What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-03-28 compared with 2023-03-16 · 149 added, 104 removed, 355 unchanged (42% of the section changed)

11 unchanged sentences

Notes to Consolidated Financial Statements for the years ended December 31, 2023 and 2022

New York Office:

805 Third Avenue

New York, NY 10022

www.rbsmllp.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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March 28, 2024

New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL

San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

ANTEA International with affiliated offices worldwide

ENDRA Life Sciences Inc.

1 unchanged sentence

Current Assets

Cash and cash equivalents

Prepaid expenses

3 unchanged sentences

Right of use assets

Prepaid expenses, long term

Liabilities and Stockholders’ Equity

15 unchanged sentences

no shares issued and outstanding

Series C Convertible Preferred Stock, $ 0.0001 par value;

100,000 shares authorized;

no shares issued and outstanding

Common stock, $ 0.0001 par value;

19 unchanged sentences

( 13,157,559 )

Other Expenses

Gain on extinguishment of debt

Other income (expense)

Total other expenses

Other Income (Expenses)

Other income (expenses)

Total other income (expenses)

Loss from operations before income taxes

4 unchanged sentences

$ ( 13,179,092 )

Deemed dividend

Net Loss attributable to common stockholders

$ ( 13,179,092 )

$ ( 11,352,321 )

Net loss per share – basic and diluted

5 unchanged sentences

Series A Convertible

Series B Convertible

Preferred Stock

Series B Convertible

Preferred Stock

2 unchanged sentences

$ ( 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 issued for RSU

Deemed dividend

( 13,179,092 )

4 unchanged sentences

Series A Convertible

Series B Convertible

Preferred Stock

Series B Convertible

Preferred Stock

3 unchanged sentences

Common stock issued for cash, net of funding costs

Common stock issued for warrant exercise

Warrants issued for cash, net of funding costs

Fair value of vested stock options

Stock paid towards preference dividend

Stock payable towards preference dividend

( 10,060,250 )

11 unchanged sentences

Fixed assets write off

Inventory reserve

Stock compensation expense including common stock issued for RSUs

Amortization of right of use assets

Gain on extinguishment of debt

Changes in operating assets and liabilities:

2 unchanged sentences

( 1,360,139 )

Increase in accounts payable and accrued liabilities

Decrease in accounts payable and accrued liabilities

Decrease in lease liability

4 unchanged sentences

Purchases of fixed assets

Proceeds from sale of fixed assets

Net cash used in investing activities

Cash Flows from Financing Activities

Proceeds from warrant exercise

Proceeds from issuance of common stock

Proceeds from issuance of warrants

Proceeds from warrant exercise

Net cash provided by financing activities

Net increase (decrease) in cash

Net decrease in cash

( 2,055,191 )

( 4,572,436 )

Cash, beginning of year

4 unchanged sentences

Supplemental disclosures of non-cash items

Deemed dividend

Conversion of Series A Convertible Preferred Stock

Stock dividend payable

Right of use asset

Lease liability

The accompanying notes are an integral part of these consolidated financial statements.

4 unchanged sentences

ENDRA Life Sciences Inc.

(“ENDRA” or the “Company”) has developed and is continuing to develop technology for increasing the capabilities of clinical diagnostic ultrasound to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray computed tomography (“CT”) and magnetic resonance imaging (“MRI”) technology is unavailable or impractical.

(“ENDRA” or the “Company”) has developed and is continuing to develop technology for characterizing tissue non-invasively, at the point of patient care, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray computed tomography (“CT”), magnetic resonance imaging (“MRI”) or other technologies are unavailable or impractical.

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

Note 2 - Summary of Significant Accounting Policies

Certain reclassifications have been made to the 2022 consolidated financial statements in order to conform to the current period presentations.

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

Note 2 - Summary of Significant Accounting Policies and Going Concern

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies.

Management makes estimates that affect certain accounts including inventory reserve, deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies.

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 December 31, 2022 and through the date of the filing of this Annual Report on Form 10-K.

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

6 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 December 31, 2022 and 2021, the Company had no cash equivalents.

Cash equivalents include investments in an institutional money market fund, which invests in U.S.

Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations.

Carrying value approximates fair value.

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.

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

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.

The Company periodically determines whether a reserve should be taken for devaluation or obsolescence of inventory.

The Company assessed its inventory at December 31, 2023 and determined that certain challenges, including potential damage and a longer timeframe for initial sales, warranted the establishment of an inventory shrinkage reserve.

As a result, the Company recognized an inventory reserve of 5 % amounting to $ 138,045 , which resulted in the net carrying value of inventory of $ 2,622,865 .

Capitalization of Fixed Assets

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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, 2023, the pool of shares issuable under the Omnibus Plan automatically increased by 867,966 shares from 454,204 shares to 1,322,169 shares .

Effective January 1, 2024, the pool of shares issuable under the Omnibus Plan automatically increased by 1,717,783 shares from 1,322,169 shares to 3,039,952 shares .

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

10 unchanged sentences

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.

These matters raise substantial doubt about the Company's ability to continue as going concern.

The accompanying financial statements for the year ended December 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.

9 unchanged sentences

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

As of December 31, 2023, the Company recorded inventory reserve of 5 % or $ 138,045 .

As of December 31, 2023 and 2022, the Company had inventory valued at $ 2,622,865 and $ 2,644,717 , respectively.

5 unchanged sentences

Fixed assets, net

Depreciation expense for the year ended December 31, 2022 and 2021 was $ 96,661 and $ 116,238 , respectively.

Depreciation expense for the year ended December 31, 2023 and 2022 was $ 123,726 and $ 96,661 .

Note 5 - Accounts Payable and Accrued Liabilities

6 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

3 unchanged sentences

Under the conditions of the loan, twenty-five percent (25%) of the loan will be forgiven if seventy-five percent (75%) is repaid prior to the initial term date .

As of December 31, 2023 and December 31, 2022, the loan had a balance of CAD 40,000 .

Subsequent to the year ended December 31, 2023, the loan was repaid in full.

Note 7 - Capital Stock

10 unchanged sentences

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 December 31, 2022, 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 $ 6,073 .

On September 26, 2022, the board of directors declared a dividend of one one-thousandth of a share of 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 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 (other than shares held by the Company’s directors and named executive officers) entitled the holder thereof to 1,000,000 votes on the proposal to adopt an amendment to the Company’s certificate of incorporation to reclassify the outstanding shares of common stock into a smaller number of shares of common stock.

Shares of Series C Preferred Stock were eligible to vote at the special meeting of the Company’s stockholders held on November 29, 2022, at which the Company’s stockholders approved a reverse stock split of its common stock.

All shares of Series C Preferred Stock were automatically redeemed in connection with the special meeting and no shares of Series C Preferred Stock remained outstanding as of December 31, 2022.

During the year ended December 31, 2022, the Company issued a total of 1,041,377 shares of its common stock in return for aggregate net proceeds of $ 8,399,512 under the June 2021 ATM Agreement (as described below).

As of December 31, 2023, there were 10,390,150 shares of common stock, (which exclude 202,020 unvested shares of restricted stock described in Note 8 below) 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 $ 5,233 .

During the year ended December 31, 2023, the Company issued a total of 7,221,047 shares of its common stock, as follows:

3,394 shares upon the conversion of 55 .397 shares of its Series A Preferred Stock;

229,348 shares in return for aggregate net proceeds of $ 10,615,975 from sales of common stock;

178,395 shares upon warrant exercises for an aggregate exercise price of $ 2,785,627 ;

10,145 shares upon cashless warrant exercises;

1,192 shares upon cashless option exercise;

1,626 shares for services valued at $ 74,000 ;

1,141 shares for RSUs valued at $ 36,460 .

- 4,312,500 shares of its common stock in return for aggregate net proceeds of $ 4,712,750 in a registered underwritten offering that closed on May 2, 2023 (the "Offering");

- 1,325,047 shares of its common stock in return for aggregate net proceeds of $ 1,770,643 under the June 2021 ATM Agreement;

- 1,583,500 upon warrant exercises for an aggregate net proceeds of $ 1,014,859 .

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 December 31, 2022, 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.

During the year ended December 31, 2022, under the June 2021 ATM Agreement the Company issued an aggregate of 1,041,377 shares of common stock in return for net proceeds of $ 8,398,936 , resulting in $ 260,776 of compensation paid to Ascendiant.

Note 8 - Common Stock Options and Restricted Stock Units (RSUs)

As of December 31, 2023, under the June 2021 ATM Agreement the Company had issued an aggregate of 2,389,681 shares of common stock in return for net proceeds of $ 10,987,263 , resulting in $ 341,433 of compensation paid to Ascendiant.

On February 14, 2024, the Company entered into a new At-The-Market Issuance Sales Agreement with Ascendiant to sell shares of common stock for aggregate gross proceeds of up to $ 6.2 million, which replaced the June 2021 ATM Agreement.

Note 8 - Common Stock Options and Restricted Stock

Common Stock Options

1 unchanged sentence

The aggregate fair value of these stock options granted by the Company during the year ended December 31, 2023 was determined to be $ 1,017,534 using the Black-Scholes-Merton option-pricing model based on the following assumptions:

(i) volatility rate of 74 % to 99 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 1.37 % to 4.36 %, and (v) expected life of 8 - 10 years.

(i) volatility rate of 105 % to 107 %, (ii) discount rate of 0 %, (iii) zero expected dividend yield, (iv) risk free rate of 3.68 % to 3.86 %, (v) price of $ 1.30 to $ 4.16 , and (vi) expected life of 10 years.

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

3 unchanged sentences

Exercisable at December 31, 2023

Restricted Common Stock

On November 30, 2023, the Company issued 202,020 shares of restricted common stock (the “Restricted Stock”) of the Company to PatentVest, Inc.

(“PatentVest”) pursuant to a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio.

The fair value of the Restricted Stock was determined to be $ 200,485 using the market price of the stock on the date of the issuance.

The Restricted Stock is subject to a vesting schedule pursuant to the Restricted Stock Agreement and the shares may not be sold, assigned, transferred, pledged, hypothecated, disposed of or otherwise encumbered prior to becoming vested.

Note 9 - Common Stock Warrants

Warrant Conversions

On May 2, 2023, the Company conducted the Offering in which the Company issued 2,156,250 warrants to purchase shares of common stock for an exercise price per share equal to $ 1.40 .

The warrants expire May 2, 2028 .

In December 2023, the Board approved the reduction of the exercise price per share from $ 1.40 to $ 0.70 .

The Company also issued to the placement agent and its designees warrants exercisable for an aggregate of 301,875 shares of common stock for an exercise price per share equal to $ 1.50 .

The warrants expire November 2, 2026 .

During the year ended December 31, 2023, the Company issued a total of 1,583,500 shares of its common stock upon warrant exercises for an aggregate net proceeds of $ 1,014,859 .

The following table summarizes all stock warrant activity of the Company for the year ended December 31, 2023:

Balance outstanding at December 31, 2022

( 1,583,500 )

Balance outstanding at December 31, 2023

Exercisable at December 31, 2023

Note 10 - Related Party Transactions

On May 2, 2023, the Company conducted the Offering in which the Company sold 83,333 shares of its common stock and 41,667 warrants to the Company’s director, Anthony DiGiandomenico, for cash at the public offering price, which was less than 5 % of beneficial ownership in the Company.

On October 17, 2023, the Company entered into a consulting agreement with one of its directors, Alex Tokman, pursuant to which Mr.

Tokman provides commercialization services.

Under the terms of the agreement, Mr.

Tokman is compensated at a rate of $ 150 per hour for his services.

On November 30, 2023, the Company entered into a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio.

PatentVest is a wholly-owned subsidiary of MDB Capital Holdings, LLC (“MDB”).

Anthony DiGiandomenico, a member of the Company’s board of directors, is the Chief of Transactions and a director of MDB.

Lou Basenese, a member of our board of directors, is President and Chief Market Strategist at Public Ventures LLC, a wholly-owned subsidiary of MDB.

Note 11 - 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 .

12 unchanged sentences

Long-term lease obligations

For the years ended December 31, 2022 and 2021, the Company incurred rent expenses of $ 213,912 and $ 178,620 , respectively.

For the year ended December 31, 2023 and 2022, the Company incurred rent expenses of $ 218,815 and $ 213,912 , respectively.

Employment and Consulting 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.

Effective January 1, 2022, the Compensation Committee increased Mr.

Michelon’s annual salary to $ 376,991 and, effective January 1, 2022, it increased Mr.

Michelon’s annual salary to $ 423,000 .

In September 2023, Mr.

Michelon agreed to a 30 % reduction of his base salary received for the remainder of 2023 in order to preserve cash for the Company’s operations.

Michelon is also eligible for an annual cash bonus based upon achievement of performance-based objectives established by the Board of Directors.

9 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, as amended December 27, 2019.

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

Effective January 1, 2022, the Compensation Committee increased Mr.

Thornton’s annual salary to $ 289,963 and, effective January 1, 2022, it increased Mr.

Thornton’s annual salary to $ 324,000 .

In September 2023, Mr.

Thorton agreed to a 30 % reduction of his base salary received for the remainder of 2023 in order to preserve cash for the Company’s operations.

Under the employment agreement, Mr.

8 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 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.

Effective January 1, 2021, the Compensation Committee increased Mr.

Maloberti’s annual salary to $ 266,255 .

On December 21, 2022, Mr.

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

Pursuant to his employment agreement, on April 28, 2019, Mr.

Maloberti was granted stock options to purchase 35,000 shares of the Company’s common stock.

The stock options have an exercise price of $ 1.04 per share, and vest in three equal annual installments beginning on the first anniversary of the grant date.

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

1 unchanged sentence

Note 12 - Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets as of December 31, 2022 and 2021 are summarized below.

Net operating loss carryforward

The components of earnings before income taxes for the years ended December 31, 2023 and 2022 were as follows:

For the Years Ended

Income (loss) before income taxes

( 8,403,400 )

( 11,548,400 )

Stock based compensation

Fair value of options

Total deferred tax assets

( 1,593,300 )

( 1,630,700 )

Valuation allowance

Net deferred tax asset

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible.

As of December 31, 2022 and 2021, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

The Company has not completed its evaluation of net operating loss (“NOL”) utilization limitations under Internal Revenue Code, as amended (the “Code”), Section 382/383, change of ownership rules.

If the Company has had a change in ownership, the NOL’s would be limited as to the amount that could be utilized each year, or possibly eliminated, based on the Code, as amended.

No federal or state/local tax provision has been provided for the years ended December 31, 2022 and 2021 due to the losses incurred during such periods.

Reconciled below is the difference between the income tax rate computed by applying the U.S.

federal statutory rate and the effective tax rate for the years ended December 31, 2021 and 2020.

federal statutory income tax

State tax, net of federal tax benefit

Total income (loss) before income taxes

$ ( 9,996,700 )

$ ( 13,179,100 )

Income tax provision (benefit) consists of the following for the years ended December 31, 2023 and 2022:

Income tax provision (benefit):

For the Years Ended

Total Current

Total Deferred

Total income tax provision (benefit)

A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows:

Rate Reconciliation

For the Years Ended

Expected tax at statutory rates

$ ( 2,099,400 )

$ ( 2,767,700 )

Permanent Differences

State Income Tax, Net of Federal benefit

$ ( 448,100 )

State Rate Change-Federal Impact

State Rate Change Adjustment

Foreign taxes at rate different than US Taxes

Current Year Change in Valuation Allowance

Prior Year True-Ups

( 1,544,500 )

Income tax provision (benefit)

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes.

Temporary differences, which give rise to a net deferred tax asset is as follows:

Deferred Tax Assets/(Liabilities) Detail

For the Years Ended

Deferred Tax Assets (Liabilities):

Stock Based Compensation

Change in valuation allowance

Effective tax rate

At December 31, 2022, the Company has available net operating loss carryforwards for federal and state income tax purposes of approximately $ 65.2 million, of which $ 16 million will begin to expire in 2028 through 2038.

ENDRA Life Sciences Canada Inc., the Company’s wholly-owned subsidiary which was incorporated in 2017, is subject to income taxes in the jurisdictions in which it operates, Canada, at a current rate of approximately 26.6 percent for 2022.

Significant judgment is required in determining the provision for income tax.

There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.

The Company recognizes liabilities for anticipated tax audit issues based on its current understanding of the tax law.

Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

ENDRA Life Sciences Canada Inc.’s operations were not material for tax purposes as of December 31, 2022 and 2021 and therefore the entity had no significant impact on the year-end 2022 and 2021 tax provision.

Generally, all expenses relating to research & development that are incurred in Canada are the responsibility and owned by the United States parent company, since it is the owner of all of the Company’s intangibles.

Accrued Bonus

ROU Liability

Capitalized R&D

Net Operating Losses (US)

Net Operating Losses (Foreign)

Net deferred tax assets (liabilities)

Valuation allowance

( 21,162,500 )

( 18,531,802 )

Net deferred tax assets (liabilities)

The domestic U.S.

net operating loss carryforward increased from $ 57,008,606 at December 31, 2022 to $ 62,033,535 at December 31, 2023.

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2023 and 2022, due to the uncertainty of realizing the deferred income tax assets.

Out of the $62,033,535 net operating losses carry forward, $16,012,698 will begin to expire in 2028 and $45,990,837 will have an indefinite life .

The Company's Total State net operating losses also increased from $ 67,608,270 at December 31, 2022 to $ 72,889,103 at December 31, 2023.

The State net operating losses will began to expire in 2028.

There are also net operating losses from Canada, France, Germany, Netherlands and UK total to 4,425,038 as of December 31, 2023.

The Internal Revenue Code includes a provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a 10.5% tax on certain income of controlled foreign corporations.

We have elected to account for GILTI as a period cost if and when occurred, rather than recognizing deferred taxes for basis differences expected to reverse.

The Company is subject to taxation in the U.S.

and various states and foreign jurisdictions.

federal income tax returns for 2020 and after remain open to examination.

We and our subsidiaries are also subject to income tax in multiple states and foreign jurisdictions.

Generally, foreign income tax returns after 2020 remain open to examination.

No income tax returns are currently under examination.

As of December 31, 2023 and 2022, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes.

The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense.

For the years ended December 31, 2023 and 2022, there were no penalties or interest recorded in income tax expense.

Note 13 - Subsequent Events

Subsequent to the year ended December 31, 2023, the Company issued a total of 118,904 shares of its common stock upon warrant exercises for an aggregate net proceeds of $ 77,407 .

Subsequent to the year ended December 31, 2023, the Company issued a total of 316,963 shares of its common stock in return for aggregate net proceeds of $ 419,977 under the June 2021 ATM Agreement.

Subsequent to the year ended December 31, 2023, the Toronto-Dominion Bank Loan was repaid in full (see note 6).

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 7A. Quantitative and Qualitative Disclosures About Market Risk