What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-19 · 54 added, 68 removed, 121 unchanged (50% of the section changed)

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Information that is contained in and can be accessed through our website, X posts and LinkedIn are not incorporated into, and do not form a part of, this Quarterly Report or any other report or document we file with the SEC.

We are leveraging experience with pre-clinical enhanced ultrasound devices to develop technology for increasing the capabilities of clinical diagnostic ultrasound and other types of capital equipment, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions in circumstances where expensive X-ray CT and MRI technology, or other diagnostic technologies such as surgical biopsy, are unavailable or impractical.

Building on our expertise in thermoacoustics, we have developed a next-generation technology platform-Thermo Acoustic Enhanced Ultrasound, or TAEUS-which is intended to enhance the capability of clinical ultrasound technology and support the diagnosis and treatment of a number of significant medical conditions that currently require the use of expensive CT or MRI imaging or where imaging is not practical using existing technology.

The first-generation TAEUS application is a standalone ultrasound accessory designed to cost-effectively quantify fat in the liver and stage progression of nonalcoholic fatty liver disease (“NAFLD”), which can otherwise only be achieved today with impractical surgical biopsies or MRI scans.

Subsequent TAEUS offerings are expected to be implemented via a second-generation hardware platform that can run multiple clinical software applications that we will offer TAEUS users for a licensing fee-adding ongoing customer value to the TAEUS platform and a growing software revenue stream for our Company.

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

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

In March 2020, we received CE mark approval for our TAEUS FLIP (“Fatty Liver Imaging Probe”) System, enabling its marketing and sales in the European Union and other CE mark geographies, including the 27 EU member states.

In June 2020, we submitted a 510(k) Application to the FDA for our TAEUS Fatty Liver 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 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 us an Additional Information (“AI”) request related to our de novo application.

After 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 had an in-person pre-submission meeting with the FDA on May 16, 2024.

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

We were incorporated as a Delaware corporation in 2007.

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.

Our 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.

We intend to focus on serving these four 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.

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

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

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.

Financial Operations Overview

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of September 30, 2024.

No revenue has been generated by our TAEUS technology, which we have not commercially sold as of March 31, 2025.

Research and Development Expenses

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Currently, our marketing efforts are through our website and attendance of key industry meetings and conferences.

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

We expect to add to our sales representation and support headcount for operations in the EU as demand and resources permit in the future, and plan to begin staffing our sales efforts in the United States once we have obtained FDA approval for the sale of the NAFLD TAEUS device in that region.

During the second quarter of 2024, we restructured our sales operations to better align with the Company’s near-term sales prospects.

We plan to begin staffing our sales efforts once we have obtained FDA approval for the sale of the NAFLD TAEUS device.

General and Administrative Expenses

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Actual results could differ from those estimates.

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

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

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

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On January 1, 2025, the pool of shares issuable under the Omnibus Plan automatically increased by 178,033 shares from 1,738 shares to 179,771 shares.

As of September 30, 2024, there were 1,458 shares of common stock remaining available for issuance under the Omnibus Plan.

As of March 31, 2025, there were 179,474 shares of common stock remaining available for issuance under the Omnibus Plan.

We record share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification.

The guidance requires the use of option-pricing models that require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock.

The guidance requires the use of option-pricing models that require the input of highly subjective assumptions, including the option’s expected life and the price volatility

of the underlying stock.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends, and the resulting charge is expensed using the straight-line attribution method over the vesting period.

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Results of Operations

Three months ended September 30, 2024 and 2023

We had no revenue during the three months ended September 30, 2024 and 2023.

Three months ended March 31, 2025 and 2024

We had no revenue during the three months ended March 31, 2025 and 2024.

Cost of Goods Sold

We had no cost of goods sold during the three months ended September 30, 2024 and 2023.

We had no cost of goods sold during the three months ended March 31, 2025 and 2024.

Research and Development

Research and development expenses were $794,444 for the three months ended September 30, 2024, as compared to $1,632,849 for the three months ended September 30, 2023, a decrease of $838,405 or 51%.

Research and development expenses were $528,685 for the three months ended March 31, 2025, as compared to $1,041,526 for the three months ended March 31, 2024, a decrease of $512,841 or 49%.

The costs include primarily wages, fees, equipment and third-party costs for the development of our TAEUS product line.

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Sales and Marketing

Sales and marketing expenses were $83,157 for the three months ended September 30, 2024, as compared to $243,332 for the three months ended September 30, 2023, a decrease of $160,175, or 66%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

Sales and marketing expenses decreased largely due to our restructuring in the second quarter.

Currently, our marketing efforts are through our website and attendance of key industry meetings.

General and Administrative

Our general and administrative expenses for the three months ended September 30, 2024 were $631,413, compared to $1,252,881 for the three months ended September 30, 2023, a decrease of $621,468, or 49%.

Our wage and related expenses for the three months ended September 30, 2024 were $(142,536), compared to $565,639 for the three months ended September 30, 2023.

Wage and related expenses in the three months ended September 30, 2024 included $(144,445) of cancellation of equity awards in connection with the departure of an executive officer, compared to $67,932 of stock compensation expense related to the issuance and vesting of options for the three months ended September 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the three months ended September 30, 2024 were $598,255, compared to $447,515 for the three months ended September 30, 2023.

Other income (expense) was $(845,076) for the three months ended September 30, 2024 was primarily due to accounting for warrants.

Other income was $28,226 for the three months ended September 30, 2023, a decrease of $873,302 or 3,094%.

As a result of the foregoing, for the three months ended September 30, 2024, we recorded a net loss of $2,354,090, compared to a net loss of $3,100,836 for the three months ended September 30, 2023.

Nine months ended September 30, 2024 and 2023

We had no revenue during the nine months ended September 30, 2024 and 2023.

Cost of Goods Sold

We had no cost of goods sold during the nine months ended September 30, 2024 and 2023.

Research and Development

Research and development expenses were $2,552,336 for the nine months ended September 30, 2024, as compared to $4,424,345 for the nine months ended September 30, 2023, a decrease of $1,872,009 or 42%.

The costs include primarily wages, fees, equipment and third-party costs for the development of our TAEUS product line.

Research and development expenses decreased from the prior year as we completed development of our initial TAEUS product and began focusing our spending on commercialization of the product that has been developed.

Sales and Marketing

Sales and marketing expenses were $484,769 for the nine months ended September 30, 2024, as compared to $672,721 for the nine months ended September 30, 2023, a decrease of $187,952, or 28%.

Sales and marketing expenses were $68,991 for the three months ended March 31, 2025, as compared to $238,660 for the three months ended March 31, 2024, a decrease of $169,669, or 71%.

The costs include primarily headcount and pre-selling activities for our TAEUS product line.

Sales and marketing expenses decreased largely due to the decrease in consulting fees.

Sales and marketing expenses decreased largely due to our restructuring in the second quarter of 2024.

Currently, our marketing efforts are through our website and attendance of key industry meetings.

General and Administrative

Our general and administrative expenses for the nine months ended September 30, 2024 were $3,483,303 compared to $3,965,889 for the nine months ended September 30, 2023, a decrease of $482,586, or 12%.

Our wage and related expenses for the nine months ended September 30, 2024 were $1,079,942, compared to $1,735,526 for the nine months ended September 30, 2023.

Wage and related expenses in the nine months ended September 30, 2024 included $93,545 of stock compensation expense related to the issuance and vesting of options, compared to $252,948 of stock compensation expense related to the issuance and vesting of options, for the nine months ended September 30, 2023.

Our professional fees, which include legal, audit, and investor relations, for the nine months ended September 30, 2024 were $1,820,454, compared to $1,471,850 for the nine months ended September 30, 2023.

Other income (expense) was $(838,535) for the nine months ended September 30, 2024 was primarily due to accounting for warrants.

Other income was $462,241 for the nine months ended September 30, 2023 and resulted mostly from the completion of the Employer Retention Tax Credit for employee retention in 2021 and 2022 of $413,844.

Other income (expense) decreased $1,300,776 or 281% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

As a result of the foregoing, for the nine months ended September 30, 2024, we recorded a net loss of $7,358,943, compared to a net loss of $8,600,714 for the nine months ended September 30, 2023.

Our general and administrative expenses for the three months ended March 31, 2025 were $871,606, compared to $1,500,355 for the three months ended March 31, 2024, a decrease of $628,749, or 42%.

Our wage and related expenses for the three months ended March 31, 2025 were $368,607, compared to $641,381 for the three months ended March 31, 2024.

Wage and related expenses in the three months ended March 31, 2025 included $83,047 of stock compensation expense related to the issuance and vesting of options for the three months ended March 31, 2025.

Our professional fees, which include legal, audit, and investor relations, for the three months ended March 31, 2025 were $305,860, compared to $639,872 for the three months ended March 31, 2024.

Other income was $24,390 for the three months ended March 31, 2025 was primarily due to interest income.

Other income was $4,841 for the three months ended March 31, 2024, a decrease of $19,549 or 404%.

For the three months ended March 31, 2025, there were changes in fair value of warrant liability of $408,562.

As a result of the foregoing, for the three months ended March 31, 2025, we recorded a net loss of $1,036,330, compared to a net loss of $2,775,700 for the three months ended March 31, 2024.

Near-Term Liquidity and Capital Resources

We are experiencing financial and operating challenges.

As of September 30, 2024, we had an accumulated deficit of $99,289,095 and had $4,745,187 in cash.

In the absence of immediate additional liquidity, we will be forced to delay or reduce our product development programs and commercialization efforts, materially curtail or cease our operations, sell or dispose of our rights or assets, pursue sale or other strategic transactions, or undergo restructuring or insolvency proceedings.

As of March 31, 2025, we had an accumulated deficit of $104,474,429 and had $2,064,874 in cash.

To date we have funded our operations through private and public sales of our securities and will need to raise additional funds in order to execute on our business plan, fully commercialize our TAEUS technology, and generate revenues.

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Except for the at-the-market sales program, we have no commitments to obtain any additional funds, and there can be no assurance funds will be available in sufficient amounts or on acceptable terms.

In addition, the Company agreed, subject to certain exceptions, not to effect any issuance of common stock or securities convertible into common stock involving a Variable Rate Transaction, as defined in the Placement Agreement and which includes sales of common stock under the at-the-market sales program, for a period commencing on the date of the Placement Agreement until 180 days following the closing of our June 2024 public offering.

If we are unable to obtain sufficient additional financing in a timely fashion and on terms acceptable to us, our financial condition and results of operations may be materially adversely affected and we may not be able to continue operations or execute our stated commercialization plan.

The consolidated financial statements included in this Form 10-Q have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying consolidated financial statements, during the nine months ended September 30, 2024, we incurred net losses of $7,358,943 and used cash in operations of $5,884,842.

In light of our cash balance as of September 30, 2024, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

As reflected in the accompanying consolidated financial statements, during the three months ended March 31, 2025, we incurred net losses of $1,036,330 and used cash in operations of $1,293,129.

In light of our cash balance as of March 31, 2025, we will need to raise additional capital in order to fund operations through the next twelve months, and prior to any ability to fund operations from revenue generated from the sale of our products.

The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

Operating Activities

During the nine months ended September 30, 2024, we used $5,884,842 of cash in operating activities primarily as a result of our net loss of $7,358,943, offset by share-based compensation of $467,240, amortization of right of use assets of $124,320, inventory reserve of $4,687, depreciation expense of $35,489, fixed assets write-off of $8,808, warrant expense of $7,323,685, change in fair value of warrant liability of $(3,341,829), gain on settlement of warrant exercises of $(3,071,252), and net in operating assets and liabilities of $77,047.

During the nine months ended September 30, 2023, we used $7,374,197 of cash in operating activities primarily as a result of our net loss of $8,600,714, offset by share-based compensation of $745,873, depreciation expense of $101,839, amortization of right of use assets of $112,365, and net changes in operating assets and liabilities of $266,440.

During the three months ended March 31, 2025, we used $1,293,129 of cash in operating activities primarily as a result of our net loss of $1,036,330, offset by share-based compensation of $83,046, amortization of right of use assets of $31,797, depreciation expense of $13,786 change in fair value of warrant liability of $(408,562), and net changes in operating assets and liabilities of $23,134.

During the three months ended March 31, 2024, we used $2,144,312 of cash in operating activities primarily as a result of our net loss of $2,775,700, offset by share-based compensation of $317,497, amortization of right of use assets of $40,376, inventory reserve of $142,733, depreciation expense of $15,300, fixed assets write-off of $8,808, and net changes in operating assets and liabilities of $106,674.

Investing Activities

During the nine months ended September 30, 2024, we used $16,000 in investing activities related to purchases of fixed assets, and received $3,204 in proceeds from sale of fixed assets.

During the nine months ended September 30, 2023, we used $27,000 in investing activities related to purchases of fixed assets.

During the three months ended March 31, 2025, we used $17,280 in investing activities related to purchases of fixed assets.

During the three months ended March 31, 2024, we used $27,000 in investing activities related to purchases of fixed assets and received $3,204 in proceeds from sale of fixed assets.

Financing Activities

During the nine months ended September 30, 2024, our financing activities provided $1,148,470 in proceeds from issuances of common stock,$5,368,363 in proceeds from issuance of warrants, and $1,320,568 in proceeds from the issuance of cashless warrants.

During the three months ended March 31, 2025, our financing activities provided $145,803 in proceeds from issuances of common stock.

During the three months ended March 31, 2024, our financing activities provided $419,967 in proceeds from issuances of common stock, $77,419 in proceeds from warrant exercises.

We also used $28,484 to repay a loan from TD Bank under the Canadian Emergency Business Account.

During the nine months ended September 30, 2023, our financing activities provided $5,846,635 in proceeds from issuances of common stock and warrants.

Long-Term Liquidity

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As a result, we will need to finance our future cash needs through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed in the Risk Factors section of this Annual Report on Form 10-K.

Our forecast of our financial resources is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed in the Risk Factors section of this Annual Report on Form 10-K.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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Off-Balance Sheet Transactions

At September 30, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

At March 31, 2025, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Quantitative and Qualitative Disclosure About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis