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Item 1. Business

2025-03-31 compared with 2024-03-28 · 286 added, 320 removed, 78 unchanged (89% of the section changed)

We were incorporated as a Delaware corporation in 2007.

We are developing a next-generation enhanced ultrasound technology platform—Thermo Acoustic Enhanced Ultrasound, or TAEUS® in order 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”) technology, or other diagnostic technologies such as surgical biopsy, are unavailable or impractical.

Our TAEUS technology uses radio frequency (“RF”) pulses to stimulate tissues, using a small fraction (less than 1%) of the amount of energy that would be transmitted into the body during an MRI scan.

The use of RF energy allows our TAEUS technology to penetrate deep into tissue, enabling the imaging of human anatomy at depths equivalent to those of conventional ultrasound.

The RF pulses are absorbed by tissue and converted into ultrasound signals, which are detected by an external ultrasound receiver and a digital acquisition system that is part of the TAEUS system.

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

We use 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 the TAEUS liver system for commercial sale.

Suppliers are vetted before engaging in work with the Company and are reviewed annually, as part of our quality management system, to assure their performance meets our needs.

We have implemented internal processes to monitor designs, inventory and supply of key components needed to manufacture our TAEUS liver system.

We plan production in accordance with anticipated 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.

In April 2016, we entered into a Collaborative Research Agreement with General Electric Company, acting through its GE Healthcare business unit and the GE Global Research Center (collectively, “GE Healthcare”), under which GE Healthcare has agreed to assist us in our efforts to commercialize this application.

In November 2017, we contracted with the Centre for Imaging Technology Commercialization (“CIMTEC”) to initiate human studies, through Canada-based Robarts Research Institute, with our TAEUS device targeting NAFLD.

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 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.

We have registered the product in each of our primary target European markets (i.e., Germany, France, and the United Kingdom).

As of December 31, 2023, we had in effect seven clinical evaluation agreements 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 submitted a 510(k) Application to the FDA for our TAEUS Fatty Live Imaging Probe (“FLIP”) System.

In February 2022, we announced that we would pursue FDA reclassification and clearance of our TAEUS FLIP System through the FDA’s “de novo” process.

We subsequently voluntarily withdrew our 510(k) Application and submitted a de novo request for the TAEUS system to the FDA in the third quarter of 2023.

In the fourth quarter of 2023, the FDA sent an Additional Information (“AI”) request related to our de novo application.

Since we received the AI request, we have had several interactions with the FDA and have provided additional information.

In order to fully respond to the FDA’s questions, we will need to compile additional clinical data, provide additional device test data, and respond to cybersecurity related questions in a new de novo submission.

We have a scheduled in-person pre-submission meeting with the FDA in the second quarter of 2024.

We currently anticipate completing the necessary clinical studies by the fourth quarter of 2024 and submitting the new de novo request to the FDA in the first half of 2025.

Diagnostic Imaging Technologies

Diagnostic imaging technologies such as CT, MRI and ultrasound allow physicians to look inside a person’s body to guide treatment or gather information about medical conditions such as broken bones, cancers, signs of heart disease or internal bleeding.

Currently, we are developing a next-generation enhanced ultrasound technology platform—Thermo-Acoustic Enhanced Ultrasound, or TAEUS®.

Our first TAEUS platform application focuses on measuring fat in the liver.

Over the past several months, we have revisited and re-evaluated ENDRA’s vision, purpose, and go-to-market strategy with respect to TAEUS.

As a result, we are implementing significant changes to ENDRA’s pursuit of future growth.

First, our renewed vision is to become a leading biomarker solution for metabolic diseases and Glucagon-Like Peptide-1 (“GLP-1”) drug management.

Our mission is to develop and offer an accurate, simple-to-use, inexpensive, at the point-of-care test – like a blood pressure cuff for the assessment and management of metabolic disease.

Second, we intend to focus on serving these four new markets:

Pharmaceutical Companies and Clinical Research Organizations (“CROs”) - to assist them in the efficient screening and monitoring of subjects for new GLP-1 therapeutics in clinical trials by providing a critical biomarker in the treatment of metabolic dysfunction-associated steatohepatitis (“MASH”), obesity, and blood sugar regulation.

High-end Primary Care Networks (Concierge Medicine) - to assist them in screening patients for obesity, diabetes, and liver disease, as well as monitoring response to lifestyle changes and drug therapies.

Bariatric and Metabolic Clinics - for the management of obesity, the detection of metabolic disease, and monitoring response to therapies.

Primary and Internal Medicine at Large - to screen patients for metabolic disease related to obesity, diabetes, and hypertension, and monitor response to lifestyle change and drug therapies.

The primary care segment may utilize external laboratories, imaging centers, and pharmacies to perform point-of-care liver fat assessment exams, hence this group is expected to be a part of ENDRA’s go-to-market strategy for the primary care provider segment at large.

Third, the primary focus of the TAEUS platform is to establish key biomarkers for metabolic diseases management with specific focus on the emerging GLP-1 therapies.

We are redefining TAEUS technology to make it more scalable and to improve its adoption in newly targeted large market segments.

As a result, we now intend to emphasize the following:

Leveraging artificial intelligence and machine learning models to complement our TAEUS technologies and further improve their accuracy;

Integrating thermo-acoustic technology with conventional ultrasound technologies to simplify, and reduce, the procedure time while reducing user error;

Reducing the form factor of TAEUS and making it cost effective.

Fourth, we plan to implement a new low barrier-to-entry, multi-year, subscription-based business model with monthly recurring revenue.

We will retain our traditional direct product sale model with annual upgrade and maintenance fees for customers who may prefer it, but our primary focus will be on the subscription-based approach.

In either case, sales are expected to be made by a direct sales force using a value proposition rooted in clinical data supported by results from reference sites.

We continue to examine the positioning (need, cost, and technical considerations) of our TAEUS platform in the rapidly evolving market for point-of-care assessment of liver fat disease against other opportunities for our platform, such as monitoring of thermo-ablative surgical procedures.

THE IMPORTANCE OF UNDERSTANDING LIVER FAT

The accumulation of fat in the liver, known as hepatic steatosis, or steatotic liver disease (“SLD”), is a key biomarker of metabolic diseases, particularly MASH.

MASH is a more severe form of metabolic dysfunction-associated steatotic liver disease (“MASLD”), characterized by liver inflammation and early fibrosis that can progress to cirrhosis, and even hepatocellular carcinoma, and other life-threatening diseases.

The presence of excess liver fat is strongly associated with metabolic disorders such as insulin resistance, type 2 diabetes, and hypertension.

Additionally, excess liver fat, particularly in the form of MASLD, is considered to be a cardiometabolic risk factor, and studies show statistically significant correlation with increased incidence of kidney disease, cancer, and neurodegenerative disease.

The excess fat stored in the liver impairs insulin signaling, causing the liver to continue producing glucose even when insulin levels are high, leading to hyperglycemia.

This not only worsens type 2 diabetes but also exacerbates inflammation and lipid imbalances, further increasing the risk of cardiovascular disease.

Given these widespread effects, reducing liver fat is a crucial strategy for improving metabolic health and preventing disease progression.

GLP-1 receptor agonists, a class of drugs originally developed for type 2 diabetes, have emerged as promising treatments for liver fat reduction and metabolic disease management.

These drugs, including semaglutide and tirzepatide, enhance insulin sensitivity, reduce appetite, and promote weight loss, all of which help lower liver fat levels.

Studies have shown that GLP-1 drugs can significantly reduce hepatic fat content and even improve liver inflammation in individuals with MASH.

By addressing both obesity and insulin resistance—two major drivers of MASH—GLP-1 receptor agonists offer a potential therapeutic option for patients with metabolic liver disease.

Their ability to target multiple aspects of metabolic dysfunction makes them an important tool in managing liver-related and systemic complications.

OPPORTUNITY - The Growing Burden of Steatotic Liver Disease and the Need for Better Diagnostics

Rising Steatotic Liver Disease (“SLD”) with No Reliable, Inexpensive, Point-of-Care Test

SLD is a rapidly emerging global health crisis, affecting over two billion people worldwide, including more than 100 million individuals in the United States.

Despite its prevalence and severe health implications, there remains a significant gap in reliable, affordable, and easily accessible point-of-care tools to detect and monitor liver fat.

As SLD continues to rise, its impact on public health and healthcare systems is becoming more evident, particularly as it is strongly linked to metabolic syndrome and a range of chronic conditions such as obesity, type 2 diabetes, cardiovascular disease, and even liver cancer.

The Enormous Global Health Burden

SLD is often asymptomatic in its early stages, making early detection a challenge.

However, research has shown that liver fat levels above 5% are a major clinical concern, as they are closely associated with metabolic syndrome and can progress to more severe conditions, including liver inflammation, fibrosis, and cirrhosis.

The disease is expected to become the leading cause of liver transplants in the United States by 2030, further highlighting the urgency for better screening and treatment options.

In addition to the physical and emotional toll on patients, the economic burden is staggering, with direct medical costs in the U.S.

alone exceeding $100 billion annually.

Given its increasing prevalence, clinical guidelines are now beginning to emphasize liver fat screening as a crucial component of metabolic disease management.

Yet, the lack of an effective, widely available diagnostic tool remains a significant barrier to proper disease management and intervention.

Emerging Therapeutics for Liver Fat Reduction

Pharmaceutical advancements are opening new doors for the treatment of SLD, particularly with the rise of GLP-1 receptor agonists.

Originally developed for type 2 diabetes, GLP-1 drugs have shown promise in treating a variety of conditions, including obesity, cardiovascular disease, kidney disease, and liver disease.

With more than 30 pharmaceutical companies actively developing GLP-1 drugs—and seven of the top 20 pharma companies active in this space—interest in these therapeutics is at an all-time high.

The field is rapidly evolving, with more than 50 active studies of GLP-1 drugs, 30 insulin sensitizers, and 10 to 15 MASH treatments currently in Phase 3 clinical trials.

Between 2022 and 2023, the number of clinical trials in this area increased approximately 68%, reflecting the urgent need for effective treatment options.

This momentum recently led to the first FDA-approved drug for fatty liver disease, Rezdiffra™, which was granted approval in March 2024.

As new therapies emerge, the need for improved diagnostic methods to identify and monitor patients undergoing treatment is critical.

Diagnostic Gaps:

The Urgent Need for Improved Liver Fat Detection

Despite significant advancements in therapeutics, the lack of efficient, cost-effective diagnostic tools remains a major challenge.

The current non-invasive “gold standard” for liver fat measurement is magnetic resonance imaging (“MRI”), but its high cost, long procedural time, and limited accessibility make it impractical for routine screening.

Similarly, liver biopsies, while highly accurate, are invasive, painful, and require specialized medical expertise, limiting their widespread use.

Alternative diagnostic methods such as ultrasound and blood tests also have notable limitations.

Ultrasound, though widely available, currently lacks the accuracy needed for detecting liver fat, particularly in individuals with higher body mass indices.

Blood tests, while non-invasive, suffer from low precision and reliability, making them insufficient for definitive diagnosis or monitoring treatment progress.

The Future of Liver Fat Diagnosis and Management

With the increasing availability of promising new treatments, the demand for reliable, non-invasive, and cost-effective liver fat diagnostics is greater than ever.

The ability to accurately detect and monitor liver fat will be essential in guiding treatment decisions, evaluating therapeutic efficacy, and preventing disease progression.

As the medical community continues to prioritize liver fat screening in clinical guidelines, innovation in diagnostic technologies will be key to addressing this growing health crisis.

SLD is no longer a silent epidemic—it is a pressing global health issue that demands immediate attention.

With groundbreaking therapies on the horizon and a growing recognition of the disease’s impact, the next crucial step is to bridge the diagnostic gap, ensuring that patients receive timely and effective care before irreversible liver damage occurs.

CURRENT TECHNOLOGY FOR LIVER FAT MEASUREMENT

CT and MRI Technologies

Diagnostic imaging technologies such as computed tomography (“CT”), MRI and ultrasound allow physicians to look inside a person’s body to guide treatment or gather information about medical conditions such as broken bones, cancers, signs of heart disease or internal bleeding.

The type of imaging technology a physician uses depends on a patient’s symptoms and the part of the body being examined.

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MRI technology excels at examining soft tissue in ligament and tendon injuries, spinal cord injuries, and brain tumors.

CT scans can take as little as 5 minutes, while an MRI scan can take up to 30 minutes.

Unfortunately, while CT and MRI systems are versatile and create high quality images, they are also expensive and not always accessible to patients.

A CT system costs approximately $1 million and an MRI system can cost up to $3 million.

CT and MRI systems are large and can weigh several tons, typically requiring significant modifications to existing healthcare facilities to safely site the CT and MRI equipment.

A CT system costs approximately $1 million and an MRI system can cost $3 million.

CT and MRI systems are large and can weigh several tons, typically requiring significant modifications to existing healthcare facilities to safely install the CT and MRI equipment.

Because of their size and weight, CT and MRI systems are usually fixed-in-place at major medical facilities.

As a result, they are less accessible to primary care and rural clinics, economically developing markets, and patient bedsides.

As of 2024, there are approximately 80,000 CT systems and 58,000 MRI systems worldwide, with a significant portion located in the U.S.

While CT and MRI systems create high quality images, their use is not always practical.

For example, the diagnosis and treatment of the estimated 2.5 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 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.

For example, metabolic disease detection, therapies response monitoring, and the efficient screening and monitoring of subjects for new GLP-1 clinical trials requires ongoing surveillance of the patients’ livers and the use of CT and MRI systems to perform that ongoing surveillance is impractical due to the high cost of the scan and the limited availability of CT and MRI systems.

Additionally, patient exposure to the ionizing radiation generated by a CT system must be limited for safety reasons.

Similarly, because of the strong magnetic field created by an MRI machine, patients with metal joint replacements or cardiac pacemakers may be limited for safety reasons in their use of an MRI system.

Ultrasound Technology

An ultrasound machine transmits sound waves, which bounce off tissues, organs and blood in the body.

The ultrasound machine captures these echoes and uses them to create an image.

An ultrasound system transmits sound waves, which bounce off tissues, organs and blood in the body.

The ultrasound system captures these echoes and uses them to create an image.

Ultrasound technology excels at imaging the structure of internal organs, muscles, and bone surfaces.

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There are an estimated 1.6 million diagnostic ultrasound systems globally in use today.

Ultrasound systems are relatively inexpensive compared to CT and MRI systems, with smaller portable ultrasound systems costing as little as $5,000 and new cart-based ultrasound systems costing between $75,000 and $200,000.

Ultrasound systems are relatively inexpensive compared to CT and MRI systems, with smaller portable ultrasound systems costing as little as $5,000 or less and new cart-based ultrasound systems costing between $50,000 and $200,000.

Ultrasound systems are also more mobile than CT and MRI systems and many are designed to be moved by an operator from room to room, or closer to patients.

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However, ultrasound’s imaging capabilities are more limited compared to CT and MRI technology.

For example, ultrasound systems cannot measure tissue temperature during thermal ablation surgery or quantify fat to diagnose early-stage liver disease-instances where CT and MRI systems are used.

Ultrasound Market

The global diagnostic ultrasound device market size was valued at $7.7 billion in 2023 and is anticipated to expand at a CAGR of 4.07% from 2022 to 2030.

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 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 to include approximately 700,000 ultrasound systems currently in use throughout the world, in addition to other types of capital equipment.

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

Population growth and age demographics that increase the demand for diagnostic screening for cancer, cardiology, and prenatal applications.

Economic development broadening investment in healthcare in underserved markets such as China and Latin America, where ultrasound technology has significant appeal due to its price point and flexibility at point-of-care.

Expanding ultrasound applications and improving image quality that drive demand for new ultrasound technologies, such as software enhancements, bi-axial probes, and dedicated single application systems.

Positive insurance reimbursement rate trends for ultrasound diagnostics due to the technology’s safety and cost-effectiveness.

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 help to satisfy this unmet need.

Our Solutions

Our TAEUS technology uses a pulsed energy source-specifically, RF—to generate ultrasonic waves in tissue.

These waves are then detected with ultrasound equipment and used to create high-contrast images and other forms of data using our proprietary algorithms.

Unlike conventional ultrasound, which creates images based on the scattering properties of tissue, thermoacoustic imaging provides tissue absorption maps of the pulsed energy, similar to those generated by CT scans.

Ultrasound is only utilized to transmit the absorption signal to the imaging system outside of the body.

Currently, ultrasound systems cannot measure tissue temperature during thermal ablation surgery or quantify fat levels accurately across the stages of SLD to make to be effective for metabolic diseases detection and therapies response monitoring, or the efficient screening & monitoring subjects for GLP-1 clinical trials, where CT and MRI systems are used.

TAEUS technology uses a pulsed energy source—specifically, radio frequency (“RF”)—to transmit energy deep into tissue and generate ultrasonic waves based on the tissue composition (or tissue chemistry), differentiating lean and fatty tissues.

These waves are then detected with ultrasound sensors at the skin surface and used to create high-contrast images (and other forms of data) using our proprietary algorithms.

Unlike conventional ultrasound, which creates images based on the scattering properties of tissue structure, thermoacoustic imaging provides tissue absorption maps that differentiate lean and fatty tissues.

Acoustic waves (ultrasound) are only utilized to transmit the absorption signal to the imaging system outside of the body.

Our TAEUS Technology Platform for Clinical Applications

To increase the utility of our thermoacoustic technology, in 2013 we began to develop our TAEUS technology platform.

Unlike the near-infrared light pulses used in our earlier photoacoustic systems, our TAEUS technology uses RF pulses to stimulate tissues, using a small fraction of the energy transmitted into the body during an MRI scan.

Using RF energy enables our TAEUS technology to penetrate deep into tissue, enabling the imaging of human anatomy at depths equivalent to those of conventional ultrasound.

To increase the versatility of our thermoacoustic technology, we developed TAEUS technology as a platform for multiple applications.

Using RF energy enables TAEUS technology to penetrate deep into tissue, enabling tissue composition at clinically relevant depths.

The RF pulses are absorbed by tissue and converted into ultrasound signals, which are detected by an external ultrasound receiver and a digital acquisition system that is part of the TAEUS system.

Our RF-based thermoacoustics imaging is not adversely affected by blood-filled organs, enabling our TAEUS technology to be used in clinical liver applications, among others.

The detected ultrasound can then be processed into ultrasound overlays or quantitative data that may be translated into clinically useful metrics using our proprietary algorithms and displayed to complement conventional gray-scale ultrasound images.

The TAEUS imaging concept is illustrated below:

After required regulatory approvals, our TAEUS technology can be added as an accessory to existing ultrasound systems, helping to improve clinical decision-making on the front lines of patient care, without requiring substantially new clinical workflows or large capital investments.

We also intend to offer a license for our TAEUS technology to OEMs, such as ultrasound and thermoablative capital equipment makers, for incorporation in their new capital equipment systems.

After required regulatory approvals, our TAEUS technology can be added as a standalone system or as an accessory to existing ultrasound systems, helping to improve clinical decision-making on the front lines of patient care, without requiring substantially new clinical workflows or large capital investments.

We also intend to offer a license for our TAEUS technology to OEMs, such as ultrasound and thermoablative capital equipment makers, for incorporation in their new products.

We believe that our TAEUS technology has the potential to add a number of new capabilities to conventional ultrasound and other types of capital equipment, thereby enhancing the utility and extending the use of these technologies to circumstances that either currently require the use of expensive CT or MRI imaging systems, where imaging is not practical using existing technology, or where other assessment tools such as surgical biopsy are required.

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Our TAEUS technology enables ultrasound to distinguish fat from lean tissue.

This capability would enable the use of TAEUS-enhanced ultrasound for the early identification, staging and monitoring of NAFLD, a precursor to NASH, liver fibrosis, cirrhosis and liver cancer.

This capability would enable the use of TAEUS-enhanced ultrasound for the early identification, staging and monitoring of SLD, MASLD, MASH, liver fibrosis, cirrhosis and liver cancer.

Temperature Monitoring:

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

Our TAEUS technology enables visualization of 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 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.

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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.

Because our TAEUS technology is designed to enhance the utility of, not replace, conventional ultrasound, we believe healthcare providers will be able to increase the utilization of, and generate new revenue from, their existing ultrasound systems once we obtain required regulatory approval for specific applications.

We further believe that clinicians will be attracted to our technology because it will enable them to perform more procedures with existing ultrasound equipment, thereby retaining more imaging patients in their clinics rather than referring patients out to a regional medical center for a CT or MRI scan.

TAEUS Liver Device

ENDRA’s first clinical product is designed to interface with a conventional ultrasound scanner, utilizing the scanner’s B-mode imaging to guide the selected region for assessment of liver fat content.

The following sub-systems will comprise ENDRA’s first generation product.

Radio Frequency (RF) Source and Computer:

The RF source consists of a low power waveform generator and an amplifier.

Together, these components provide the characteristic pulses required to excite thermoacoustic signals in tissue.

The computer provides processing capability to both utilize the conventional ultrasound data for navigation to the measurement site of interest, and the calculations required to convert digitized thermoacoustic signals to measurements of fat in liver tissue.

The entire sub-system will reside in a single enclosure, on wheels, and sit adjacent to the ultrasound imaging system.

Specialized Transducer:

A single channel “receive only” ultrasound transducer is specifically designed and optimized for thermoacoustic imaging.

The transducer sub-system will detect thermoacoustic signals excited by the RF source within the liver.

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

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

RF Applicator:

The RF applicator transmits pulses of energy, provided by the RF source, into tissue.

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

TAEUS platforms will 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:

reading tissue composition, temperature, vascular flow, tissue perfusion, and other potential applications.

Ultimately, we expect our technology will be incorporated into conventional ultrasound systems and our business model will transition from producing stand-alone systems to licensing our technology, IP and specialized components to ultrasound OEMs.

Existing ultrasound equipment already includes power supplies, computation, high speed electronics, and ultrasound transducers, which may be leveraged by our thermoacoustic imaging applications.

The RF source and applicator are the principal hardware components that will be added to OEM ultrasound systems for the OEM fully integrated form of our product.

Energy Generation :

The RF source consists of a low power waveform generator and a high gain amplifier.

Together, these components generate the characteristic pulses of energy required to excite thermoacoustic signals in tissue.

Energy Delivery into Tissue :

The RF applicator transmits pulses of energy generated by the RF source into tissue.

The applicator is positioned at the skin surface in proximity to the target region for measurement and is designed to efficiently couple pulsed RF energy into target tissues.

Signal Detection :

A “receive only” ultrasound transducer specifically designed and optimized for thermoacoustic imaging.

The transducer sub-system detects thermoacoustic signals induced by the RF source within tissue.

The transducer assembly is connected to high-speed electronics for signal amplification, digitization, and processing.

Computation and Display :

The entire sub-system will reside in a single enclosure, on wheels, and sit adjacent to the patient exam bed.

A small digital touchscreen display is used for both operator input and the display of data.

TAEUS platforms may provide two-dimensional imaging with a transducer composed of multiple receive elements.

ENDRA is currently developing an improved version of its first-generation liver device.

The RF source and applicator would be similar to those in the first-generation product, but the multi-element transducer would allow for multiple applications including reading tissue composition, response to thermoablative procedures, vascular flow, tissue perfusion, and other potential applications.

We are following a model that mirrors the approach used by companies in the past to introduce new ultrasound imaging capabilities to existing conventional ultrasound scanners.

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Ultimately, as these new technologies gained acceptance in the marketplace they were incorporated into OEM-designed and built systems that were sold by the leading ultrasound imaging vendors.

TAEUS System for the Early Assessment and Monitoring of Nonalcoholic Fatty Liver Disease, or NAFLD

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

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

Obesity, hepatitis, and diabetes are leading contributors to the development of NAFLD.

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 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.

The scar tissue blocks the flow of blood through the liver and slows the processing of nutrients, hormones, drugs, and naturally produced toxins.

It also slows the production of proteins and other substances made by the liver.

Once a patient develops cirrhosis of the liver, the only life-saving therapy is a liver transplant.

Additionally, cirrhosis patients may develop liver cancer.

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.

Despite the increased incidence of NAFLD and its role in the development of NASH, cirrhosis and liver cancer, we believe that no low-cost, accurate and safe method exists for measuring fat in the liver.

Current liver enzyme blood tests are indicative, but cannot reliably confirm early stage NAFLD or NASH, and liver enzyme levels are normal in a large percentage of patients with NAFLD.

Existing ultrasound technology can only measure fat qualitatively in the liver at moderate to severe levels, typically greater than 30% liver fat, and ultrasound has low accuracy when used on obese patients.

While early stage NAFLD and NASH can be confirmed by an MRI scan, an MRI scan is expensive, and MRI systems are not widely available or practical for many patients.

A surgical biopsy can be used to confirm NAFLD and NASH, but is also expensive, involves a painful procedure and exposes patients to the risk of infection and bleeding.

Furthermore, MRIs and surgical biopsies are impractical for repeated screening and monitoring of liver disease.

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

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.

Glucagon-like peptide 1 (GLP-1) agonists, used for the treatment of type 2 diabetes and obesity are also being evaluated in connection with the reduction of liver fat.

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

Because of the high cost and limited global availability, CT and MRI technology is not typically used for this function.

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.

Potential Licensing and Partnership Opportunities

A pipeline of 20+ 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.

The companies can also benefit from simpler, non-invasive measurements of biomarkers, such as liver fat, in the clinical stage.

To this end, in March 2021, ENDRA announced a collaboration agreement with Hepion Pharmaceuticals to incorporate TAEUS as an add-on technology to support Hepion’s patient screening and biomarker measurements during its Phase 2b study of its lead drug candidate, and is working with Hepion to identify a target site at which to utilize TAEUS.

In April 2016, we entered into a Collaborative Research Agreement with GE Healthcare.

Under the terms of the agreement, GE Healthcare has agreed to assist us in our efforts to commercialize our TAEUS technology for use in a fatty liver application by, among other things, providing equipment and technical advice, and facilitating introductions to GE Healthcare clinical ultrasound customers.

In return for this assistance, we have agreed to afford GE Healthcare certain rights of first offer with respect to manufacturing and licensing rights for the target application.

More specifically, we have agreed that, prior to commercially releasing our NAFLD TAEUS application, we will offer to negotiate an exclusive ultrasound manufacturer relationship with GE Healthcare for a period of at least one year of commercial sales.

The commercial sales would involve, within our sole discretion, either our commercially selling GE Healthcare ultrasound systems as the exclusive ultrasound system with our TAEUS fatty liver application embedded, or GE Healthcare being the exclusive ultrasound manufacturer to sell ultrasound systems with our TAEUS fatty liver application embedded.

The agreement with GE Healthcare does not prevent us from selling our TAEUS fatty liver application technology to distributors or directly to non-manufacturer purchasers.

Additionally, the agreement provides that (1) prior to offering to license any of our TAEUS fatty liver application intellectual property to a third party, we will first offer to negotiate to license our TAEUS fatty liver application intellectual property to GE Healthcare and (2) prior to selling any equity interests to a healthcare device manufacturer, we must first offer to negotiate in good faith to sell such equity interests to GE Healthcare.

The agreement is subject to termination by either party upon not less than 60 days’ notice.

On December 16, 2022, we and GE Healthcare entered into an amendment to our agreement, extending its term to December 16, 2024.

Clinical Studies

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 Robarts Research Institute in London, Canada.

TARGET MARKETS

We intend to initially focus on four potential markets for the TAEUS liver device:

1) Pharmaceutical Companies and CROs, 2) High-end Primary Care Networks, 3) Bariatric and Metabolic Clinics and 4) Primary and Internal Medicine at large.

We expect that there will be some minimal focus on Hepatology and Radiology customers;

however, these are no longer the Company’s go-to-market focus.

Pharmaceutical Companies and Clinical Research Organizations (CROs)

In recent years, the pharmaceutical industry has witnessed a significant surge in the development of GLP-1 drugs.

As of January 2025, more than 30 pharmaceutical companies are engaged in developing GLP-1 drugs, demonstrating the increasing interest and investment in this sector.

Among these, seven of the top 20 global pharmaceutical companies are actively involved, further highlighting the potential of GLP-1 therapies in treating metabolic disorders such as diabetes and obesity.

Clinical trials for GLP-1 and related insulin sensitizers have seen a substantial rise over the past year.

As of January 2025, there are more than 50 active GLP-1 trials and 10 to 15 insulin sensitizer studies in Phase 3.

The number of clinical trials in this field grew by an impressive 68% year-over-year from 2022 to 2023, indicating a rapidly expanding research landscape.

Similarly, as of January 2025, there are 10 to 15 active clinical trials for MASH drugs, reflecting the growing focus on treatments for liver-related metabolic diseases.

Recruiting patients for Phase 3 clinical trials remains one of the most critical and challenging aspects of drug development.

GLP-1 Trials :

The typical patient count for Phase 3 GLP-1 trials ranges between 1,000 and 3,000.

However, patient recruitment is complicated by screening failure rates, which can range between 20% and 50%.

This means that to secure 1,000 eligible participants, as many as 2,000 individuals must be screened.

MASH Trials :

Similarly, Phase 3 clinical trials for MASH drugs require between 1,000 and 2,000 participants.

Given the complexity of the disease and eligibility requirements, the screening process must cover between 2,500 and 10,000 candidates to meet the required participation levels.

These high screening failure rates contribute to increased costs and extended timelines for clinical trials.

The financial burden of conducting late-stage clinical trials is substantial.

One key component of the cost structure is the use of Magnetic Resonance Proton Density Fat Fraction (“MR PDFF”), a diagnostic tool commonly used in metabolic disease studies.

One in three Phase 2 or 3 GLP-1 studies incorporates MR PDFF during the trials.

The cost for CROs to conduct these exams typically falls between $1,500 and $2,500 per patient, with a minimum of two to three exams of each patient required per trial.

There is a partial reimbursement, but it’s minimal.

These costs underscore the financial considerations that pharmaceutical companies must account for when planning large-scale trials.

High-End Primary Care Networks (Concierge Medicine)

High-End Primary Care Networks, also known as concierge medicine, are experiencing rapid growth in the U.S., with approximately 20 national and hundreds of regional networks operating 6,500 facilities.

These organizations are expanding at a 12% compound annual growth rate (“CAGR”), have an average of 2-3 doctors per facility with approximately 150 patients per doctor.

Concierge practices emphasize personalized care, proactive health management, and cutting-edge technology to differentiate themselves from traditional healthcare models.

One area where concierge medicine can further stand out is through advanced metabolic health monitoring, particularly liver fat fraction assessment.

Early detection and proactive management of liver fat accumulation can provide significant health benefits, particularly for patients at risk of metabolic disorders, obesity, and diabetes—conditions frequently encountered in concierge practices.

Concierge medicine thrives on offering innovative health solutions that traditional primary care settings may not provide.

New technologies are of high interest in this sector, and cost is less of a concern, making our offering an attractive investment for concierge networks.

By incorporating liver fat fraction monitoring into routine patient assessments, concierge physicians can:

Offer Personalized Preventative Care :

Early detection of liver fat accumulation enables tailored interventions, including lifestyle modifications and pharmaceutical treatments.

Enhance Cardiometabolic Risk Management :

Since liver health is linked to cardiovascular and metabolic conditions, monitoring liver fat fraction can improve overall patient outcomes.

Strengthen Patient Engagement and Retention :

Providing access to cutting-edge diagnostic tools reinforces the concierge model’s value proposition, encouraging long-term membership.

Set a New Standard in Concierge Medicine :

By integrating metabolic health monitoring, concierge practices can position themselves as leaders in proactive and precision medicine.

Bariatric and Metabolic Clinics

Bariatric and metabolic clinics are on the front lines of tackling obesity and related metabolic diseases, providing critical care to thousands of patients across the U.S.

These clinics—an estimated 900 nationwide with a growth rate of 7.5% annually—are increasingly expanding their scope beyond weight loss to treat a broad range of metabolic disorders.

With about three doctors per facility, each clinic is responsible for managing approximately 350 patients every year.

Moreover, 60% of these clinics have integrated treatments for broader metabolic diseases, including the prescription of GLP-1 receptor agonists to help regulate appetite and blood sugar levels.

While these clinics are leading the way in metabolic disease management, one major challenge persists—the high cost of diagnosing and monitoring metabolic conditions.

Traditional methods, such as MRI-based liver fat fraction assessments, are expensive, time-consuming, and often impractical for routine use.

Clinics generally rely on basic biometric markers such as Body Mass Index (“BMI”) and ultrasound exams.

BMI and ultrasound are not accurate predictors of liver fat.

Given the inaccuracy of biometric markers and ultrasound liver fat assessments, bariatric and metabolic clinics need more affordable, scalable solutions to monitor metabolic diseases effectively.

Primary and Internal Medicine At Large

Obesity, diabetes, and liver disease are on the rise in the U.S., placing an increasing burden on healthcare providers.

Primary care and internal medicine physicians are on the front lines, responsible for screening patients and monitoring their response to lifestyle changes and drug therapies.

However, the prevailing approach to diagnosing and tracking metabolic conditions remains costly and inefficient, largely due to the reliance on ineffective ultrasound or expensive MRI-based liver fat fraction assessments.

is currently home to approximately 9,000 diagnostic imaging centers and growing at a rate of 4% per year.

At least 50% of diagnostic imaging centers are equipped with ultrasound machines, indicating that these facilities are well-positioned to expand their role in metabolic disease screening.

An average imaging center handles approximately 1,000 patients per month for liver tests.

While imaging centers play a crucial role in liver disease detection, diagnostic labs are essential for screening obesity, diabetes, and metabolic disorders at scale.

Approximately 275,000 diagnostic labs are located in the U.S., with a 3% annual growth rate.

Each lab services around 3,500 patients per month, with 25% undergoing metabolic disease-related tests.

However, most of these laboratories focus on blood-based markers for diabetes and liver disease.

While blood tests provide valuable insights, they do not directly measure liver fat fraction or structural changes in the liver—critical indicators of metabolic health.

CLINICAL STUDIES, REGULATORY APPROVALS, AND COMMERCIALIZATION

Regulatory Market Access Approval Pathway and Human Study

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

Based on certain factors, such as the installed base of ultrasound systems, availability of other imaging technologies, such as CT and MRI, economic strength and applicable regulatory requirements, we sought initial approval of our liver device for sale in the European Union, followed by the United States and may seek to seek future approval in other markets.

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 MASLD, guiding our algorithm development, and comparing our technology to MRI.

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

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

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).

As of December 31, 2023, the Company had in effect seven clinical evaluation agreements.

Commercialization

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 a full time sales representative in each of 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 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.

See further discussion above in “Item 1.

Business – Overview.”

Other Potential Clinical Applications for our TAEUS Technology

The data collected from the study, including additional usability inputs, was included in our TAEUS technical file submission for device CE mark.

A CE mark was received for our MASLD TAEUS application in March 2020.

We entered into several additional clinical evaluation agreements and collaborations with research hospitals in North America and Europe for the conduct of clinical studies comparing our TAEUS clinical system to MRI PDFF in the measurement of liver fat.

These agreements provided for clinical trials to collect data and user feedback to inform the further development of our TAEUS clinical system.

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 entered into clinical evaluation agreements with Inselspital University Hospital in Bern, Switzerland, and King’s College Hospital - London, in the United Kingdom.

In 2024, we entered into a clinical evaluation agreement for a post-CE Mark study with Ludwig-Maximilians-Universität München in Munich Germany.

EU Market Access (CE Mark)

The first TAEUS application we intend to commercialize is our MASLD TAEUS application.

Our initial target market for this application is the European Union.

After receiving CE mark approval for our TAEUS Liver system in March 2020, indicating that the TAEUS Liver system complies with all applicable European Directives and Regulations in the European Union (“EU”) and other CE mark geographies, we registered the product in each of our primary target European markets (i.e., Germany, France, and the United Kingdom).

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 imposed 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, including post marketing surveillance obligations.

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.

Our original CE Mark certification, which has been issued under the then applicable framework of the Medical Device Directive, requires re-certification under the MDR in order to continue marketing of the application in the EU.

The transitional provisions of the MDR are to expire on December 31, 2028 for Class I, Class IIa and certain Class IIb devices (which includes ENDRA’s Class IIa device) subject to certain conditions (including, among others, continued compliance with the MDD, no significant changes to design or intended purpose, a quality management system, and engagement with a Notified Body to obtain conformity assessment).

We are working with our Notified Body to ensure a timely MDR CE Mark transition, while aligning to the extended transition deadline.

We successfully concluded both an ISO 13485 Audit and an MDR Quality System Audit in November 2024, setting the groundwork for a future CE Mark Technical Documentation Audit in 2026, well ahead of the transition deadline of December 31, 2028.

Market Access (FDA De Novo Request)

In the third quarter of 2023, we submitted a De Novo request to the FDA that included as support clinical data gathered from human studies comparing liver fat measurements by our TAEUS liver device to measurements by MRI-PDFF.

In the fourth quarter of 2023, the FDA sent an Additional Information (“FDA AI”) request related to our De Novo application.

In order to fully respond to the FDA’s questions, we were required to compile additional clinical data, provide additional device test data, and respond to cybersecurity related questions in a new De Novo submission.

In light of the need for additional clinical data, the original De Novo was formally closed by the FDA on April 24, 2024 in line with FDA internal procedures.

Since we received the FDA AI request, we have had several interactions with the FDA including a highly informative pre-submission in-person meeting in May 2024 related to the clinical trial design for the TAEUS liver device in support of our De Novo request.

Prior to the meeting, ENDRA provided the FDA with a detailed description of the TAEUS technology to be used in clinical testing, along with a clinical study synopsis outlining a prospective hypothesis-driven, statistically powered multicenter clinical study spanning a fat fraction range representative of steatotic liver disease in the U.S., ranging from healthy to severe.

ENDRA plans to submit a new De Novo request based on the completion of a clinical study to enable sales in the United States.

The commencement of this study is subject to successful completion of our current research and development activities.

We expect that, should we be successful in obtaining the FDA’s grant of our De Novo request, we will have clearance to market the liver fat fraction TAEUS application in the U.S.

with the first and only liver fat content quantification claim.

We believe that future claims and product upgrades would be eligible for submission under Section 510(k) following the reclassification that would be established by the FDA’s grant of the De Novo request for our liver fat fraction TAEUS device.

For more information, see “Regulation—FDA Regulation” below.

Sales and Marketin g

During the second quarter, we restructured our European sales operations to better align with the Company’s near-term sales prospects and go-to-market strategy.

We expect to commence product commercialization with the small direct sales and marketing team which will later engage and support larger channel partners and clinical customers in primary geographic markets - initially in Europe, and later in the U.S.

after FDA approval.

We plan to implement a new low barrier-to-entry, multi-year, subscription-based business model with monthly recurring revenue.

We will retain our traditional direct product sale option with annual upgrade and maintenance fees for customers who may prefer it, but our primary focus will be on the “subscription based” approach.

In either case, sales are expected to be made by a direct sales force using a value proposition rooted in clinical data supported by results from a number of established clinical reference sites.

Based on our assessment of the medical capital equipment market, we intend to price our initial liver TAEUS system competitively taking into the consideration multiple factors such as TAEUS’s clinical value, customer ROI and competitive differentiation compared to alternatives.

ENGINEERING, DESIGN AND MANUFACTURING

We use suppliers of components and contract manufacturers to design, assemble and test the TAEUS liver system.

Suppliers are vetted before engaging in work with the Company and are reviewed annually, as part of our quality management system, to assure their performance meets our needs.

We have implemented internal processes to monitor designs, inventory and supply of key components needed to manufacture our TAEUS liver system.

We plan production in accordance with anticipated commercialization and sales timelines and availability and lead times of needed materials.

European Union

The primary regulatory environment in Europe is the European Union.

In the European Union, applications incorporating our TAEUS technology are regulated as Class IIa medical devices.

As described above, our MASLD TAEUS application has received, and we expect our future applications will need to receive, certification from a Notified Body required to CE mark our applications as a result of successful review of one or more submissions prepared by our contract engineering and manufacturer(s), so that such applications can be marketed and distributed within the European Economic Area.

Each of our applications will be required to be regularly recertified for CE marking, which require period ISO/CE audits and additional MDR transition audits.

The audit process, which will include on-site visits at our facility, and possibly the contract manufacturer’s(s’) facility(ies), will require us to provide the contract manufacturer(s) with information and documentation concerning our quality management system and all applicable documents, policies, procedures, manuals, and other information.

Additionally, in order to import our devices into various EU countries, we must comply with the Restriction of Hazardous Substances Directive (“RoHS”) and the Registration, Evaluation, Authorisation and Restriction of Chemicals (“REACH”).

We have undertaken a number of steps that both we and our suppliers are compliant with RoHS and REACH in order to do business in the European Union.

In the European Union, the manufacturer of medical devices is subject to current Good Manufacturing Practice, specifically ISO 13485, as set forth in the relevant recognized standards, laws and guidelines of the European Union and its member states.

Compliance with ISO 13485 is generally assessed by a Notified Body accredited by a Competent Authority.

For a Class IIa device, typically, quality system evaluation is performed by the Notified Body, which also provides the certifications necessary to fix a CE mark to the products.

The Notified Body may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications.

In addition to obtaining approval for each application, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body.

Further inspections may occur over the life of the application.

We also must comply with data privacy regulations in the European Union and the UK.

The collection and use of health data and other personal data including data collected in clinical trials is governed in the EU by the General Data Protection Regulation (“GDPR”), which imposes substantial obligations upon companies and new rights for individuals.

The GDPR also forms part of the law of Great Britain (England and Wales, Scotland and Northern Ireland) by virtue of section 3 of the European Union (Withdrawal) Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (“UK GDPR”).

Failure to comply with the GDPR may result in fines of the higher of (i) €20,000,000 or (ii) 4% of the preceding fiscal year’s total annual global revenues of the noncompliant company, among other administrative penalties.

Although we do not expect to obtain possession of any personal data from the operation of our products, the GDPR has increased our responsibility and potential liability in relation to personal data involved in the operation of our products, and we may be required to implement additional measures in order to comply with the GDPR and with other laws, rules, regulations and standards in the EU and UK relating to privacy and data protection.

This may be onerous and if our efforts to comply with GDPR or other applicable laws, rules, regulations and standards are not successful, or are perceived to be unsuccessful, it could adversely affect our business.

FDA Regulation

Each of our products must be approved, granted or cleared by the FDA before it is marketed in the United States.

Before and after approval, grant or clearance in the United States, our applications are subject to extensive regulation by the FDA under the Federal Food, Drug and Cosmetic Act (the “FD&C Act”) and/or the Public Health Service Act, as well as by other regulatory bodies.

The FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices and pharmaceutical products.

Section 513(f)(2) of the FD&C Act allows manufacturers to submit a De Novo request to the FDA for devices “automatically” classified into Class III by operation of section 513(f)(1).

Pursuant to the Food and Drug Administration Modernization Act (the “FDAMA”), in order to submit a De Novo request, a device first has to be found not substantially equivalent (“NSE”) to legally-marketed predicate devices through a premarket notification (510(k)).

Section 513(f)(2) was modified by section 607 of Food and Drug Administration Safety and Innovation Act, which created an alternative mechanism for submitting a De Novo request that does not require that a device be reviewed first under a 510(k) and found NSE prior to submission of a De Novo request.

If a device manufacturer believes their device is appropriate for classification into Class I or Class II and determines, based on currently available information, there is no legally marketed predicate device, they may submit a De Novo request without a preceding 510(k).

We believe that our device is appropriate for classification into Class II and, based on available information, that there is no legally marketed predicate device.

Hence, we expect that our device will require FDA De Novo grant prior to being legally marketed, and plan to submit our anticipated De Novo request without a preceding 510(k).

ENVIRONMENTAL

Our manufacturing processes involve the use, generation, and disposal of hazardous materials and wastes, including alcohol, adhesives, and cleaning materials.

As such, we are subject to stringent federal, state, and local laws relating to the protection of the environment, including those governing the use, handling, and disposal of hazardous materials and wastes.

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 face direct and indirect competition from a number of competitors, many of whom have greater financial, sales and marketing and other resources than we do, and offer alternatives to RF-based thermoacoustic technology for measuring the fat content of liver with ultrasound machines.

Manufacturers of ultrasound and MRI systems include multi-national corporations such as GE Healthcare, Royal Philips, Siemens Healthineers, Canon Corporation, and Fujifilm Corporation.

There is another smaller but emerging market of low-end hand-held ultrasound competitors that could pursue some liver-related applications.

In the SLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l.

In the thermal ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St.

Jude Medical, Inc.

As of December 31, 2024, we had 21 employees and contractors - 16 employees and five contractors, 14 of whom are employed on a full-time basis.

Nine were engaged in research and development activities, one was engaged in intellectual property reporting, four were engaged in regulatory and clinical activities, two were engaged in operations activities and five were engaged in administrative activities.

Geographically, 17 people were in the United States, two people in Canada, and two people in Europe.

None of our employees are covered by a collective bargaining agreement, and we believe our relationship with our employees is good.

We also employ technical and scientific advisors, on an as-needed basis, to supplement existing staff.

We believe that these advisors provide us with necessary expertise in clinical ultrasound applications, ultrasound technology, and intellectual property.

OTHER POTENTIAL APPLICATIONS OF OUR TECHNOLOGY

Temperature Monitoring of Thermoablative Surgery

We also intend to develop a TAEUS platform application to guide thermal ablation surgery, such as in the treatment of cardiac atrial fibrillation, chronic pain and lesions of the liver, thyroid, kidneys and other soft tissues.

We also intend to develop a TAEUS platform application to monitor thermal ablation surgery, for interventions in chronic pain and lesions of the liver, thyroid, kidneys, and other soft tissues.

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

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

The global radiofrequency ablation devices market size was valued at approximately $3.6 billion in 2021 and is expected to surpass $10.2 billion by 2030, representing a CAGR of 11% during the forecast period (2022-2030).

The global RF ablation devices market size was valued at approximately $4.3 billion in 2021 and is expected to surpass $13.2 billion by 2032, representing a CAGR of 12% during the forecast period.

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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We believe these existing methods either lack real-time precision or are impractical due to cost, poor availability and other factors.

We believe that the ability to visualize changes in tissue temperature in real time could potentially enhance the effectiveness and safety of thermoablation therapies and that our TAEUS technology platform combined with traditional ultrasound has the potential to guide thermoablation surgery more cost-effectively and more accurately than existing methods.

Depiction of ex-vivo TAEUS tissue temperature analysis overlaid on traditional ultrasound image.

We believe that the ability to visualize changes in tissue viability, in real time, could potentially enhance the effectiveness and safety of thermoablation therapies, and that our TAEUS technology platform, combined with traditional ultrasound, has the potential to guide thermoablation surgery more cost-effectively, and more accurately, than existing methods.

Vascular Imaging

We believe that our TAEUS technology can be used to image blood vessels and distinguish them from the surrounding tissue.

In addition to our NAFLD and thermoablation applications, we intend to develop a cardiovascular application based on our TAEUS technology that, with the use of a standard saline contrast agent, can enable existing ultrasound systems to perform a number of cardiovascular diagnostic functions, such as identifying arterial plaque or blocked or malformed vessels, as well as safely guiding biopsies away from vital vasculature.

In addition to our SLD and thermoablation applications, we intend to develop a cardiovascular application based on our TAEUS technology that, with the use of a standard saline contrast agent, can enable existing ultrasound systems to perform a number of cardiovascular diagnostic functions, such as identifying arterial plaque or blocked or malformed vessels, as well as safely guiding biopsies away from vital vasculature.

Conventional ultrasound imaging systems use Doppler imaging in a variety of vascular applications.

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INTELLECTUAL PROPERTY

We rely on a combination of patent, copyright, trademark and trade secret laws and other agreements with employees and third parties to establish and protect our proprietary intellectual property rights.

We rely on a combination of patent, copyright, trademark and trade secret laws and agreements with employees and third parties to establish and protect our proprietary intellectual property rights.

We require our officers, employees and consultants to enter into standard agreements containing provisions requiring confidentiality of proprietary information and assignment to us of all inventions made during the course of their employment or consulting relationship.

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

As of December 31, 2023, we maintained a patent portfolio consisting of forty (40) patents issued in the United States and thirty-two (32) issued patents in foreign jurisdictions, four (4) patent applications pending in the United States and twenty-three (23) patent applications pending internationally relating to our technology.

As of December 31, 2024, we maintained a patent portfolio consisting of 41 patents issued in the United States and 41 issued patents in foreign jurisdictions, 4 patent applications pending in the United States and 22 patent applications pending internationally relating to our technology.

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

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(“PatentVest”), a specialized consulting firm focused on intellectual property valuation, intellectual property portfolio management and intellectual property M&A for clients seeking to protect and leverage their intellectual property portfolio for growth.

Pursuant to a Consulting Services Agreement (the “Services Agreement”) between the Company and PatentVest, PatentVest will undertake a comprehensive assessment of our technology and intellectual property portfolio and work with the Company to create an intellectual property strategy and corresponding plan.

Pursuant to a Consulting Services Agreement (the “Services Agreement”) between the Company and PatentVest, PatentVest is undertaking a comprehensive assessment of our technology and intellectual property portfolio and work with the Company to create an intellectual property strategy and corresponding plan.

Pursuant to the Services Agreement, the Company agreed to pay PatentVest strictly through the issuance of restricted shares of the Company’s common stock.

Sales and Marketing

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.

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 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.

Based on our design work and our understanding of the medical capital equipment market, we intend to price our initial liver TAEUS system at a price point of approximately $65,000, which we believe could enable clinical purchasers to recoup their investment in less than one year by performing a relatively small number of additional procedures, initially paid out-of-pocket by patients until government and private insurance reimbursement is secured for the TAEUS liver 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 ultrasound and thermoablative capital equipment makers, for incorporation in their new capital equipment systems.

Engineering, Design and Manufacturing

Development of TAEUS Device

We contracted with StarFish Product Engineering, Inc.

(“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 regulatory clearance in the EU.

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 and our de novo submission to the FDA in the third quarter of 2023.

The relationship with StarFish has expanded and now Starfish is our designated contract manufacturing partner for the TAEUS® liver system.

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

Regulatory Approval Pathway and Human Study

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

Based on certain factors, such as the installed base of ultrasound systems, availability of other imaging technologies, such as CT and MRI, economic strength and applicable regulatory requirements, we sought initial approval of our applications for sale in the European Union, followed by the United States and plan to seek additional approval in China.

The first TAEUS application we intend to commercialize is our NAFLD TAEUS application.

Our initial target market for this application is the European Union.

For commercial reasons and to support our application for CE marking, we contracted with CIMTEC, a medical imaging research group, to conduct human studies through Canada-based Robarts Research Institute to demonstrate our NAFLD TAEUS application’s ability to distinguish fat from lean tissue.

In September 2019, we announced the completion and reported top-level findings of Robarts Research Institute’s initial healthy subject study and data collection of 50 subjects, which was included in our TAEUS liver device technical file submission for device CE mark.

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

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.

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, should initially expire in May 2024 and re-certification under the MDR will be required in order to continue marketing of the application in the EU.

However, 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.

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 to request the classification of our NAFLD TAEUS application as a Class II device, as described below under “ FDA Approval or Clearance of Medical Devices ”.

In the third quarter of 2023, we submitted a de novo request to the FDA that included as support clinical data gathered from human studies comparing liver fat measurements by our TAEUS device to measurements by MRI-PDFF.

In the fourth quarter of 2023, the FDA sent us an AI request related to our de novo application.

Since we received the AI request, we have had several interactions with the FDA and have provided additional information.

We have a scheduled in-person pre-submission meeting with the FDA in the second quarter of 2024.

We currently anticipate completing the necessary clinical studies by the fourth quarter of 2024 and submitting the new de novo request to the FDA in the first half of 2025.

We expect that, should we be successful in obtaining the FDA’s grant of our de novo request, we will have clearance to market the liver fat fraction TAEUS application in the U.S.

with specific tissue fat content claims.

However, we will need to obtain additional FDA clearances to be able to make diagnostic claims for fatty tissue content determination.

Accordingly, to support our commercialization efforts we expect that, following receipt of the FDA’s grant of our initial de novo request, we would submit one or more additional applications to the FDA, each of which would need to include additional clinical trial data, so that following receipt of the necessary clearances we may make those diagnostic claims.

We believe these additional applications will be eligible for submission under Section 510(k) following the reclassification that would be established by the FDA’s grant of the de novo request for our liver fat fraction TAEUS device.

European Union

The primary regulatory environment in Europe is the European Union.

In the European Union, applications incorporating our TAEUS technology are regulated as Class IIa medical devices.

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.

The audit procedure, which will include on-site visits at our facility, and the contract manufacturer’s(s’) facility(ies), will require us to provide the contract manufacturer(s) with information and documentation concerning our quality management system and all applicable documents, policies, procedures, manuals, and other information.

We have undertaken initial processes to meet compliance with RoHS and REACH and will need to ensure that we and our suppliers are compliant with these laws to do business in the European Union.

In the European Union, the manufacturer of medical devices is subject to current Good Manufacturing Practice, or cGMP, as set forth in the relevant laws and guidelines of the European Union and its member states.

Compliance with cGMP is generally assessed by a Notified Body accredited by a Competent Authority.

For a Class IIa device, typically, quality system evaluation is performed by the Notified Body, which also provides the certifications necessary to fix a CE mark to the products.

The Notified Body may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications.

In addition to obtaining approval for each application, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body.

Further inspections may occur over the life of the application.

We also must comply with data privacy regulations in the European Union and the UK.

FDA Regulation

Each of our products must be approved or cleared by the FDA before it is marketed in the United States.

Before and after approval or clearance in the United States, our applications are subject to extensive regulation by the FDA under the FD&C Act and/or the Public Health Service Act, as well as by other regulatory bodies.

FDA Approval or Clearance of Medical Devices

In the United States, medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls the FDA determines are necessary to reasonably ensure their safety and efficacy:

general controls, such as labeling and adherence to quality system regulations;

special controls, clearance of a premarket notification, or 510(k) submission, specific controls such as performance standards, patient registries and post-market surveillance and additional controls such as labeling and adherence to quality system regulations;

special controls and approval of a premarket approval, or 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.

510(k) submissions generally include, among other things, a description of the device and its manufacturing, device labeling, medical devices to which the device is substantially equivalent, safety and biocompatibility information and the results of performance testing.

In some cases, a 510(k) submission must include data from human clinical studies.

Marketing may commence only when the FDA issues an order finding substantial equivalence.

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.

However, in some instances the FDA may require clinical studies to demonstrate substantial equivalence to the predicate device.

Whether clinical data is provided or not, the FDA may decide to reject the substantial equivalence argument we present.

If that happens, the device is automatically designated as a Class III device, unless the sponsor requests a risk-based classification determination for the device in accordance with the “de novo” process, which may determine that the new device is of low to moderate risk and that it can be appropriately be regulated as a Class I or II device.

In the de novo process, the FDA must determine that general and special controls are sufficient to provide reasonable assurance of the safety and effectiveness of a device which has no predicate.

Upon receipt of a de novo request, the FDA will conduct an acceptance review to assess the completeness of the application and whether it meets the minimum threshold of acceptability.

If the de novo request is accepted for substantive review, the FDA will conduct a classification review of legally marketed device types and analyze whether an existing legally marketed device of the same type exists, which information is used to confirm the subject device is eligible for de novo classification.

During the course of review, the FDA may address any issues through interactive review or send a formal request for additional information in order for the review to proceed.

If a de novo request is granted, the device may be legally marketed, and a new classification is established.

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 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.

If the FDA determines that the changed product does not qualify for 510(k) clearance, then a company must submit, and the FDA must approve, a PMA before marketing can begin.

Clinical Trials of Medical Devices

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.

An investigational device exemption application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device on humans and that the testing protocol is scientifically sound.

The investigational device exemption will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin.

Clinical studies of investigational devices may not begin until an institutional review board has approved the study.

During the study, the sponsor must comply with the FDA’s investigational device exemption requirements.

These requirements include investigator selection, trial monitoring, adverse event reporting, and record keeping.

The investigators must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with reporting and record keeping requirements.

The sponsor, the FDA, or the institutional review board at each institution at which a clinical trial is being conducted may suspend a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable risk.

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 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’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;

ensuring the traceability of all devices placed onto the market by the manufacturer, including through a unique devise identification system;

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;

preparing of post-marketing surveillance reports and additional studies on the medical devices;

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 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.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties.

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 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

China’s regulatory approval framework includes nationwide approval based on a showing that the device for which approval is sought has been previously approved in the country of origin.

Alternatively, we understand it is also possible to receive approval at the provincial level or to work exclusively with hospitals that do not require such nationwide or provincial approval.

We intend to explore these potential paths to regulatory compliance in China.

Other Regulations

We and our contractors 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 are also become subject to regulations and product registration requirements in foreign countries in which we have received approval may sell our TAEUS liver device, 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 are 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.

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.

Manufacturers of CT and MRI systems include multi-national corporations such as Royal Philips, Siemens AG and Fujifilm Corporation, many of whom also manufacture and sell ultrasound equipment.

In the NAFLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l.

In the thermal ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St.

Jude Medical, Inc.

As of December 31, 2023, we had 21 employees, all of whom are employed on a full-time basis.

Twelve full-time employees were engaged in research and development activities, three full-time employees were engaged in sales activities, three full-time employees were engaged in product assembly, and three 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.

We also employ technical advisors, on an as-needed basis, to supplement existing staff.

We believe that these technical advisors provide us with necessary expertise in clinical ultrasound applications, ultrasound technology, and intellectual property.

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