endra_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 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 August 14, 2024, there were 72,439,526 shares of our common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets - June 30, 2024 (unaudited) and December 31, 2023	3

	Condensed Consolidated Statements of Operations - Three and six months Ended June 30, 2024 and 2023 (unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity – Three and six months Ended June 30, 2024 and 2023 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows - Six months Ended June 30, 2024 and 2023 (unaudited)	7

	Notes to the Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

Item 1.	Legal Proceedings	24

Item1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosure	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

	Signatures	26

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ENDRA Life Sciences Inc.

Condensed Consolidated Balance Sheets

	June 30,			December 31,
Assets	2024			2023
Current Assets	(Unaudited)
Cash	$	6,400,732		$	2,833,907
Prepaid expenses		312,742			198,905
Total Current Assets		6,713,474			3,032,812
Non-Current Assets
Inventory		2,711,923			2,622,865
Fixed assets, net		91,777			111,782
Right of use assets		272,284			354,091
Prepaid expenses, long term		647,085			626,610
Other assets		5,986			5,986
Total Assets	$	10,442,529		$	6,754,146

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities	$	1,167,434		$	700,754
Lease liabilities, current portion		182,733			173,857
Loans		-			28,484
Total Current Liabilities		1,350,167			903,095

Long Term Debt
Lease liabilities		98,421			192,062
Total Long Term Debt		98,421			192,062

Total Liabilities		1,448,588			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; 1000,000,000 shares authorized; 72,439,526 and 10,390,150 shares issued and outstanding, respectively		7,244			1,039
Additional paid in capital		105,921,675			97,582,868
Stock payable		27			5,233
Accumulated deficit		(96,935,005	)		(91,930,152	)
Total Stockholders’ Equity		8,993,941			5,658,989
Total Liabilities and Stockholders’ Equity	$	10,442,529		$	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			Six Months Ended			Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2024			2023			2024			2023
Operating Expenses
Research and development	$	716,366		$	1,400,182		$	1,757,892		$	2,791,496
Sales and marketing		162,952			247,773			401,612			429,389
General and administrative		1,351,535			1,346,610			2,851,890			2,713,008
Total operating expenses		2,230,853			2,994,565			5,011,394			5,933,893

Operating loss		(2,230,853	)		(2,994,565	)		(5,011,394	)		(5,933,893	)

Other Income
Other income		1,700			437,433			6,541			434,015
Total other income		1,700			437,433			6,541			434,015

Loss from operations before income taxes		(2,229,153	)		(2,557,132	)		(5,004,853	)		(5,499,878	)

Provision for income taxes		-			-			-			-

Net Loss	$	(2,229,153	)	$	(2,557,132	)	$	(5,004,853	)	$	(5,499,878	)

Net loss per share – basic and diluted	$	(0.08	)	$	(0.43	)	$	(0.26	)	$	(1.20	)

Weighted average common shares – basic and diluted		27,283,009			5,996,186			18,998,902			4,582,645

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)

*Six Months Ended June 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		-	$	-		3,169,103	$	317	$	89,068,015	$	6,073		$	(81,869,902	)	$	7,204,504
Common stock issued for cash, net of funding costs		-			-		-		-		4,312,500		431		4,712,319		-			-			4,712,750
Warrants issued for cash, net of funding costs		-			-		-		-		-		-		20,053		-			-			20,053
Fair value of vested stock options		-			-		-		-		-		-		493,134		-			-			493,134
Stock payable towards preference dividend		-			-		-		-		-		-		3,646		(3,646	)		-			-
Net loss		-			-		-		-		-		-		-		-			(5,499,878	)		(5,499,878	)
Balance as of June 30, 2023		141.397		$	1		-	$	-		7,481,603	$	748	$	94,297,167	$	2,427		$	(87,369,780	)	$	6,930,563


*Six Months Ended June 30, 2024*	Series A Convertible Preferred Stock					Series B Convertible Preferred Stock				Common stock				Additional Paid in		Stock			Accumulated			Total Stockholders'
	Shares			Amount		Shares		Amount		Shares		Amount		Capital		Payable			Deficit			Equity
Balance as of December 31, 2023		141.397		$	1		-	$	-		10,390,150	$	1,039	$	97,582,868	$	5,233		$	(91,930,152	)	$	5,658,989
Preferred stock conversion to common stock		(123.909	)		-1		-		-		8,893		1		-		-			-			-
Common stock issued for cash		-			-		-		-		6,424,654		643		1,147,827		-			-			1,148,470
Common stock issued for warrant exercise		-			-		-		-		44,463,520		4,446		5,362,234		-			-			5,366,680
Common stock issued for cashless warrant exercise		-			-		-				11,071,501		1,107		1,319,461		-			-			1,320,568
Fair value of vested common stock		-			-		-		-		80,808		8		79,992		-			-			80,000
Fair value of vested stock options		-			-		-		-		-		-		424,087		-			-			424,087
Stock payable towards preference dividend		-			-		-		-		-		-		5,206		(5,206	)		-			-
Net loss		-			-		-		-		-		-		-		-			(5,004,853	)		(5,004,853	)
Balance as of June 30, 2024		17.488		$	-		-	$	-		72,439,526	$	7,244	$	105,921,675	$	27		$	(96,935,005	)	$	8,993,941

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*Three Months Ended June 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 March 31, 2023		141.397		$	1		-	$	-		3,169,103	$	317	$	89,307,675	$	3,692		$	(84,812,648	)	$	4,499,037
Common stock issued for cash, net of funding costs		-		$	-		-	$	-		4,312,500	$	431	$	4,712,319		-			-			4,712,750
Warrants issued for cash, net of funding costs		-		$	-		-	$	-		-	$	-	$	20,053		-			-			20,053
Fair value of vested stock options		-			-		-		-		-		-		255,855		-			-			255,855
Stock payable towards preference dividend		-			-		-		-		-		-		1,265		(1,265	)		-			-
Net loss		-			-		-		-		-		-		-		-			(2,557,132	)		(2,557,132	)
Balance as of June 30, 2023		141.397		$	1		-	$	-		7,481,603	$	748	$	94,297,167	$	2,427		$	(87,369,780	)	$	6,930,563

*Three Months Ended June 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 March 31, 2024		34.976		$	-		-	$	-		10,914,447	$	1,092	$	98,402,631	$	301		$	(94,705,852	)	$	3,698,172
Preferred stock conversion to common stock		(17.488	)		-		-		-		1,271		-		-		-			-			-
Common stock issued for cash		-			-		-		-		6,107,691		611		727,892		-			-			728,503
Common stock issued for warrant exercise		-			-		-		-		44,344,616		4,434		5,284,827		-			-			5,289,261
Common stock issued for cashless warrant exercise		-			-		-				11,071,501		1,107		1,319,461		-			-			1,320,568
Fair value of vested common stock		-			-		-		-		-		-		-		-			-			-
Fair value of vested stock options		-			-		-		-		-		-		186,590		-			-			186,590
Stock payable towards preference dividend		-			-		-		-		-		-		274		(274	)		-			-
Net loss		-			-		-		-		-		-		-		-			(2,229,153	)		(2,229,153	)
Balance as of June 30, 2024		17.488		$	-		-	$	-		72,439,526	$	7,244	$	105,921,675	$	27		$	(96,935,005	)	$	8,993,941

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 Cash Flows

(Unaudited)

	Six Months Ended			Six Months Ended
	June 30,			June 30,
	2024			2023
Cash Flows from Operating Activities
Net loss	$	(5,004,853	)	$	(5,499,878	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		23,993			69,781
Fixed assets write off		8,808			-
Inventory reserve		4,687			-
Stock compensation expense		504,087			493,134
Amortization of right of use assets		81,807			73,974
Changes in operating assets and liabilities:
Increase in prepaid expenses		(134,312	)		(44,107	)
Increase in inventory		(93,745	)		(112,916	)
Decrease in accounts payable and accrued liabilities		466,680			318,550
Decrease in lease liability		(84,765	)		(73,980	)
Net cash used in operating activities		(4,227,613	)		(4,775,442	)

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			4,712,750
Proceeds from warrant exercise		6,687,248			-
Proceeds from issuance of warrants		-			20,053
Repayment of loan		(28,484	)		-
Net cash provided by financing activities		7,807,234			4,732,803

Net increase (decrease) in cash		3,566,825			(69,639	)

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

Cash, end of period	$	6,400,732		$	4,819,459

Supplemental disclosures of cash items
Interest paid	$	16,547		$	-
Income tax paid	$	-		$	-

Supplemental disclosures of non-cash items
Stock dividend payable	$	(5,206	)	$	(3,646	)
Right of use asset	$	272,284		$	431,842
Lease liability	$	281,154		$	444,167

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 six months ended June 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 six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The balance sheet at June 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.

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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 June 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.

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 June 30, 2024 and December 31, 2023 the Company recorded a right of use asset of $272,284 and $354,091, respectively. At June 30, 2024 and December 31, 2023 the Company recorded a lease liability of $281,154 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 June 30, 2024 and 2023, the Company incurred $716,366 and $1,400,182 of expenses related to research and development costs, respectively. During the six months ended June 30, 2024 and 2023, the Company incurred $1,757,892 and $2,791,496 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 4,520,560 and 1,514,715 potentially dilutive shares, which include outstanding common stock options, and warrants, as of June 30, 2024 and December 31, 2023, respectively.

	June 30, 2024		December 31, 2023
Options to purchase common stock		679,187		624,240
Warrants to purchase common stock		3,840,368		882,349
Shares issuable upon conversion of Series A Convertible Preferred Stock		1,005		8,126
Potential equivalent shares excluded		4,520,560		1,514,715

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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 1,717,783 shares from 1,322,169 shares to 3,039,952 shares.

The Company records share-based compensation in accordance with the provisions of the Share-based Compensation Topic of the FASB Codification. 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 June 30, 2024 of $96,935,005. The Company had working capital of $5,363,307 as of June 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 six months ended June 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 June 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 June 30, 2024, the Company had no orders pending for the sale of a TAEUS system.

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

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

	June 30, 2024			December 31, 2023
Property, leasehold and capitalized software	$	579,955		$	587,030
TAEUS development and testing		125,151			125,151
Accumulated depreciation		(613,329	)		(600,399	)
Fixed assets, net	$	91,777		$	111,782

Depreciation expense for the six months ended June 30, 2024 and 2023 was $23,993 and $69,781.

Note 5 - Accounts Payable and Accrued Liabilities

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

	June 30, 2024		December 31, 2023
Accounts payable	$	300,356	$	360,401
Accrued payroll		326,010		150,293
Accrued bonuses		267,344		35,518
Accrued employee benefits		5,750		5,750
Insurance premium financing		267,974		148,792
Total	$	1,167,434	$	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 six months ended June 30, 2024, the loan was repaid in full. As of June 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 June 30, 2024, the authorized capital of the Company consisted of 90,000,000 shares of capital stock, comprised of 80,000,000 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 June 30, 2024, there were 72,439,526 shares of common stock outstanding (which excludes both the 121,212 unvested shares of restricted stock described in Note 8 below and the conversion of Series A Preferred Stock into 1,005 shares of common stock ), 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 $27.

During the six months ended June 30, 2024, the Company issued a total of 62,049,376 shares of its common stock, as follows:

- 6,107,691 shares of its common stock in return for aggregate net proceeds of $728,503 under the Placement Agreement;

- 55,416,117 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);

- 118,904 shares of its common stock upon warrant exercises for aggregate net proceeds of $77,419;

- 316,963 shares of its common stock in return for aggregate net proceeds of $419,967 under the June 2021 ATM Agreement; and

- 8,893 shares of its common stock upon conversion of 123.909 shares of its Series A Preferred Stock.

During the six months ended June 30, 2024, a total of 80,808 shares of the previously issued restricted common stock vested. The shares were issued for services and valued at $80,000.

During the six months ended June 30, 2023, the Company issued a total of 4,312,500 shares of its common stock in return for aggregate net proceeds of $4,712,750.

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 6,107,691 shares of common stock and pre-funded warrants to purchase up to an aggregate of 55,430,770 shares of common stock (the “pre-funded warrants”), together with Series A warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 61,538,461 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 3,076,923 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 $0.13 and the purchase price of each pre-funded warrant and accompanying common warrants was $0.1299.

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

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 became exercisable on August 9, 2024, the first trading day following effectiveness of an amendment to the Company’s certificate of incorporation (the “Charter Amendment”) to increase the number of authorized shares of common stock (the “Initial Exercise Date”). Each Series A Warrant has an exercise price of $0.22 per share of common stock and will expire five years from the Initial Exercise Date. Each Series B Warrant has an exercise price of $0.22 per share of common stock and 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 $0.001 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 A Warrants and Series B Warrants.

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 $0.0434 (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. As of June 30, 2024, under the June 2021 ATM Agreement the Company had issued an aggregate of 2,706,644 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 June 30, 2024, the Company had not sold any shares under the February 2024 ATM Agreement.

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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 six months ended June 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 $1.13 to $1.59, and (vi) expected life of 8-10 years. A summary of option activity under the Company’s Omnibus Plan as of June 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		624,240		$	19.25		7.26
Granted		55,346			2.06		7.68
Exercised		-			-		-
Forfeited		-			-		-
Cancelled or expired		(399	)		24.08		-
Balance outstanding at June 30, 2024		679,187		$	17.85		6.84
Exercisable at June 30, 2024		416,825		$	22.36		6.01

Restricted Common Stock

On November 30, 2023, the Company issued 202,020 shares of restricted common stock (the “Restricted Stock”) of the Company to PatentVest, Inc. (“PatentVest”) pursuant to a Restricted Stock Agreement and Consulting Services Agreement, each with PatentVest, in exchange for certain services related to the Company’s patent portfolio. The fair value of the Restricted Stock was determined to be $200,485 using the market price of the stock on the date of the issuance. The Restricted Stock is subject to a vesting schedule pursuant to the Restricted Stock Agreement and the shares may not be sold, assigned, transferred, pledged, hypothecated, disposed of or otherwise encumbered prior to becoming vested. During the six months ended June 30, 2024, the Company recorded as vested 80,808 shares valued at $80,000.

Note 9 - Common Stock Warrants

On June 4, 2024, the Company entered into the Placement Agreement in which the company issued pre-funded warrants to purchase up to an aggregate of 55,430,770 shares of common stock (the “pre-funded warrants”), together with Series A warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase up to an aggregate of 61,538,461 shares of common stock (the “Series B Warrants” and, together with the Series A Warrants, the “common warrants”). 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 $0.001 as the exercise price for that purpose and (y) 3.0. The common stock, pre-funded warrants and common 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 placement agent warrants (“Placement Agent Warrants” and, together with the pre-funded warrants and the common warrants, the “Warrants”) to purchase up to 3,076,923 shares of common stock. The purchase price of each share of common stock and accompanying common warrants was $0.13 and the purchase price of each pre-funded warrant and accompanying common warrants was $0.1299.

Warrant Exercises

On May 2, 2023, the Company conducted a registered offering in which the Company issued 2,156,250 warrants to purchase shares of common stock for an exercise price per share equal to $1.40. The warrants expire May 2, 2028. In December 2023, the Board approved a temporary reduction of the exercise price per share from $1.40 to $0.70. The Company also issued to the placement agent and its designees warrants exercisable for an aggregate of 301,875 shares of common stock for an exercise price per share equal to $1.50. The warrants expire November 2, 2026. During the six months ended June 30, 2024, the Company issued a total of 118,904 shares of its common stock upon warrant exercises for an aggregate net proceeds of $83,233.

Between June 4, 2024 and June 7, 2024, 55,430,770 pre-funded warrants were exercised. The company issued a total of 55,416,117 shares of its common stock upon the cash exercises of 44,344,616 warrants and cashless exercises of 11,071,501 warrants for aggregate net proceeds of $6,609,831 (includes net proceeds from sale and exercise of pre-funded warrants). The remaining 14,653 warrants were used to satisfy the exercise price under the warrants’ cashless exercise provision.

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The following table summarizes all stock warrant activity of the Company for the six months ended June 30, 2024:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Contractual Term (Years)
Balance outstanding at December 31, 2023		882,349		$	1.58		3.79
Granted		(58,493,040	)		0.14		2.01
Exercised		(55,535,021	)		0.13		1.93
Forfeited		-			-		-
Expired		-			-		-
Balance outstanding at June 30, 2024		3,840,368		$	0.53		3.39
Exercisable at June 30, 2024		3,840,368		$	0.53		3.39

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 provides 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.

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.

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 June 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 1.75 years.

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

	Operating Lease
2024		101,312
2025 and beyond		202,624
Total	$	303,936
Less: amount representing interest		(22,781	)
Present value of future minimum lease payments

SEC Form 10-Q filed by ENDRA Life Sciences Inc.