Amendment: SEC Form 10-Q/A filed by ENDRA Life Sciences Inc.

11/21/24 5:14:20 PM ET

$NDRA

Biotechnology: Electromedical & Electrotherapeutic Apparatus

Health Care

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endra_10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-37969

ENDRA LIFE SCIENCES INC.

(Exact name of registrant as specified in its charter)

Delaware		26-0579295
(State of incorporation)		(I.R.S. Employer Identification No.)

3600 Green Court, Suite 350, Ann Arbor, MI 48105-1570

(Address of principal executive office) (Zip code)

(734) 335-0468

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		NDRA		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 19, 2024, there were 536,908 shares of our common stock, par value $0.0001 per share, outstanding.

EXPLANATORY NOTE:

The registrant’s Form 10-Q filed with the SEC on November 19, 2024, did not include inline XBRL tagging. The sole purpose of this Amendment No. 1 to the registrant’s Form 10-Q for the quarterly period ended September 30, 2024 is to add inline XBRL tagging to the Form 10-Q in accordance with Rule 405 of Regulation S-T.

No changes have been made to the registrant’s Form 10-Q. This Amendment No. 1 does not reflect any subsequent events occurring after the original filing date of the Form 10-Q or modify or update in any way disclosures made in the original filing.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	4

	Condensed Consolidated Balance Sheets - September 30, 2024 (unaudited) and December 31, 2023	4

	Condensed Consolidated Statements of Operations - Three and Nine months Ended September 30, 2024 and 2023 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity – Three and Nine months Ended September 30, 2024 and 2023 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows - Nine months Ended September 30, 2024 and 2023 (unaudited)	8

	Notes to the Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

Item 1.	Legal Proceedings	26

Item1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosure	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

	Signatures	28

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ENDRA Life Sciences Inc.

Condensed Consolidated Balance Sheets

	September 30,			December 31,
Assets	2024			2023
Current Assets	(Unaudited)
Cash	$	4,745,187		$	2,833,907
Prepaid expenses		217,120			198,905
Total Current Assets		4,962,307			3,032,812
Non-Current Assets
Inventory, net		2,711,923			2,622,865
Fixed assets, net		80,281			111,782
Right of use assets		229,771			354,091
Prepaid expenses, long term		388,842			626,610
Other assets		5,986			5,986
Total Assets	$	8,379,110		$	6,754,146

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities	$	626,706		$	700,754
Lease liabilities, current portion		187,339			173,857
Loans		-			28,484
Total Current Liabilities		814,045			903,095

Long Term Debt
Lease liabilities		49,823			192,062
Warrant Liability		910,556			-
Total Long Term Debt		960,379			192,062

Total Liabilities		1,774,424			1,095,157

Stockholders’ Equity
Series A Convertible Preferred Stock, $0.0001 par value; 10,000 shares authorized; 17.488 and 141.397 shares issued and outstanding, respectively		-			1
Series B Convertible Preferred Stock, $0.0001 par value; 1,000 shares authorized; no shares issued and outstanding		-			-
Series C Convertible Preferred Stock, $0.0001 par value; 100,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $0.0001 par value; 20,000,000 shares authorized; 534,863 and 5,937 shares issued and outstanding, respectively		53			1
Additional paid in capital		105,893,728			97,583,906
Stock payable		-			5,233
Accumulated deficit		(99,289,095	)		(91,930,152	)
Total Stockholders’ Equity		6,604,686			5,658,989
Total Liabilities and Stockholders’ Equity	$	8,379,110		$	6,754,146

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

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ENDRA Life Sciences Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2024			2023			2024			2023
Operating Expenses
Research and development	$	794,444		$	1,632,849		$	2,552,336		$	4,424,345
Sales and marketing		83,157			243,332			484,769			672,721
General and administrative		631,413			1,252,881			3,483,303			3,965,889
Total operating expenses		1,509,014			3,129,062			6,520,408			9,062,955

Operating loss		(1,509,014	)		(3,129,062	)		(6,520,408	)		(9,062,955	)

Other Expenses
Other income (expense)		65,528			28,226			72,069			462,241
Warrant expense		(7,323,685	)					(7,323,685	)
Changes in fair value of warrant liability		3,341,829						3,341,829
Gain or Loss on settlement of warrant exercise		3,071,252						3,071,252
Total other expenses		(845,076	)		28,226			(838,535	)		462,241

Loss from operations before income taxes		(2,354,090	)		(3,100,836	)		(7,358,943	)		(8,600,714	)

Provision for income taxes		-			-			-			-

Net Loss	$	(2,354,090	)	$	(3,100,836	)	$	(7,358,943	)	$	(8,600,714	)

Net loss per share – basic and diluted	$	(9.54	)	$	(706.20	)	$	(82.14	)	$	(2,672.98	)

Weighted average common shares – basic and diluted		246,816			4,391			89,592			3,218

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

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ENDRA Life Sciences Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

*Nine Months Ended September 30,2023*
	Series A Convertible				Series B Convertible								Additional								Total
	Preferred Stock				Preferred Stock				Common stock				Paid in		Stock			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Payable			Deficit			Equity
Balance as of December 31, 2022		141.397	$	1		-		-		1,811	$	0	$	89,068,332	$	6,073		$	(81,869,902	)	$	7,204,504
Common stock issued for cash, net of funding costs		-		-		-		-		2,996		0		5,826,582		-			-			5,826,582
Warrants issued for cash, net of funding costs		-		-		-		-		-		-		20,053		-			-			20,053
Fair value of vested stock options		-		-		-		-		-		-		745,873		-			-			745,873
Stock payable towards preference dividend		-		-		-		-		-		-		4,012		(4,012	)		-			-
Net loss		-		-		-		-		-		-		-		-			(8,600,714	)		(8,600,714	)
Balance as of September 30,2023		141.397	$	1		-	$	-		4,807	$	0	$	95,664,852	$	2,061		$	(90,470,616	)	$	5,196,298

*Nine Months Ended September 30,2024*
	Series A Convertible					Series B Convertible								Additional								Total
	Preferred Stock					Preferred Stock				Common stock				Paid in		Stock			Accumulated			Stockholders'
	Shares			Amount		Shares		Amount		Shares		Amount		Capital		Payable			Deficit			Equity
Balance as of December 31, 2023		141.397		$	1		-	$	-		5,937	$	1	$	97,583,906	$	5,233		$	(91,930,152	)	$	5,658,989
Preferred stock conversion to common stock		(123.909	)		1		-		-		5		-		1		-			-			-
Common stock issued for cash		-			-		-		-		3,671		-		1,148,470		-			-			1,148,470
Common stock issued for warrant exercise		-			-		-		-		518,876		51		5,368,312		-			-			5,368,363
Common stock issued for cashless warrant exercise		-			-		-				6,327		1		1,320,567		-			-			1,320,568
Fair value of vested common stock (netted off with cancellation of options for terminated employees)		-			-		-		-		46		-		80,000		-			-			80,000
Fair value of vested stock options		-			-		-		-		-		-		387,239		-			-			387,239
Stock payable towards preference dividend		-			-		-		-		-		-		5,233		(5,233	)		-			-
Net loss		-			-		-		-		-		-		-		-			(7,358,943	)		(7,358,943	)
Balance as of September 30,2024		17.488		$	-		-	$	-		534,863	$	53	$	105,893,728	$	-		$	(99,289,095	)	$	6,604,686

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*Three Months Ended September 30,2023*
	Series A Convertible				Series B Convertible								Additional								Total
	Preferred Stock				Preferred Stock				Common stock				Paid in		Stock			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Payable			Deficit			Equity
Balance as of June 30,2023		141.397	$	1		-	$	-		4,275	$	0	$	94,297,915	$	2,427		$	(87,369,780	)	$	6,930,563
Common stock issued for cash, net of funding costs		-	$	-		-	$	-		532	$	0	$	1,113,832		-			-			1,113,832
Fair value of vested stock options		-		-		-		-		-		-		252,739		-			-			252,739
Stock payable towards preference dividend		-		-		-		-		-		-		366		(366	)		-			-
Net loss		-		-		-		-		-		-		-		-			(3,100,836	)		(3,100,836	)
Balance as of September 30,2023		141.397	$	1		-	$	-		4,807	$	0	$	95,664,852	$	2,061		$	(90,470,616	)	$	5,196,298

*Three Months Ended September 30,2024*
	Series A Convertible				Series B Convertible								Additional									Total
	Preferred Stock				Preferred Stock				Common stock				Paid in			Stock			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Payable			Deficit			Equity
Balance as of June 30,2024		17.488	$	-		-	$	-		41,394	$	4	$	105,928,915		$	27		$	(96,935,005	)	$	8,993,941
Common stock issued for warrant exercise		-		-		-		-		493,469		49		1,634			-			-			1,683
Fair value of vested stock options (netted off with cancellation of options for terminated employees)		-		-		-		-		-		-		(36,848	)		-			-			(36,848	)
Stock payable towards preference dividend		-		-		-		-		-		-		27			(27	)		-			-
Net loss		-		-		-		-		-		-		-			-			(2,354,090	)		(2,354,090	)
Balance as of September 30,2024		17.488	$	-		-	$	-		534,863	$	53	$	105,893,728		$	-		$	(99,289,095	)	$	6,604,686

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ENDRA Life Sciences Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended			Nine Months Ended
	September 30,			September 30,
	2024			2023
Cash Flows from Operating Activities
Net loss	$	(7,358,943	)	$	(8,600,714	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		35,489			101,839
Fixed assets write off		8,808
Inventory reserve		4,687
Stock compensation expense		467,240			745,873
Amortization of right of use assets		124,320			112,365
Warrant expense		7,323,685
Changes in fair value of warrant liability		(3,341,829	)
Gain or Loss on settlement of warrant exercise		(3,071,252	)
Changes in operating assets and liabilities:
Decrease in prepaid expenses		219,553			42,380
Increase in inventory		(93,745	)		(112,916	)
Decrease in accounts payable and accrued liabilities		(74,098	)		449,350
Decrease in lease liability		(128,757	)		(112,374	)
Net cash used in operating activities		(5,884,842	)		(7,374,197	)

Cash Flows from Investing Activities
Purchases of fixed assets		(16,000	)		(27,000	)
Proceeds from sale of fixed assets		3,204
Net cash used in investing activities		(12,796	)		(27,000	)

Cash Flows from Financing Activities
Proceeds from issuance of common stock		1,148,470			5,826,582
Proceeds from issuance of warrants		5,368,363			20,053
Proceeds from issuance of cashless warrants		1,320,568
Repayment of loan		(28,484	)
Net cash provided by financing activities		7,808,917			5,846,635

Net increase (decrease) in cash		1,911,280			(1,554,562	)

Cash, beginning of period		2,833,907			4,889,098

Cash, end of period	$	4,745,187		$	3,334,536

Supplemental disclosures of cash items
Interest paid	$	23,211		$	-
Income tax paid	$	-		$	-

Supplemental disclosures of non-cash items
Stock dividend payable	$	(5,232	)	$	(4,012	)
Right of use asset	$	229,771		$	393,451
Lease liability	$	237,162		$	405,773
Cashless warrants	$	3,071,252		$	-

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

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ENDRA Life Sciences Inc.

Notes to Condensed Consolidated Financial Statements

For the nine months ended September 30, 2024 and 2023

(Unaudited)

Note 1 - Nature of the Business

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

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

Note 2 - Summary of Significant Accounting Policies

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 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.

Principles of Consolidation

The Company’s consolidated financial statements include all accounts of the Company and its consolidated subsidiaries and/or entities as of reporting period ending date(s) and for the reporting period(s) then ended. All inter-company balances and transactions have been eliminated.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The balance sheet at September 30, 2024 has been derived from the audited financial statements at that date. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual financial statements for the twelve months ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024.

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit, and other highly liquid investments with maturities of one year or less, when purchased, to be cash. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and periodically evaluates the creditworthiness of the financial institutions and has determined the credit exposure to be negligible. The Company maintains cash deposits at multiple banks to mitigate the risk associated with a failure of any specific bank.

Inventory

The Company’s inventory is stated at the lower of cost or estimated net realizable value, with cost primarily determined on a weighted-average cost basis on the first-in, first-out method. The Company periodically determines whether a reserve should be taken for devaluation or obsolescence of inventory. The Company assessed its inventory at September 30, 2024 and determined that certain challenges, including potential damage and a longer timeframe for initial sales, warranted the establishment of an inventory shrinkage reserve. As a result, the Company recognized an inventory reserve of 5% amounting to $142,733, which resulted in the net carrying value of inventory of $2,711,923.

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Capitalization of Fixed Assets

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.

Leases

Accounting Standards Update (“ASU”) No. 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements. At September 30, 2024 and December 31, 2023 the Company recorded a right of use asset of $229,771 and $354,091, respectively. At September 30, 2024 and December 31, 2023 the Company recorded a lease liability of $237,162 and $365,919, respectively.

Revenue Recognition

ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASC Topic 606”) provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under ASC Topic 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to perform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The adoption of ASC Topic 606 did not have an impact on the Company’s operations or cash flows.

Research and Development Costs

The Company follows FASB Accounting Standards Codification (“ASC”) Subtopic 730-10, “Research and Development”. Research and development costs are charged to the statement of operations as incurred. During the three months ended September 30, 2024 and 2023, the Company incurred $794,444 and $1,632,849 of expenses related to research and development costs, respectively. During the nine months ended September 30, 2024 and 2023, the Company incurred $2,552,336 and $ 4,424,345 of expenses related to research and development costs, respectively.

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under ASC Subtopic 260-10, “Earnings Per Share”. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. There were 181,974 and 788 potentially dilutive shares, which include outstanding common stock options, and warrants, as of September 30, 2024 and December 31, 2023, respectively.

	September 30, 2024		December 31, 2023
Options to purchase common stock		279		290
Warrants to purchase common stock		181,694		493
Shares issuable upon conversion of Series A Convertible Preferred Stock		1		5
Potential equivalent shares excluded		181,974		788

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Fair Value Measurements

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value.

In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” the Company measures certain financial instruments at fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

·	Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

·	Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

·	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The carrying amounts of the Company’s financial assets and liabilities, including cash, accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities, approximate their fair values because of the short maturity of these instruments. The fair value of notes payable and convertible notes approximates their fair values since the current interest rates and terms on these obligations are the same as prevailing market rates.

Share-based Compensation

The Company’s 2016 Omnibus Incentive Plan (the “Omnibus Plan”) permits the grant of stock options and other share-based awards to its employees, consultants and non-employee members of the 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. Effective January 1, 2024, the pool of shares issuable under the Omnibus Plan automatically increased by 982 shares from 756 shares to 1,738 shares.

The Company records 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, and the resulting charge is expensed using the straight-line attribution method over the vesting period.

Stock compensation expense recognized during the period is based on the value of share-based awards that were expected to vest during the period adjusted for estimated forfeitures. The estimated fair value of grants of stock options and warrants to non-employees of the Company is charged to expense, if applicable, in the financial statements. These options vest in the same manner as the employee options granted under the stock incentive plan as described above.

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Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has limited commercial experience and had a cumulative net loss from inception to September 30, 2024 of $99,289,095. The Company had working capital of $4,148,262 as of September 30, 2024. The Company has not established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern and will require additional financing to fund its future planned operations, including research and development and commercialization of its products. These matters raise substantial doubt about the Company's ability to continue as going concern. The accompanying financial statements for the nine months ended September 30, 2024 have been prepared assuming the Company will continue as a going concern, but the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be required to delay, reduce the scope of, or eliminate one or more of the Company’s research and development activities or commercialization efforts or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Accounting Pronouncements

The Company considered recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC, did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.

Note 3 - Inventory

As of September 30, 2024 and December 31, 2023, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods. As of September 30, 2024, the Company had no orders pending for the sale of a TAEUS system.

As of September 30, 2024, the Company recorded inventory reserve of 5% or $142,733.

As of September 30, 2024 and December 31, 2023, the Company had inventory valued at $2,711,923 and $2,622,865, respectively.

Note 4 - Fixed Assets

As of September 30, 2024 and December 31, 2023, fixed assets consisted of the following:

	September 30, 2024			December 31, 2023
Property, leasehold and capitalized software	$	579,954		$	587,030
TAEUS development and testing		125,153			125,151
Accumulated depreciation		(624,826	)		(600,399	)
Fixed assets, net	$	80,281		$	111,782

Depreciation expense for the three months ended September 30, 2024 and 2023 was $11,496 and $32,058.

Depreciation expense for the nine months ended September 30, 2024 and 2023 was $35,489 and $101,839.

Note 5 - Accounts Payable and Accrued Liabilities

As of September 30, 2024 and December 31, 2023, current liabilities consisted of the following:

	September 30, 2024		December 31, 2023
Accounts payable	$	279,417	$	360,401
Accrued payroll		133,355		150,293
Accrued bonuses		-		35,518
Accrued employee benefits		5,750		5,750
Insurance premium financing		208,184		148,792
Total	$	626,706	$	700,754

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Note 6 - Bank Loans

Toronto-Dominion Bank Loan

On April 27, 2020, the Company entered into a commitment loan with TD Bank under the Canadian Emergency Business Account, in the principal aggregate amount of CAD 40,000, due and payable upon the expiration of the initial term on December 31, 2022, which was later extended to December 31, 2023. This note bears interest on the unpaid balance at the rate of zero percent (0%) per annum during the initial term. Under this note no interest payments were due until January 1, 2024. Under the conditions of the loan, twenty-five percent (25%) of the loan will be forgiven if seventy-five percent (75%) is repaid prior to the initial term date. During the nine months ended September 30, 2024, the loan was repaid in full. As of September 30, 2024 and December 31, 2023, the loan had a balance of CAD 0 and CAD 40,000, respectively.

Note 7 - Capital Stock

Capital Stock

At September 30, 2024, the authorized capital of the Company consisted of 30,000,000 shares of capital stock, comprised of 20,000,000 shares of common stock with a par value of $0.0001 per share, and 10,000,000 shares of preferred stock with a par value of $0.0001 per share. The Company has designated 10,000 shares of its preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”), 1,000 shares of its preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”), 100,000 shares of its preferred stock as Series C Preferred Stock, and the remainder of the 9,889,000 preferred shares remain authorized but undesignated.

As of September 30, 2024, there were 534,863 shares of common stock outstanding (which excludes both the 69 unvested shares of restricted stock described in Note 8 below and the conversion of Series A Preferred Stock into 1 shares of common stock and does include 12,857 shares of common stock due to exercise of warrants ), 17.488 shares of Series A Preferred Stock, and no shares of Series B Preferred Stock or Series C Preferred Stock issued and outstanding, and a stock payable balance of $0.

During the nine months ended September 30, 2024, the Company issued a total of 528,926 shares of its common stock, as follows:

Registered offering (described below):

- 3,490 shares of its common stock in return for aggregate net proceeds of $728,503 under the Placement Agreement;

- 31,666 shares of its common stock upon exercise of pre-funded warrants for aggregate net proceeds of $6,609,831 under the Placement Agreement (includes net proceeds from sale and exercise of pre-funded warrants);

Other issuances:

- 68 shares of its common stock upon warrant exercises for aggregate net proceeds of $77,419;

- 181 shares of its common stock in return for aggregate net proceeds of $419,967 under the June 2021 ATM Agreement;

- 5 shares of its common stock upon conversion of 123.909 shares of its Series A Preferred Stock; and

- 46 shares of the previously issued restricted common stock vested. The shares were issued for services and valued at $80,000.

Series B warrant exercises:

- 493,469 shares of its common stock upon cashless exercise of Series B Warrants

During the nine months ended September 30, 2023, the Company issued a total of 2,464 shares of its common stock in return for aggregate net proceeds of $4,712,750 under the Offering. The company issued an additional 531 shares of its common stock in return for aggregate net proceeds of $1,113,832 under the June 2021 ATM Agreement.

Registered Offering

On June 4, 2024, the Company entered into a placement agency agreement (the “Placement Agreement”) with Craig-Hallum Capital Group LLC (the “Placement Agent”) pursuant to which the Placement Agent served, on a best efforts basis, in connection with the issuance and sale (the “Offering”) of 3,490 shares of common stock and pre-funded warrants to purchase up to an aggregate of 31,666 shares of common stock (the “pre-funded warrants”), together with Series A warrants to purchase up to an aggregate of 178,255 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 178,255 shares of common stock (the “Series B Warrants” and, together with the Series A Warrants, the “Series Warrants”). The common stock, pre-funded warrants and Series Warrants were sold in a fixed combination, with each share of common stock or pre-funded warrant accompanied by a Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock. In connection with the Offering, the Company also issued to the Placement Agent warrants (“Placement Agent Warrants”) to purchase up to 1,758 shares of common stock. The Offering closed on June 5, 2024. The purchase price of each share of common stock and accompanying Series Warrants was $227.50 and the purchase price of each pre-funded warrant and accompanying common warrants was $227.325.

The Company received net proceeds from the Offering, after deducting offering expenses payable by the Company, of $7,338,333.

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The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No. 333-278842), declared effective by the SEC on June 4, 2024.

The Series Warrants were first exercised in connection with the reverse stock split effective on August 20, 2024. Each Series A Warrant will expire five years from the Initial Exercise Date. Each Series B Warrant will expire two and one-half years from the Initial Exercise Date.

Under the alternate cashless exercise option of the Series B Warrants, the holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cashless exercise of the Series B Warrant using $1.75 as the exercise price for that purpose and (y) 3.0.

In addition, the Series Warrants include a provision that resets their respective exercise prices in the event of a reverse split of the Company’s common stock to a price equal to the lesser of (i) the then current exercise price and (ii) lowest volume weighted average price (VWAP) during the period commencing five trading days immediately preceding and the five trading days commencing on the date the Company effects a reverse stock split, (such lower price, the “Floor Price”), provided that such Floor Price shall not be lower than $0.0434 (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions), with a proportionate adjustment to the number of shares underlying the Series Warrants. The effect of the Company’s August 2024 and November 2024 reverse splits are that the number of shares underlying the Series A Warrants and Series B Warrants totaled 178,255 each.

Subject to certain exceptions, the Series A Warrants provide for an adjustment to the exercise price and number of shares underlying the Series A Warrants upon the Company’s issuance of Common Stock or Common Stock equivalents at a price per share that is less than the exercise price of the Series A Warrants, provided that such adjusted price shall be no less than $75.95 (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions).

A holder does not have the right to exercise any portion of the Series A Warrants or Series B Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series A Warrants and Series B Warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following notice from the holder to us.

Pursuant to the Placement Agreement, in addition to the Placement Agent Warrants described above, the Company paid the Placement Agent a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the Offering. The Company reimbursed expenses of the Placement Agent in connection with the Offering, including but not limited to legal fees, of $100,000. The Placement Agent Warrants have an expiration date of three and one-half years from the Initial Exercise Date and were immediately exercisable upon issuance.

The Company has 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, for a period commencing on the date of the Placement Agreement until 180 days following the closing of the Offering.

At-the-Market Equity Offering Programs

On June 21, 2021, the Company entered into the At-The-Market Issuance Sales Agreement with Ascendiant (the “June 2021 ATM Agreement”) to sell shares of common stock for aggregate gross proceeds of up to $20.0 million, from time to time, through an “at-the-market” equity offering program under which Ascendiant acts as sales agent. Prior to its replacement by the February 2024 ATM Agreement (as defined below), under the June 2021 ATM Agreement the Company issued an aggregate of 1,547 shares of common stock in return for net proceeds of $11,407,240, resulting in $354,527 of compensation paid to Ascendiant. On February 14, 2024, the Company entered into a new At-The-Market Issuance Sales Agreement with Ascendiant (the “February 2024 ATM Agreement”) to sell shares of common stock for aggregate gross proceeds of up to $6.2 million, which replaced the June 2021 ATM Agreement. As of September 30, 2024, the Company had not sold any shares under the February 2024 ATM Agreement.

Reverse Stock Split

On August 16, 2024, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment (the “Certificate of Amendment”) to its certificate of incorporation, which Certificate of Amendment effectuated as of August 20, 2024 at 12:01 a.m. Eastern Time (the “Effective Time”) a reverse split of the Company’s common stock by a ratio of one-for-50 (the “August 2024 Reverse Stock Split”). All per share amounts (including exercise prices) and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the August 2024 Reverse Stock Split and the November 2024 Reverse Stock Split (as described in Note 13 below). No fractional shares were, or shall be, issued in connection with the August 2024 Reverse Stock Split.

The August 2024 Reverse Stock Split resulted in a proportionate adjustment to the per share conversion or exercise price and the number of shares of common stock issuable upon the conversion or exercise of outstanding preferred stock, stock options and warrants, as well as the number of shares of common stock eligible for issuance under the Omnibus Plan.

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Note 8 - Common Stock Options and Restricted Stock

Common Stock Options

Stock options are awarded to the Company’s employees, consultants and non-employee members of the board of directors under the Omnibus Plan and are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant. The aggregate fair value of these stock options granted by the Company during the nine months ended September 30, 2024 was determined to be $77,418 using the Black-Scholes-Merton option-pricing model based on the following assumptions: (i) volatility rate of 107% to 111%, (ii) discount rate of 0%, (iii) zero expected dividend yield, (iv) risk free rate of 3.93% to 4.21%, (v) price of $19,777.50 to $2,782.50, and (vi) expected life of 8-10 years. A summary of option activity under the Company’s Omnibus Plan as of September 30, 2024, and changes during the year then ended, is presented below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Balance outstanding at December 31, 2023		290		$	33,685.11		7.25
Granted		27			3,710.00		7.26
Exercised		-			-		-
Forfeited		-			-		-
Cancelled or expired		(38	)		9,770.53		-
Balance outstanding at September 30, 2024		279		$	30,566.79		5.58
Exercisable at September 30, 2024		187		$	41,592.73		4.39

Restricted Common Stock

On November 30, 2023, the Company issued 115 shares of restricted common stock (the “Restricted Stock”) of the Company to PatentVest, Inc. (“PatentVest”) pursuant to a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio. The fair value of the Restricted Stock was determined to be $200,485 using the market price of the stock on the date of the issuance. The Restricted Stock is subject to a vesting schedule pursuant to the Restricted Stock Agreement and the shares may not be sold, assigned, transferred, pledged, hypothecated, disposed of or otherwise encumbered prior to becoming vested. During the nine months ended September 30, 2024, the Company recorded as vested 46 shares valued at $80,000.

Note 9 - Common Stock Warrants

As described above in “Registered Offering” (Note 7), the Company issued pre-funded warrants to purchase up to an aggregate of 31,666 shares of common stock (the “pre-funded warrants”), together with Series A Warrants to purchase up to an aggregate of 178,255 shares of common stock and Series B Warrants to purchase up to an aggregate of 178,255.

Additionally, the Series B Warrants contain an alternative cashless exercise option whereby the holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cashless exercise of the Series B Warrant using $1.75 (after adjustment) as the exercise price for that purpose and (y) 3.0.

In connection with the Offering, the Company also issued placement agent warrants (“Placement Agent Warrants” and, together with the pre-funded warrants and the Series Warrants, the “Warrants”) to purchase up to 1,758 shares of common stock. The purchase price of each share of common stock and accompanying Series Warrants was $227.50 and the purchase price of each pre-funded warrant and accompanying Series Warrants was $227.325.

Warrant Exercises

On May 2, 2023, the Company conducted a registered offering in which the Company issued 1,232 warrants to purchase shares of common stock for an exercise price per share equal to $2,450. The warrants expire May 2, 2028. In December 2023, the Board approved a temporary reduction of the exercise price per share from $2,450 to $1,225. The Company also issued to the underwriter and its designees warrants exercisable for an aggregate of 172 shares of common stock for an exercise price per share equal to $2,625. The warrants expire November 2, 2026. During the nine months ended September 30, 2024, the Company issued a total of 67 shares of its common stock upon warrant exercises for aggregate net proceeds of $83,233.

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Between June 4, 2024 and June 7, 2024, 31,674 pre-funded warrants were exercised. The company issued a total of 31,666 shares of its common stock upon the cash exercises of 25,339 pre-funded warrants and cashless exercises of 6,327 pre-funded warrants for aggregate net proceeds of $6,609,831 (includes net proceeds from sale and exercise of pre-funded warrants). The remaining 8 pre-funded warrants were used to satisfy the exercise price under the warrants’ cashless exercise provision.

Between August 19, 2024 and September 3, 2024, the Company issued a total of 493,469 shares of its common stock upon the alternate cashless exercise of 177,000 Series B Warrants.

The following table summarizes all warrant activity of the Company for the nine months ended September 30, 2024:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Contractual Term (Years)
Balance outstanding at December 31, 2023		493		$	2,758.09		3.80
Issued		389,937			89.95		3.48
Exercised		(208,736	)		99.69		2.28
Forfeited		-			-		-
Expired		-			-		-
Balance outstanding at September 30, 2024		181,694		$	85.33		4.85
Exercisable at September 30, 2024		181,694		$	85.33		4.85

Common Stock Warrants

On August 20, 2024 (the “Issuance Date”), the Company issued 178,225 Series A Warrants and 178,225 Series B Warrants. The Company accounts for the 356,510 warrants, in the aggregate, in accordance with the guidance in ASC 815 “Derivative and Hedging” whereby under that provision the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classified the warrant instruments as a liability at fair value and adjusts the instruments to fair value each period. This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. During the three and nine months ending September 30, 2024, the Company recognized $7,323,685 as warrant liability expense and income from the change in fair value of warrant liability of $3,341,829 in the statement of operations. For the nine month period ended September 30, 2024, the Company recognized $3,071,252 as gain on settlement for the exercise of warrants during the period, and $910,556 as a warrant liability as of September 30, 2024.

Series A Warrants

Each Series A Warrant entitles the holder to purchase one share of the Company’s common stock at $28.70 per share, subject to antidilution adjustments, and expires on August 19, 2029. In addition, if the Company sells or issues equity or an equity linked instrument for consideration per share less than the price equal to the exercise price then in effect, then the exercise price shall be reduced to an amount equal to the lower of (a) the new issuance price, or (b) the lowest volume weighted average price (“VWAP”) during the five consecutive trading days immediately following the dilutive issuance. The reduced share price shall not be less than $75.95.

In addition, if there is a share price adjustment upon a split, reverse-split, share dividend, or share combination recapitalization, and the lowest VWAP during the preceding five trading days is less than the exercise price in effect (the “Event Market Price”), the then exercise price shall be reduced to the Event Market Price and the number of warrant issuable shall be increased such that the aggregate exercise price of the Series A Warrant on the Issuance Date then outstanding shall remain unchanged.

Series B Warrants

Each Series B Warrant entitles the holder to purchase one share of the Company’s common stock at $28.70 per share, subject to antidilution adjustments, and expires on February 18, 2027. In addition, if the Company sells or issues equity or an equity linked instrument for consideration per share less than the price equal to the exercise price then in effect, then the exercise price shall be reduced to an amount equal to the lower of (a) the new issuance price, or (b) the lowest volume weighted average price (“VWAP”) during the five consecutive trading days immediately following the dilutive issuance. The reduced share price shall not be less than $75.95.

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In addition, if there is a share price adjustment upon a split, reverse-split, share dividend, or share combination recapitalization, and the lowest VWAP during the preceding five trading days is less than the exercise price in effect (the “Event Market Price”), the then exercise price shall be reduced to the Event Market Price and the number of warrant issuable shall be increased such that the aggregate exercise price of the Series B Warrant on the Issuance Date then outstanding shall remain unchanged.

Alternative Cashless Exercise for Series B Warrants

The holders of the Series B Warrants may exercise their warrants at the alternative cashless exercise price of $1.75 per share. Also, upon cashless exercise, the holder receives three underlying common shares for each warrant exercised.

Redemption Right

The Series A and Series B Warrants may be redeemed at the option of the Company any time after (i) the VWAP has equal or exceeded $16.50 for ten consecutive trading days and (ii) the average daily trading volume for such days exceeded $150,000.

Recurring Fair Value Measurements

The Company’s warrant liability for the Series A and Series B Warrants is based on the Black-Scholes option pricing model utilizing management judgement and pricing inputs from observable and unobservable markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability is classified within Level 2 of the fair value hierarchy because the Company uses observable inputs like market prices for its common stock and risk-free interest rate, but requires estimations for factors like the Company’s own volatility, which is not directly quoted in active markets.

Measurement

The Company established the initial fair value for the warrant liability on August 20, 2024, the date the warrants were issued. Upon exercise, the instrument is marked to its fair value upon exercise, and the shares delivered are recorded at fair value in the Company’s statement of stockholders’ equity. The warrant liability was valued based on the following inputs for the Series A and Series B Warrants, respectively:

Input	August 20, 2024 (Initial Measurement)		September 30, 2024
Exercise price		$0.82 and $0.05		$0.82
Stock price	$	0.66		$0.20
Volatility		122% and 145%		127% and 152%
Discount rate		3.70% and 3.90%		3.58% and 3.63%
Expected dividend		-		-
Expected life (years)		5 and 2.5		4.89 and 2.39

Note 10 - Related Party Transactions

On October 17, 2023, the Company entered into a consulting agreement with one of its directors, Alex Tokman, pursuant to which Mr. Tokman provided commercialization services. Under the terms of the agreement, Mr. Tokman was compensated at a rate of $150 per hour for his services.

On November 30, 2023, the Company entered into a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio. PatentVest is a wholly-owned subsidiary of MDB Capital Holdings, LLC (“MDB”). Anthony DiGiandomenico, a member of the Company’s board of directors, is the Chief of Transactions and a director of MDB. Lou Basenese, a member of our board of directors, is President and Chief Market Strategist at Public Ventures LLC, a wholly-owned subsidiary of MDB.

There were no related party transactions during the quarter ended September 30, 2024.

Note 11 - Commitments and Contingencies

Office Lease

Effective January 1, 2015, the Company entered into an office lease agreement with Green Court, LLC, a Michigan limited liability company, for approximately 3,657 rentable square feet of space, for the initial monthly rent of $5,986, which commenced on January 1, 2015 for an initial term of 60 months. On October 10, 2017 this lease was amended increasing the rentable square feet of space to 3,950 and the monthly rent to $7,798.

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

The Company records the lease asset and lease liability at the present value of lease payments over the lease term. The lease typically does not provide an implicit rate; therefore, the Company uses its estimated incremental borrowing rate at the time of lease commencement to discount the present value of lease payments. The Company’s discount rate for operating leases at September 30, 2024 was 10%. Lease expense is recognized on a straight-line basis over the lease term to the extent that collection is considered probable. As a result, the Company has been recognizing rents as they become payable based on the adoption of ASC Topic 842. The weighted-average remaining lease term is 1.5 years.

As of September 30, 2024, the maturities of operating lease liabilities are as follows:

	Operating Lease
2024		50,656
2025 and beyond		202,624
Total	$	253,280
Less: amount representing interest		(16,117	)
Present value of future minimum lease payments		237,163
Less: current obligations under leases		(187,339	)
Long-term lease obligations	$	49,823

For the nine months ended September 30, 2024 and 2023, the Company incurred rent expenses of $164,405 and $163,104, respectively.

Employment and Consulting Agreements

Alexander Tokman - Effective August 13, 2024, the Board appointed Alexander Tokman as the Company’s acting Chief Executive Officer and Chairman of the Board of Directors. In connection with his appointment, Mr. Tokman and the Company entered into an employment agreement, dated August 13, 2024 (the “Employment Agreement”). Mr. Tokman’s employment with the Company is “at will” and may be terminated by him or the Company at any time and for any reason. Pursuant to the Employment Agreement, Mr. Tokman will receive an annual base salary of $300,000, subject to adjustment at the Board’s discretion. Mr. Tokman is also eligible for an annual cash bonus based upon the achievement of performance-based objectives established by the Board of Directors.

If Mr. Tokman’s employment is terminated by the Company without cause (as defined in the Omnibus Plan), if Mr. Tokman resigns for good reason (as defined in the Employment Agreement), or if Mr. Tokman’s employment ends following the hiring no later than February 13, 2026 of a replacement chief executive officer whom Mr. Tokman assists in recruiting, Mr. Tokman will be entitled to receive, subject to his execution of a standard release agreement, 12 months’ continuation of his current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control). Additionally, under the Employment Agreement, Mr. Tokman is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

The foregoing description of the Employment Agreement does not purport to be complete and is subject to, and qualified in its entirety by the full text of the Employment Agreement, which is filed as an exhibit with this Report.

Michael Thornton - The Company has an employment agreement with Michael Thornton, the Company’s Chief Technology Officer, dated May 12, 2017, as amended December 27, 2019. The employment agreement provides for an annual base salary that is subject to adjustment at the board of directors’ discretion. Effective January 1, 2022, the Compensation Committee increased Mr. Thornton’s annual salary to $324,000. In September 2023, Mr. Thornton agreed to a 30% reduction of his base salary received for the remainder of 2023 in order to preserve cash for the Company’s operations. Under the employment agreement, Mr. Thornton is eligible for an annual cash bonus based upon achievement of performance-based objectives established by the board of directors. Upon termination without cause, any portion of Mr. Thornton’s option award scheduled to vest within 12 months will automatically vest, and upon termination without cause within 12 months following a change of control, the entire unvested portion of the option award will automatically vest. Upon termination for any other reason, the entire unvested portion of the option award will terminate.

If Mr. Thornton’s employment is terminated by the Company without cause or Mr. Thornton terminates his employment for good reason, Mr. Thornton will be entitled to receive 12 months’ continuation of his current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).

Under his employment agreement, Mr. Thornton is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.

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Richard Jacroux - On August 7, 2024, the Company’s Board of Directors appointed Richard Jacroux as Chief Financial Officer. Mr. Jacroux works in a part-time capacity for the Company through Impact Solve, LLC (dba Impact Solutions) an accounting and chief financial officer service firm. Mr. Jacroux receives a base monthly fee of $8,650 plus expenses in respect of his services to the Company. The Company’s needs have typically required more than the base fee., averaging $11,000 a month for the three months ending September 30, 2024.

Litigation

From time to time the Company may become a party to litigation in the normal course of business. As of September 30, 2024, there were no legal matters that management believes would have a material effect on the Company’s financial position or results of operations.

Note 12– Subsequent Events

Reverse Stock Split

At a Special Meeting of Stockholders of the Company held on October 28, 2024 (the “Special Meeting”), the stockholders of the Company approved amendments to the Company’s Fourth Amended and Restated Certificate of Incorporation effecting reverse stock splits of the Company’s common stock, and authorized the Company’s Board of Directors, in its discretion, to effect a reverse stock split of Common Stock , whereby each issued and outstanding share of Common Stock would be reclassified and converted into a fraction of a share between ¼ and 1/35 (the “Ratios” and each, a “Ratio”), inclusive (the “November 2024 Reverse Stock Split”). Following the Special Meeting, the Board approved a Ratio of 1/35.

The November 2024 Reverse Stock Split resulted in a proportionate adjustment to the per share conversion or exercise price and the number of shares of common stock issuable upon the conversion or exercise of outstanding preferred stock, stock options and warrants, as well as the number of shares of common stock eligible for issuance under the Omnibus Plan. All per share amounts (including exercise prices) and numbers of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the November 2024 Reverse Stock Split. No fractional shares were, or shall be, issued in connection with the November 2024 Reverse Stock Split.

Issuance of Shares

The company issued 2,007 shares on November 11, 2024 and an additional 38 shares on November 13, 2024, for a total of 2,045 shares, primarily due to the exercise of 988 warrants.

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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, 2023, as filed with the SEC on March 28, 2024, 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 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.

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Financial Operations Overview

Revenue

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

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, 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.

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

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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, 2024, the pool of shares issuable under the Omnibus Plan automatically increased by 982 shares from 756 shares to 1,737 shares. As of September 30, 2024, there were 1,458 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 September 30, 2024 and 2023

Revenue

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

Cost of Goods Sold

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

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%. 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 $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.

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Other Income

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%.

Net Loss

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

Revenue

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%. 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. 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

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.

Net Loss

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.

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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. 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. 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. 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.

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.

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. 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.

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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 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. 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.

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.

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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified the following material weakness as of September 30, 2024: insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting.

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To remediate the material weakness, management intends to implement the following measures during 2024, as the Company’s resources and financial means allow:

·	Add additional accounting personnel or outside consultants, such as a new controller, to properly segregate duties and to effect timely, accurate preparation of the financial statements; and

·	Continue the development of adequate written accounting policies and procedures.

The additional hiring is contingent upon our efforts to obtain additional funding and the results of our operations.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting or in other factors that could affect these controls during the three months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any pending legal proceedings that we believe will have a material adverse effect on our business or financial condition. We may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in this section and under “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on March 28, 2024. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this report.

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended September 30, 2024.

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Item 6. Exhibits

Exhibit Number		Description
3.1		Fourth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 12, 2017)
3.2		Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 18, 2020)
3.3		Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 9, 2024)
3.4		Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 5, 2024)
3.5		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-1 (File No. 333-214724), as amended, originally filed on November 21, 2016)
4.1		Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1 filed on May 10, 2024)
4.2		Form of Series A Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed on May 31, 2024)
4.3		Form of Series B Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 filed on May 31, 2024)
4.4		Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1 filed on May 10, 2024)
4.5		Form of Amendment to Series A Warrant (incorporated by reference to Exhibit 3.8 to the Company’s Form 10-Q filed on August 14, 2024)
4.6		Form of Amendment to Series B Warrant (incorporated by reference to Exhibit 3.9 to the Company’s Form 10-Q filed on August 14, 2024)
10.1†*		Employment Agreement, dated August 13, 2024, by and between the Company and Alexander Tokman
31.1†		Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2†		Certification of Periodic Report by Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1†		Certification of Periodic Report by Chief Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS#		XBRL Instance Document
101.SCH#		XBRL Taxonomy Schema
101.CAL#		XBRL Taxonomy Extension Calculation Linkbase
101.DEF#		XBRL Taxonomy Extension Definition Linkbase
101.LAB#		XBRL Taxonomy Extension Label Linkbase
101.PRE#		XBRL Taxonomy Extension Presentation Linkbase

* Indicates management compensatory plan, contract or arrangement.

† Previously filed.

# Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ENDRA LIFE SCIENCES INC.

Date: November 21, 2024	By:	/s/ Alexander Tokman
		Alexander Tokman
		Chief Executive Officer and Chairman (Principal Executive Officer)

	ENDRA LIFE SCIENCES INC.

Date: November 21, 2024	By:	/s/ Richard Jacroux
		Richard Jacroux
		Chief Financial Officer (Principal Financial and Accounting Officer)

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