAEUS application has received, and we expect our future applications will need to receive, a CE mark from an appropriate Competent Authority or Notified Body, as the case may be, 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 recertification may require an annual audit.

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special controls and approval of a premarket approval, or PMA, application.

We expect all of our products to be classified as Class II medical devices and thus require FDA authorization prior to marketing by means of a 510(k) clearance or de novo request, rather than a PMA application.

We expect all of our products to be classified as, or subject to reclassification as, Class II medical devices and thus require FDA authorization prior to marketing by means of a 510(k) clearance or de novo request, rather than a PMA application.

To request marketing authorization by means of a 510(k) clearance, we must submit a notification demonstrating that the proposed device is substantially equivalent to another legally marketed medical device, has the same intended use, and is as safe and effective as a legally marketed device and does not raise different questions of safety and effectiveness than a legally marketed device.

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Historically, the typical 510(k) review time has been approximately nine to twelve months from the date of the initial 510(k) submission.

However, the COVID-19 pandemic has resulted in the FDA reallocating a number of its reviewers to address emergency use authorizations for COVID-19-related products, which may result in longer 510(k) review times for other devices.

In many instances, the 510(k) pathway for product marketing requires only non-clinical testing as proof of substantial equivalence to a lawfully marketed predicate device for a given indication.

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If the device is classified as Class II, the device may serve as a predicate for future 510(k) submissions.

If the device is not approved through de novo review, then it must go through the standard PMA process for Class III devices, which generally requires extensive pre-clinical and clinical trial data and involves an inspection of the manufacturer’s facilities for compliance with quality system requirements as well as a review period during which an FDA advisory committee is convened to review the application and make a recommendation to the FDA regarding its approval.

If the device is not approved through de novo review, then it must go through the standard PMA process for Class III devices, which generally requires extensive pre-clinical and clinical trial data and involves an inspection of the manufacturer’s facilities for compliance with quality system requirements as well as a review period during which an FDA advisory committee may be convened to review the application and make a recommendation to the FDA regarding its approval.

After a device receives 510(k) clearance, including following classification as a Class I or II device upon an approved de novo request, any product modification that could significantly affect the safety or effectiveness of the product, or that would constitute a significant change in intended use, requires a new 510(k) clearance.

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Clinical Trials of Medical Devices

One or more clinical trials are generally required to support a PMA application and more recently are becoming necessary to support a 510(k) submission.

Depending on the nature of the device, one or more clinical trials may be necessary to support a 510(k) submission and, potentially, for EU CE certification, as well as generally required for PMA applications.

Clinical studies of unapproved or uncleared medical devices or devices being studied for uses for which they are not approved or cleared (investigational devices) must be conducted in compliance with FDA requirements (and/or, if conducted in another jurisdiction, the applicable laws and regulations of the jurisdiction in which the trial is conducted).

If an investigational device could pose a significant risk to patients, the sponsor company must submit an investigational device exemption application to the FDA prior to initiation of the clinical study.

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During the approval or clearance process, the FDA typically inspects the records relating to the conduct of one or more investigational sites participating in the study supporting the application.

Post-Approval Regulation of Medical Devices

Post-Approval U.S.

Regulation of Medical Devices

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.

These include:

the FDA quality systems regulation, which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products;

the FDA’s Quality Systems Regulation (“QSR”), which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products;

labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;

the Medical Device Reporting regulation, which requires reporting to the FDA of certain adverse experiences associated with use of the product.

Post-Approval EU Regulation of Medical Devices

Notwithstanding the certification and the CE marking on approved medical devices, economic operators such as the manufacturers, importers or distributors of our products are subject to certain ongoing and/or post marketing obligations.

These include:

the manufacturer maintaining an authorized representative in the EU;

maintaining an appropriate system for obtaining, reviewing, assessing and appropriately collecting and registering reports from patients, users, distributors or healthcare professionals of suspected incidents, complaints, non-confirming products, recalls and/or withdrawals;

preparing and maintaining SOPs for product withdrawal, recall or other field safety corrective and preventive actions (“CAPA”) as well as maintaining a system to manage CAPA that ensures collection and evaluation of internal and external quality information, the identification of failure causes and the implementation of enduring corrective actions to eliminate failure causes and to prevent recurrence;

ensuring supply chain traceability and ensure proper quality monitoring of any distributors;

regular (and, if required, ad hoc) reporting to the competent authorities in accordance with MDR.

Good Manufacturing Practices Requirements

Manufacturers of medical devices are required to comply with the good manufacturing practices set forth in the quality system regulation promulgated under Section 520 of the FD&C Act.

Current good manufacturing practices regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation.

The manufacturing facility for an approved product must be registered with the FDA and meet current good manufacturing practices requirements to the satisfaction of the FDA pursuant to a pre-PMA approval inspection before the facility can be used.

Manufacturers of medical devices are required to comply with the good manufacturing practices set forth in the QSR promulgated under Section 520 of the FD&C Act.

The QSR requires, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation.

The manufacturing facility for an approved product must be registered with the FDA and meet QSR requirements to the satisfaction of the FDA pursuant to a pre-PMA approval inspection before the facility can be used.

Manufacturers, including third party contract manufacturers, are also subject to periodic inspections by the FDA and other authorities to assess compliance with applicable regulations.

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Adverse experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or in product withdrawal.

Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following the approval.

Product approvals or clearances may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following the approval.

China Regulation

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Other Regulations

We will become subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements.

We and our contractors also must comply with numerous federal, state and local laws relating to matters such as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and hazardous substance disposal.

Furthermore, we are subject to various reporting requirements including those prescribed by the Affordable Care Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

We cannot be sure that we will not be required to incur significant costs to comply with these laws and regulations in the future or that these laws or regulations will not adversely affect our business, financial condition, and results of operations.

Unanticipated changes in existing regulatory requirements or the adoption of new requirements could adversely affect our business, financial condition, and results of operations.

We will also become subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements.

Additionally, third parties designing, manufacturing or conducting human studies of our devices will be subject to local regulations, such as those of Health Canada.

The time required to obtain clearance required by foreign countries may be longer or shorter than that required for EMA or FDA clearance, and requirements for licensing a product in a foreign country may differ significantly from EMA and FDA requirements.

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.

Future environmental laws may require us to alter our manufacturing processes, thereby increasing our manufacturing costs.

We believe that our products and manufacturing processes at our facilities comply in all material respects with applicable environmental laws.

However, the risk of environmental liabilities cannot be completely eliminated.

While we believe that we are the only company developing RF-based thermoacoustic ultrasound products, we will 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.

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As of December 31, 2022, we had 21 employees, all of whom are employed on a full-time basis.

13 full-time employees were engaged in research and development activities, 4 full-time employees were engaged in sales activities, 2 full-time employees were engaged in product assembly, and 3 full-time employees were engaged in administrative activities.

Geographically we employ 15 people in the United States, 3 people in Canada, 2 people in France, 1 person in Germany and 1 person in the United Kingdom.

Thirteen full-time employees were engaged in research and development activities, four full-time employees were engaged in sales activities, two full-time employees were engaged in product assembly, and two full-time employees were engaged in administrative activities.

Geographically, we employ fifteen people in the United States, three people in Canada, one person in France, one person in Germany and one person in the United Kingdom.

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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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-K

Item 1. Business