ENDRA Life Sciences Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements As used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless the context otherwise requires, the terms “we,” “us,” “our,” “ENDRA” and the “Company” refer to ENDRA Life Sciences Inc., a Delaware corporation, and its direct and indirect subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical financial statements and related notes thereto in this Form 10-Q. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “plan,” “estimate,” “anticipate” or other comparable terms. All statements other than statements of historical facts included in this Form 10-Q, including those regarding our strategies, prospects, financial condition, operations, costs, plans and objectives, are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expectations for revenues, cash flows and financial performance, the anticipated results of our development efforts and the timing for receipt of required regulatory approvals and product launches. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in, or implied by, the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our limited commercial experience, limited cash and history of losses; our ability to obtain adequate financing to fund our business operations in the future; our ability to achieve profitability; our ability to develop a commercially feasible application based on our Thermo-Acoustic Enhanced Ultrasound (“TAEUS”) technology; market acceptance of our technology; uncertainties associated with any future pandemic, including possible effects on our operations; results of our human studies, which may be negative or inconclusive; our ability to find and maintain development partners; our reliance on collaborations and strategic alliances and licensing arrangements; the amount and nature of competition in our industry; our ability to protect our intellectual property; potential changes in the healthcare industry or third-party reimbursement practices; delays and changes in regulatory requirements, policy and guidelines including potential delays in submitting required regulatory applications for Food and Drug Administration (“FDA”) approval; our ability to obtain and maintain CE mark certification and secure required FDA and other governmental approvals for our TAEUS applications; our ability to regain compliance with the listing standards of the Nasdaq Capital Market and maintain the listing of our common stock on such exchange; our ability to comply with regulation by various federal, state, local and foreign governmental agencies and to maintain necessary regulatory clearances or approvals; and the other risks and uncertainties described in the Risk Factors section of our Annual Report on Form 10-K for the period ended December 31, 2024, as filed with the SEC on March 31, 2025, and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Available Information From time to time, we use press releases, X (formerly) Twitter (@endralifesci) and LinkedIn (www.linkedin.com/company/endra-inc) to distribute material information. Our press releases and financial and other material information are routinely posted to and accessible on the Investors section of our website, www.endrainc.com. Accordingly, investors should monitor these channels, in addition to our SEC filings and public conference calls and webcasts. In addition, investors may automatically receive e-mail alerts and other information about the Company by enrolling their e-mail addresses by visiting the “Email Alerts” section of our website at investors.endrainc.com. 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. Overview 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. 16 Table of Contents We intend to focus on serving these four markets: 1. 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. 2. 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. 3. Bariatric and Metabolic Clinics - for the management of obesity, the detection of metabolic disease, and monitoring response to therapies. 4. 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 · user error; and · 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 Revenue No revenue has been generated by our TAEUS technology, which we have not commercially sold as of March 31, 2025. Research and Development Expenses Our research and development expenses primarily include wages, fees and equipment for the development of our TAEUS technology platform and the proposed applications. Additionally, we incur certain costs associated with the protection of our products and inventions through a combination of patents, licenses, applications and disclosures. These costs and expenses include: · employee-related expenses, such as salaries, bonuses and benefits, consultant-related expenses such as consultant fees and bonuses, stock-based compensation, overhead related expenses and travel-related expenses for our research and development personnel; · expenses incurred under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”) as well as consultants that support the implementation of our clinical and non-clinical studies; · manufacturing and packaging costs in connection with conducting clinical trials; · formulation, research and development expenses related to our TAEUS technology; and · costs for sponsored research. We plan to incur research and development expenses for the foreseeable future as we expect to continue the development of TAEUS and pursue FDA approval of the NAFLD TAEUS system. At this time, due to the inherently unpredictable nature of clinical development and regulatory approvals, we are unable to estimate with certainty the costs we will incur and the timelines we will require in our continued development efforts. Sales and Marketing Expenses Sales and marketing expenses consist primarily of headcount and consulting costs, and marketing and tradeshow expenses. Currently, our marketing efforts are through our website and attendance of key industry meetings and conferences. 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. 17 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of salaries and related expenses for our management and personnel, and professional fees, such as for accounting, consulting and legal services. We anticipate continued costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors and officers insurance, increased legal and accounting costs and investor relations costs. Critical Accounting Policies and Estimates Warrant Liability The Company accounts for the liability classified warrants in accordance with the guidance contained in ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging. Such guidance provides criteria for instruments do not meet the criteria for equity treatment thereunder. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. 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. Share-based Compensation Our Omnibus Plan permits the grant of stock options and other stock awards to our employees, consultants and non-employee members of our board of directors. Each January 1 the pool of shares available for issuance under the Omnibus Plan automatically increases by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the Omnibus Plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the board of directors takes action to set a lower amount, the amount determined by the board. On January 1, 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 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 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. Recent Accounting Pronouncements See Note 2 of the accompanying financial statements for a discussion of recently issued accounting standards. Results of Operations Three months ended March 31, 2025 and 2024 Revenue 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 March 31, 2025 and 2024. 18 Table of Contents Research and Development 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. Research and development expenses decreased from the prior year as we complete development of our initial TAEUS product and began focusing our spending on clinical trials and commercialization of the product that has been developed. Sales and Marketing 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 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 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 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. Net Loss 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. 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. We need additional capital to allow us to continue to execute our commercialization plans. We are considering potential financing options that may be available to us, such as sales of our common stock, including through our at-the-market sales program. 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. 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 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 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. 19 Table of Contents 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 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 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. Long-Term Liquidity We have not completed the commercialization of any of our TAEUS technology platform applications. We expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses will increase substantially as we: · advance the engineering design and development of our TAEUS technology; · acquire parts and build finished goods inventory of the TAEUS FLIP system; · complete regulatory filings required for marketing approval of our NAFLD TAEUS application in the United States, including clinical studies to advance our de novo application with the FDA; · seek to hire a small internal marketing team to engage and support channel partners and clinical customers for our NAFLD TAEUS application; · expand marketing of our NAFLD TAEUS application; · advance development of our other TAEUS applications; and · add operational, financial and management information systems and personnel, including personnel to support our product development, planned commercialization efforts and our operation as a public company. It is possible that we will not achieve the progress that we expect because the actual costs and timing of completing the development and regulatory approvals for a new medical device are difficult to predict and are subject to substantial risks and delays. We have no committed external sources of funds except for the February 2024 ATM Agreement, the use of which may be limited due to registration statement rules relating to public float. We do not expect that our existing cash will be sufficient for us to complete the commercialization of our NAFLD TAEUS application or to complete the development of any other TAEUS application and we will need to raise substantial additional capital for those purposes. 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 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. Until we can generate a sufficient amount of revenue from our TAEUS platform applications, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaborations and licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts or perhaps even cease the operation of our business. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to our technologies or applications or grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. 20 Table of Contents Off-Balance Sheet Transactions At March 31, 2025, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, we are not required to provide the information required by this Item 3.