What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 79 added, 184 removed, 266 unchanged (50% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current Assets

4 unchanged sentences

Right of use assets

Vendor advance

Liabilities and Stockholders’ Equity

10 unchanged sentences

10,000 shares authorized;

141,397 and 141,397 shares issued and outstanding, respectively

Series B Convertible Preferred Stock, $ 0.0001 par value;

1,000 shares authorized;

no shares issued and outstanding

141 .397 shares issued and outstanding

Common stock, $ 0.0001 par value;

80,000,000 shares authorized;

63,174,455 and 42,554,514 shares issued and outstanding, respectively

3,169,103 shares issued and outstanding

Additional paid in capital

10 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating Expenses

6 unchanged sentences

( 2,855,269 )

( 9,844,178 )

( 8,426,764 )

Other Expenses

Gain on extinguishment of debt

Other income (expense)

3 unchanged sentences

( 2,858,202 )

( 9,889,496 )

( 8,126,622 )

Provision for income taxes

1 unchanged sentence

$ ( 2,858,202 )

$ ( 9,889,496 )

$ ( 8,126,622 )

Deemed dividend

Net Loss attributable to common stockholders

$ ( 3,440,227 )

$ ( 2,658,242 )

$ ( 9,889,496 )

$ ( 8,247,693 )

Net loss per share – basic and diluted

2 unchanged sentences

ENDRA Life Sciences Inc.

Condensed Consolidated Statements Changes in Stockholders’ Equity

Three Months Ended

September 30, 2021

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

Balance as of June 30, 2021

$ ( 62,927,940 )

Common stock issued for warrant exercise

Common stock issued for option exercise

Fair value of vested stock options

Stock payable towards preference dividend

Stock payable for RSU

( 2,658,242 )

Balance as of September 30, 2021

$ ( 65,586,182 )

Three Months Ended

September 30, 2022

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

Balance as of June 30, 2022

( 75,140,079 )

Fair value of vested stock options

Stock payable towards preference dividend

( 3,440,227 )

Balance as of September 30, 2022

$ ( 78,580,306 )

Nine Months Ended September 30, 2021

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2022

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

1 unchanged sentence

( 68,690,810 )

Series A Convertible Preferred Stock converted to common stock

Common stock issued for cash, net of funding costs

Common stock issued for warrant exercise

Common stock issued for option exercise

Fair value of vested stock options

Stock payable towards preference dividend

Common stock issued for services

Stock payable towards RSU's

Deemed dividend

( 2,858,202 )

Balance as of September 30, 2021

Balance as of March 31, 2022

$ ( 71,549,012 )

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Series A Convertible

Series B Convertible

Preferred Stock

Stockholders'

1 unchanged sentence

( 81,869,902 )

Common stock issued for cash, net of funding costs

Fair value of vested stock options

2 unchanged sentences

( 2,942,746 )

Balance as of September 30, 2022

Balance as of March 31, 2023

$ ( 84,812,648 )

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

4 unchanged sentences

Stock compensation expense including common stock issued for RSUs

Stock payable for investor relations

Amortization of right of use assets

Gain on extinguishment of debt

Changes in operating assets and liabilities:

1 unchanged sentence

Increase in inventory

( 1,349,499 )

Increase in accounts payable and accrued liabilities

7 unchanged sentences

Cash Flows from Financing Activities

Proceeds from warrant exercise

Proceeds from issuance of common stock

2 unchanged sentences

( 2,533,847 )

( 2,334,171 )

Cash, beginning of period

4 unchanged sentences

Supplemental disclosures of non-cash items

Deemed dividend

Conversion of Series A Convertible Preferred Stock

Stock dividend payable

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

For the Three and Nine months ended September 30, 2022 and 2021

For the three months ended March 31, 2023 and 2022

Note 1 - Nature of the Business

2 unchanged sentences

ENDRA was incorporated on July 18, 2007 as a Delaware corporation.

Certain reclassifications have been made to the 2021 consolidated financial statements in order to conform to the current period presentations.

These classifications did not impact the net loss for period ended March 31, 2023.

Note 2 - Summary of Significant Accounting Policies

Reverse Stock Split

All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the Reverse Split (as defined and described under Note 7 below).

Use of Estimates

3 unchanged sentences

Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.

The COVID-19 pandemic has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel.

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the magnitude and duration of COVID-19, the extent to which it continues impact worldwide macroeconomic conditions, the emergence of variants of the virus and effectiveness of vaccines, access to capital markets, and governmental and business reactions to the pandemic.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2022 and through the date of the filing of this Quarterly Report on Form 10-Q.

The accounting matters assessed included, but were not limited to, estimates related to the accounting for potential liabilities and accrued expenses, the assumptions utilized in valuing stock-based compensation issued for services, the realization of deferred tax assets, and assessments of impairment related to long-lived assets.

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.

Despite the Company’s efforts, the ultimate impact of COVID-19 on the Company’s business depends on factors beyond the Company’s knowledge or control, including the duration and severity of the outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects.

As a result, the Company is unable to estimate the extent to which COVID-19 will negatively impact its financial results or liquidity.

Principles of Consolidation

5 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date.

3 unchanged sentences

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of one year or less, when purchased, to be cash.

As of September 30, 2022 and December 31, 2021, the Company had no cash equivalents.

As of March 31, 2023 and December 31, 2022, the Company had no cash equivalents.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible.

In light of the liquidity concerns in the banking system arising from the closure of Silicon Valley Bank and appointment of the Federal Deposit Insurance Corporation as receiver, the Company maintains cash deposits at multiple banks to mitigate the risk associated with a failure of any specific bank.

The Company’s inventory is stated at the lower of cost or estimated net realizable value, with cost primarily determined on a weighted-average cost basis on the first-in, first-out method.

9 unchanged sentences

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements.

At September 30, 2022 and December 31, 2021 the Company recorded a right of use asset of $ 541,456 and $ 643,413 , respectively.

At September 30, 2022 and December 31, 2021 the Company recorded a lease liability of $ 552,830 and $ 650,477 , respectively.

As of March 31, 2023 and December 31, 2022, the Company recorded a right of use asset of $ 469,290 and $ 505,816 , respectively.

As of March 31, 2023 and December 31, 2022, the Company recorded a lease liability of $ 481,618 and $ 518,147 , respectively.

Revenue Recognition

6 unchanged sentences

Research and development costs are charged to the statement of operations as incurred.

During the three months ended September 30, 2022 and 2021, the Company incurred $ 1,830,297 and $ 1,173,319 of expenses related to research and development costs, respectively.

During the nine months ended September 30, 2022 and 2021, the Company incurred $ 4,890,879 and $ 4,059,730 of expenses related to research and development costs, respectively.

During the three months ended March 31, 2023 and 2022, the Company incurred $ 1,391,314 and $ 1,213,022 of expenses related to research and development costs, respectively.

Net Earnings (Loss) Per Common Share

2 unchanged sentences

Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive.

There were 8,375,004 and 7,848,899 potentially dilutive shares, which include outstanding common stock options, and warrants, as of September 30, 2022 and December 31, 2021, respectively.

The potential shares, which are excluded from the determination of basic and diluted net loss per share as their effect is anti-dilutive, are as follows:

September 30,

There were 665,104 and 410,358 potentially dilutive shares, which include outstanding common stock options, and warrants, as of March 31, 2023 and December 31, 2022, respectively.

Options to purchase common stock

19 unchanged sentences

Each January 1 the pool of shares available for issuance under the Omnibus Plan automatically increases by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the Omnibus Plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the board of directors takes action to set a lower amount, the amount determined by the board.

On January 1, 2022, the pool of shares authorized for issuance under the Omnibus Plan automatically increased by 1,622,848 shares from 7,461,228 shares to 9,084,076 shares.

On January 1, 2023, the pool of shares issuable under the Omnibus Plan automatically increased by 867,966 shares from 454,203 shares to 1,322,169 shares.

The Company records share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification.

7 unchanged sentences

GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

The Company has limited commercial experience and had a cumulative net loss from inception to September 30, 2022 of $ 78,580,306 .

The Company had working capital of $ 9,859,534 as of September 30, 2022.

The Company has limited commercial experience and had a cumulative net loss from inception to March 31, 2023 of $ 84,812,648 .

The Company had working capital of $ 3,687,342 as of March 31, 2023.

The Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations, including research and development and commercialization of its products.

The accompanying financial statements for the period ended September 30, 2022 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable.

The accompanying financial statements for the three months ended March 31, 2023 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable.

Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing.

6 unchanged sentences

Note 3 - Inventory

As of September 30, 2022 and December 31, 2021, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of September 30, 2022, the Company had no orders pending for the sale of a TAEUS system.

As of September 30, 2022 and December 31, 2021, the Company had inventory valued at $ 2,634,077 and $ 1,284,578 , respectively.

As of March 31, 2023 and December 31, 2022, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods.

As of March 31, 2023, the Company had no orders pending for the sale of a TAEUS system.

As of March 31, 2023 and December 31, 2022, the Company had inventory valued at $ 2,735,349 and $ 2,644,717 , respectively.

Note 4 - Fixed Assets

As of September 30, 2022 and December 31, 2021, fixed assets consisted of the following:

September 30,

As of March 31, 2023 and December 31, 2022, fixed assets consisted of the following:

Property, leasehold and capitalized software

2 unchanged sentences

Fixed assets, net

Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 23,793 and $ 29,823 , respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 64,532 and $ 94,977 , respectively.

Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 34,516 and $ 19,038 , respectively.

Note 5 - Accounts Payable and Accrued Liabilities

As of September 30, 2022 and December 31, 2021, current liabilities consisted of the following:

September 30,

As of March 31, 2023 and December 31, 2022, current liabilities consisted of the following:

Accounts payable

4 unchanged sentences

Note 6 - Bank Loans

SBA Paycheck Protection Program

In April 2020, the Company issued a U.S.

Small Business Administration (“SBA”) Paycheck Protection Program Note (the “SBA Note”) to First Republic Bank (the “Lender”) for a loan in the principal amount of $ 308,600 (the “SBA Loan”) under the Paycheck Protection Program (“PPP”) promulgated under the Coronavirus Aid, Relief and Economic Security Act of 2020, as modified by the Paycheck Protection Program Flexibility Act of 2020.

On May 10, 2021 received notice that the SBA Loan had been forgiven in full in accordance with the terms and provisions of the PPP.

The Company did not provide any collateral or personal guarantees for the SBA Loan, nor did the Company pay any facility charge to the government or to the Lender.

Toronto-Dominion Bank Loan

On April 27, 2020, the Company entered into a commitment loan with TD Bank under the Canadian Emergency Business Account, in the principal aggregate amount of CAD 40,000 , which is due and payable upon the expiration of the initial term on December 31, 2022 .

On April 27, 2020, the Company entered into a commitment loan with TD Bank under the Canadian Emergency Business Account, in the principal aggregate amount of CAD 40,000 , due and payable upon the expiration of the initial term on December 31, 2022 , which was later extended to December 31, 2023.

This note bears interest on the unpaid balance at the rate of zero percent ( 0 %) per annum during the initial term.

2 unchanged sentences

Note 7 - Capital Stock

At September 30, 2022, the authorized capital of the Company consisted of 90,000,000 shares of capital stock, comprised of 80,000,000 shares of common stock with a par value of $ 0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

The Company has designated 10,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 1,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”), and the remainder of 9,989,000 shares remain authorized but undesignated.

As of September 30, 2022, there were 63,174,455 shares of common stock, 141,397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock issued and outstanding, and a stock payable balance of $ 8,490 .

During the nine months ended September 30, 2022, the Company issued a total of 20,619,941 shares of its common stock in return for aggregate net proceeds of $ 8,399,512 under the June 2021 ATM Agreement (as described below).

During the nine months ended September 30, 2021, the Company issued a total of 8,116,023 shares of its common stock, as follows:

67,889 shares upon the conversion of 55,397 shares of its Series A Preferred Stock;

4,198,170 shares in return for aggregate net proceeds of $ 10,294,904 from sales of common stock;

3,567,899 shares upon warrant exercises for an aggregate exercise price of $ 2,785,627 ;

202,887 shares upon cashless warrant exercises;

23,835 shares upon cashless option exercise;

32,527 shares for services valued at $ 74,000 ;

22,815 shares upon vesting of restricted stock units (“RSUs”) valued at $ 36,460 .

Reverse Stock Split

On December 7, 2022, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment (the “Certificate of Amendment”) to its certificate of incorporation, which Certificate of Amendment effectuated as of December 19, 2022 at 12:01 a.m.

Eastern Time (the “Effective Time”) a reverse split of the Company’s common stock by a ratio of one-for-20 (the “Reverse Split”).

All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the Reverse Split.

No fractional shares were, or shall be, issued in connection with the Reverse Split.

A stockholder who would otherwise be entitled to receive a fractional share of common stock is entitled to receive the fractional share rounded up to the next whole share.

The Reverse Split did not change the number of shares of common or preferred stock that the Company is authorized to issue, or the par value of the Company’s common or preferred stock.

The Reverse Split resulted in a proportionate adjustment to the per share conversion or exercise price and the number of shares of common stock issuable upon the conversion or exercise of outstanding preferred stock, stock options and warrants, as well as the number of shares of common stock eligible for issuance under the Company’s 2016 Omnibus Incentive Plan.

Capital Stock

As of March 31, 2023, the authorized capital of the Company consisted of 90,000,000 shares of capital stock, comprised of 80,000,000 shares of common stock with a par value of $ 0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

The Company has designated 10,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”), 1,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”), 100,000 shares of its preferred stock as Series C Preferred Stock, and the remainder of the 9,889,000 preferred shares remain authorized but undesignated.

As of March 31, 2023, there were 3,169,103 shares of common stock, 141,397 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding, and a stock payable balance of $ 3,692 .

During the three months ended March 31, 2022, the Company issued a total of 100,245 shares of its common stock in return for aggregate net proceeds of $ 854,052 .

At-the-Market Equity Offering Program

On June 21, 2021, the Company entered into the At-The-Market Issuance Sales Agreement with Ascendiant (the “June 2021 ATM Agreement”) to sell shares of common stock for aggregate gross proceeds of up to $ 20.0 million, from time to time, through an “at-the-market” equity offering program under which Ascendiant acts as sales agent.

As of September 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 21,292,682 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

During the nine months ended September 30, 2022, under the June 2021 ATM Agreement the Company has issued an aggregate of 20,619,941 shares of common stock in return for net proceeds of $ 8,398,936 , resulting in $ 260,776 of compensation paid to Ascendiant.

As of March 31, 2023, under the June 2021 ATM Agreement the Company has issued an aggregate of 1,064,634 shares of common stock in return for net proceeds of $ 9,216,618 , resulting in approximately $ 286,289 of compensation paid to Ascendiant.

Note 8 - Common Stock Options

1 unchanged sentence

Stock options are awarded to the Company’s employees, consultants and non-employee members of the board of directors under the Omnibus Plan and are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant.

The aggregate fair value of these stock options granted by the Company during the nine months ended September 30, 2022 was determined to be $ 909,072 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

The aggregate fair value of these stock options granted by the Company during the three months ended March 31, 2023 was determined to be $ 1,017,235 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

(i) volatility rate of 106 % to 107 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 3.68 % to 3.93 %, and (v) expected life of 10 years.

A summary of option activity under the Company’s Omnibus Plan as of September 30, 2022, and changes during the year then ended, is presented below:

Weighted Average

Remaining Contractual

A summary of option activity under the Company’s Omnibus Plan as of March 31, 2023, and changes during the year then ended, is presented below:

Balance outstanding at December 31, 2022

Cancelled or expired

Balance outstanding at September 30, 2022

Exercisable at September 30, 2022

Balance outstanding at March 31, 2023

Exercisable at March 31, 2023

Note 9 - Common Stock Warrants

Warrant Conversions and Consent Solicitation

The following table summarizes all stock warrant activity of the Company for the nine months ended September 30, 2022:

Number of Warrants

Weighted Average

Exercise Price

Weighted Average

Contractual Term (Years)

The following table summarizes all stock warrant activity of the Company for the three months ended March 31, 2023:

Balance outstanding at December 31, 2022

( 2,230,411 )

Balance outstanding at September 30, 2022

Exercisable at September 30, 2022

Balance outstanding at March 31, 2023

Exercisable at March 31, 2023

Note 10 - Commitments and Contingencies

1 unchanged sentence

On October 10, 2017 this lease was amended increasing the rentable square feet of space to 3,950 and the monthly rent to $ 7,798 .

On July 16, 2019, the Company exercised its option to extend the lease for an additional 5 years past the initial term originally expiring on December 31, 2019 .

On March 15, 2021, the Company entered into an amendment to the lease, adding approximately 3,248 rentable square feet, increasing the initial monthly rent to $15,452 effective May 2021, and extending the term of the lease to December 31, 2025 .

2 unchanged sentences

therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments.

The Company’s discount rate for operating leases at September 30, 2022 was 10 %.

The Company’s discount rate for operating leases at March 31, 2023 was 10 %.

Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable.

1 unchanged sentence

The weighted-average remaining lease term is 2.75 years.

As of September 30, 2022, the maturities of operating lease liabilities are as follows:

As of March 31, 2023, the maturities of operating lease liabilities are as follows:

2025 and beyond

3 unchanged sentences

Long-term lease obligations

For the three months ended September 30, 2022 and 2021, the Company incurred rent expenses of $ 53,698 and $ 53,263 , respectively.

For the nine months ended September 30, 2022 and 2021, the Company incurred rent expenses of $ 160,302 and $ 119,802 , respectively.

Employment and Consulting Agreements

For the three months ended March 31, 2023 and 2022, the Company incurred rent expenses of $ 53,809 and $ 52,763 , respectively.

Employment Agreements

Francois Michelon - The Company has an employment agreement with Francois Michelon, the Company’s Chief Executive Officer and Chairman of the board of directors, dated May 12, 2017 and amended on December 27, 2019.

The employment agreement provides for an annual base salary that is subject to adjustment at the board of directors’ discretion.

The annual base salary in effect during the period covered by this Form 10-Q was $423,000.

Effective January 1, 2022, it increased Mr.

Michelon’s annual salary to $423,000.

Under the employment agreement, Mr.

1 unchanged sentence

Upon termination without cause, any portion of Mr.

Michelon’s option award scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Michelon’s option award granted pursuant to his employment agreement that is scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Upon termination for any other reason, the entire unvested portion of the option award will terminate.

4 unchanged sentences

Michelon is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

Michael Thornton - The Company has an employment agreement with Michael Thornton, the Company’s Chief Technology Officer, dated May 12, 2017 and on December 27, 2019.

Michael Thornton - The Company has an employment agreement with Michael Thornton, the Company’s Chief Technology Officer, dated May 12, 2017 and amended on December 27, 2019.

The employment agreement provides for an annual base salary that is subject to adjustment at the board of directors’ discretion.

The annual base salary in effect during the period covered by this Form 10-Q was $ 324,000 .

Effective January 1, 2022, it increased Mr.

Thornton’s annual salary to $ 324,000 .

Under the employment agreement, Mr.

1 unchanged sentence

Upon termination without cause, any portion of Mr.

Thornton’s option award scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Thornton’s option award granted pursuant to his employment agreement that is scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest.

Upon termination for any other reason, the entire unvested portion of the option award will terminate.

4 unchanged sentences

Thornton is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

Renaud Maloberti - The Company has an employment agreement with Renaud Maloberti, dated April 15, 2019, that provides for an annual base salary of $ 250,000 and eligibility for an annual cash bonus to be paid based on attainment of Company and individual performance objectives to be established by the Board of Directors.

The annual base salary in effect during the period covered by this Form 10-Q was $296,000.

The employment agreement also provides for eligibility to receive benefits substantially similar to those of the Company’s other senior executive officers.

Upon termination without cause that is not the result of death or disability within 12 months following a change in control, the entire unvested portion of the award will automatically vest without any limitation upon sales.

Upon termination for any other reason, the entire unvested portion of the award will terminate.

If the termination is for cause, the vested portion of the award will also terminate.

Unless terminated sooner, the term of Mr.

Maloberti’s employment agreement renews on a year-to-year basis.

Maloberti’s employment is terminated by the Company without cause (as defined in the Omnibus Plan), Mr.

Maloberti will be entitled to receive, subject to his execution of a standard release agreement, 8 months’ continuation of his current base salary and a lump sum payment equal to 8 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).

Under his employment agreement, Mr.

Maloberti is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

Renaud Maloberti - The Company had an employment agreement with Renaud Maloberti, dated April 15, 2019, that provided for an annual base salary of $ 250,000 and eligibility for an annual cash bonus to be paid based on attainment of Company and individual performance objectives to be established by the Board of Directors.

On December 21, 2022, Mr.

Maloberti notified the Company of his resignation as the Company’s Chief Commercial Officer, effective January 13, 2023.

From time to time the Company may become a party to litigation in the normal course of business.

As of September 30, 2022, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

As of March 31, 2023, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

Note 12 - Subsequent Events

On September 26, 2022, the Company’s board of directors declared a dividend of one one-thousandth of a share of Series C Preferred Stock, par value $ 0.0001 per share (“Series C Preferred Stock”), for each outstanding share of the Company’s common stock, and 1.359 shares of Series C Preferred Stock for each outstanding share of Series A Convertible Preferred Stock, to stockholders of record at 5:00 p.m.

Eastern Time on October 7, 2022.

Each whole share of Series C Preferred Stock entitles the holder thereof to 1,000,000 votes (and each fraction of a share of Series C Preferred Stock will have a ratable number of votes) on any proposal to adopt an amendment to the Company’s certificate of incorporation to reclassify the outstanding shares of the Company’s common stock into a smaller number of shares at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”).

All shares of Series C Preferred stock that are not present in person or by proxy at any meeting of stockholders held to vote on the Reverse Stock Split as of immediately prior to the opening of the polls at such meeting will automatically be redeemed in whole by the Company without further action on the part of the Company or the holder of shares of Series C Preferred Stock.

Any outstanding shares of Series C Preferred Stock that are not redeemed at such time will be redeemed (i) if such redemption is ordered by the Company’s board of directors in its sole discretion, automatically and effective on such time and date specified by the board of directors or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split at any meeting of stockholders held for the purpose of voting on such proposal.

Each share of Series C Preferred Stock redeemed in any redemption described above will be redeemed for no consideration.

The Series C Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company.

No shares of Series C Preferred Stock may be transferred by the holder thereof except in connection with a transfer by such holder of shares of Common Stock or Series A Preferred Stock, as applicable, of such holder, in which case a number of (i) one one-thousandths (1/1,000ths) of a share of Series C Preferred Stock equal to the number of shares of Common Stock to be transferred by such holder or (ii) a number of shares of Series C Preferred Stock issued in respect of each share of Series A Preferred Stock to be transferred will be automatically transferred to the transferee of such shares of Common Stock or Series A Preferred Stock, as applicable.

The foregoing description of the Series C Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designations of Series C Preferred Stock, which is filed as Exhibit 4.5 hereto.

On April 27, 2023, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Newbridge Securities Corporation (the “Underwriter”), relating to the issuance and sale (the “Offering”) of 3,750,000 shares of our common stock and warrants to purchase up to 1,875,000 shares of our common stock.

The warrants were offered and sold at the rate of one warrant to purchase one share for every two shares of common stock purchased in the Offering.

The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of common stock was $ 2.41 per set of securities, yielding an effective price of $ 1.20 per share and $ 0.01 per warrant.

Under the terms of the Underwriting Agreement, the Company also granted to the Underwriter an option (the “Over-allotment Option”) to purchase up to an additional 562,500 shares of common stock and additional warrants to purchase 281,250 shares of common stock.

The Offering closed on May 2, 2023.

The Company conducted the Offering pursuant to a Registration Statement on Form S-1 (File Nos.

333-271003 and 333-271483) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission (the “Commission”) on April 27, 2023.

At the closing of the Offering, the Underwriter fully exercised the Over-allotment Option.

The net proceeds to us from the Offering were approximately $4.5 million, after deducting underwriting discounts and commissions and other estimated offering expenses.

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

What changed 10-Q

Item 1. Financial Statements