ENDRA Life Sciences Inc 10-K for FY2025
ENDRA Life Sciences Inc. (NDRA)
About this 10-K
ENDRA Life Sciences Inc filed this 10-K on March 31, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $7.03M
- compared with a net loss of $11.51M a year earlier
- Diluted EPS
- -$8.93
- compared with -$56.94 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the Fiscal Year
Ended:
For the transition period from __________________ to __________________
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As of March 31, 2026, there were
DOCUMENTS INCORPORATED BY REFERENCE
ENDRA LIFE SCIENCES INC.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) 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 “anticipate,” “believe,” “could,” “expect,” “estimate,” “future”, “goal,” “intend,” “likely,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “will,” “would”, or other comparable terms and references to future periods. All statements other than statements of historical facts included in this Annual Report 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: estimates of the timing of future events and anticipated results of our development efforts, including the timing of submission for and receipt of required regulatory approvals and product launches; statements relating to future financial position and projected costs and revenue; expectations concerning our business strategy; and statements regarding our ability to find and maintain development partners.
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 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; |
| ● | delays and changes in regulatory requirements, policy and guidelines, including potential delays in submitting required regulatory applications or other submissions with respect to U.S. Food and Drug Administration (“FDA”) or other regulatory agency approval; |
| ● | our ability to obtain and maintain required CE mark certifications and secure required FDA and other governmental approvals for our Thermo-Acoustic Enhanced Ultrasound (“TAEUS”) applications; |
| ● | our ability to develop any commercially feasible applications based on our TAEUS technology; |
| ● | market acceptance of our technology; |
| ● | the effect of macroeconomic conditions on our business; |
| ● | results of our human studies, which may be negative or inconclusive; |
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| ● | our ability to find and maintain development partners; |
| ● | our reliance on third parties, collaborations, strategic alliances and licensing arrangements to complete our business strategy; |
| ● | 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; |
| ● | our ability to comply with regulation by various federal, state, local and foreign governmental agencies and to maintain necessary regulatory clearances or approvals; |
| ● | our ability to regain compliance with Nasdaq listing standards; |
| ● | our ability to successfully execute on our new digital asset treasury strategy; |
| ● | risks related to regulatory developments regarding digital assets and digital asset markets, which could adversely affect our business, financial condition, and results of operations; |
| ● | the volatile and unpredictable cycles in the digital asset industry; |
| ● | in the accounting treatment of digital assets; |
| ● | our dependence on our senior management team; and |
| ● | the other risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of this Annual Report. |
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. 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.
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PART I
As used in this Annual Report, unless the context otherwise requires, the terms “ENDRA,” “we,” “us,” “our,” and the “Company” refer to ENDRA Life Sciences Inc., a Delaware corporation, and its subsidiaries.
Item 1. Business
OVERVIEW
We were incorporated as a Delaware corporation in 2007. We are developing a next-generation enhanced ultrasound technology platform—Thermo- Acoustic Enhanced Ultrasound, or TAEUS®.
Our initial focus for the development and commercialization of TAEUS is a solution for the assessment of liver fat, a key biomarker associated with metabolic diseases, including metabolic dysfunction-associated steatotic liver disease (“MASLD”) and metabolic dysfunction-associated steatohepatitis
(“MASH”).
Our objective is to develop a scalable biomarker solution for metabolic disease assessment and management through a non-invasive, point- of-care approach.
We have periodically evaluated and refined our vision, purpose, and go-to-market strategy with respect to TAEUS in response to evolving market conditions and development priorities.
To support adoption across targeted market segments, we are focused on:
| ● | Leveraging artificial intelligence and machine learning models to enhance measurement accuracy accuracy and reproducibility; | |
| ● | Integrating thermo-acoustic technology with conventional ultrasound to streamline workflows and reduce operator variability; and | |
| ● | Reducing system size and cost to improve accessibility across care settings. |
For our go-to-market strategy, we intend to focus on serving these four markets:
| 1. | Pharmaceutical Companies and Clinical Research Organizations (“CROs”); | |
| 2. | High-end Primary Care Networks (Concierge Medicine); | |
| 3. | Bariatric and Metabolic Clinics; and | |
| 4. | Primary and Internal Medicine Practices. |
We plan to offer a multi-year, subscription-based business model with recurring revenue, while continuing to support traditional capital equipment sales with associated service and upgrade offerings.
In 2025, the Company expanded its business strategy to include a Digital Asset Treasury (“DAT”) initiative, managed in collaboration with Arca Investment Management (“Arca”), which seeks to optimize capital preservation and generate non-dilutive returns through investments in decentralized finance (“DeFi”) assets. This financial strategy operates in tandem with the Company’s core medical technology mission: the commercialization of the TAEUS platform via a recurring subscription model, with a specific focus on the burgeoning GLP-1 and metabolic disease markets.
RECENT DEVELOPMENTS
We continue to examine the positioning (need, cost, and technical considerations) of our TAEUS platform in the rapidly evolving market for point-of-care assessment of liver fat disease against other opportunities for our platform, such as monitoring of thermo-ablative surgical procedures.
In 2026, we implemented cost reduction measures, including a reduction in headcount and prioritization of development activities over clinical ones, to extend our operating runway and focus resources on product improvements and regulatory strategy for our TAEUS liver application.
These actions are expected to impact the timing of certain development activities, including delaying the timing of a future De Novo submission to the U.S. Food and Drug Administration (“FDA”) relating to our TAEUS liver application. We are continuing to refine our clinical and regulatory strategy based on prior FDA feedback and ongoing development efforts.
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On March 25, 2026, the Company announced that its Board of Directors initiated a process to evaluate a range of strategic alternatives aimed at maximizing shareholder value. As a part of this process, the Board will evaluate a range of potential alternatives, including, but not limited to strategic investments, mergers, business combinations, in-licensing or collaboration arrangements, asset sales, or sale or merger of the Company. The Company has not set a timetable for completion of the process, and there is no guarantee it will result in any transaction or other strategic outcome.
THE IMPORTANCE OF UNDERSTANDING LIVER FAT
The accumulation of fat in the liver, referred to as steatotic liver disease (“SLD”), is a key biomarker of metabolic diseases, particularly MASH. MASH is a more severe form of MASLD, characterized by liver inflammation and early fibrosis that can progress to cirrhosis, and even hepatocellular carcinoma, and other life-threatening diseases. The presence of excess liver fat is strongly associated with metabolic disorders such as insulin resistance, type 2 diabetes, and hypertension. Additionally, excess liver fat, particularly in the form of MASLD, is considered to be a cardiometabolic risk factor, and studies show statistically significant correlation with increased incidence of kidney disease, cancer, and neurodegenerative disease.
OPPORTUNITY
Rising SLD with No Reliable, Inexpensive, Point-of-Care Test
SLD is a rapidly emerging global health crisis, affecting over two billion people worldwide, including more than 100 million individuals in the United States. Despite its prevalence and severe health implications, there remains a significant gap in reliable, affordable, and easily accessible point-of-care tools to detect and monitor liver fat. As SLD continues to rise, its impact on public health and healthcare systems is becoming more evident, particularly as it is strongly linked to metabolic syndrome and a range of chronic conditions such as obesity, type 2 diabetes, cardiovascular disease, and even liver cancer.
Given its increasing prevalence, clinical guidelines are now beginning to emphasize liver fat screening as a crucial component of metabolic disease management. Yet the lack of an effective, widely available diagnostic tool remains a significant barrier to proper disease management and intervention.
Emerging Therapeutics for Liver Fat Reduction
Pharmaceutical advancements are opening new doors for the treatment of SLD, particularly with the rise of GLP-1 receptor agonists. Originally developed for type 2 diabetes, GLP-1 drugs have shown promise in treating a variety of conditions, including obesity, cardiovascular disease, kidney disease, and liver disease.
Multiple pharmaceutical companies are actively developing GLP-1 receptor agonists and related therapies, reflecting significant industry investment in metabolic disease treatment. As new therapies emerge, the need for improved diagnostic methods to identify and monitor patients undergoing treatment is critical.
Diagnostic Gaps: The Urgent Need for Improved Liver Fat Detection
Current methods for assessing liver fat include MRI-based techniques and liver biopsy. MRI-based methods are effective but expensive and resource- intensive, limiting routine use. Liver biopsy is invasive and not suitable for widespread screening or monitoring.
Alternative approaches, including conventional ultrasound and blood-based tests, may lack sufficient accuracy or do not directly quantify liver fat. As a result, there remains a need for non-invasive, cost-effective, point-of-care tools capable of assessing liver fat.
The Future of Liver Fat Diagnosis and Management
With the increasing availability of promising new treatments, the demand for reliable, non-invasive, and cost-effective liver fat diagnostics is greater than ever. The ability to accurately detect and monitor liver fat will be essential in guiding treatment decisions, evaluating therapeutic efficacy, and preventing disease progression. As the medical community continues to prioritize liver fat screening in clinical guidelines, innovation in diagnostic technologies will be key to addressing this growing health crisis.
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CURRENT TECHNOLOGY FOR LIVER FAT MEASUREMENT
CT and MRI Technologies
Diagnostic imaging technologies such as computed tomography (“CT”), MRI and ultrasound allow physicians to look inside a person’s body to guide treatment or gather information about medical conditions such as broken bones, cancers, signs of heart disease or internal bleeding. The type of imaging technology a physician uses depends on a patient’s symptoms and the part of the body being examined. CT technology is well suited for viewing bone injuries, diagnosing lung and chest problems, and detecting cancers. MRI technology excels at examining soft tissue in ligament and tendon injuries, spinal cord injuries, and brain tumors.
Unfortunately, while CT and MRI systems are versatile and create high quality images, they are also expensive and not always accessible to patients. A CT system costs approximately $1 million and an MRI system can cost $3 million. CT and MRI systems are large and can weigh several tons, typically requiring significant modifications to existing healthcare facilities to safely install the CT and MRI equipment. Because of their size and weight, CT and MRI systems are usually fixed-in-place at major medical facilities. As a result, they are less accessible to primary care and rural clinics, economically developing markets, and patient bedsides.
While CT and MRI systems create high quality images, their use is not always practical. For example, metabolic disease detection, therapies response monitoring, and the efficient screening and monitoring of subjects for new GLP-1 clinical trials requires ongoing surveillance of the patients’ livers and the use of CT and MRI systems to perform that ongoing surveillance is impractical due to the high cost of the scan and the limited availability of CT and MRI systems. Additionally, patient exposure to the ionizing radiation generated by a CT system must be limited for safety reasons. Similarly, because of the strong magnetic field created by an MRI machine, patients with metal joint replacements or cardiac pacemakers may be limited for safety reasons in their use of an MRI system.
Ultrasound Technology
An ultrasound system transmits sound waves, which bounce off tissues, organs and blood in the body. The ultrasound system captures these echoes and uses them to create an image. Ultrasound technology excels at imaging the structure of internal organs, muscles, and bone surfaces. Due to its utility, cost- effectiveness and safety profile, ultrasound imaging is frequently used in a physician’s examination room or at a patient’s bedside as a first-line diagnostic tool, which has resulted in an overall increase in the number of ultrasound scans performed.
Ultrasound systems are more broadly available to patients than either CT or MRI systems. There are an estimated 1.6 million diagnostic ultrasound systems globally in use today. Ultrasound systems are relatively inexpensive compared to CT and MRI systems, with smaller portable ultrasound systems costing as little as $5,000 or less and new cart-based ultrasound systems costing between $50,000 and $200,000. Ultrasound systems are also more mobile than CT and MRI systems and many are designed to be moved by an operator from room to room, or closer to patients. Ultrasound technology does not present the same safety concerns as CT and MRI technology, since ultrasound does not emit ionizing radiation and ultrasound contrast agents are generally considered to be safe.
However, ultrasound’s imaging capabilities are more limited compared to CT and MRI technology. Currently, ultrasound systems cannot measure tissue temperature during thermal ablation surgery or quantify fat levels accurately across the stages of SLD to make to be effective for metabolic diseases detection and therapies response monitoring, or the efficient screening and monitoring of subjects for GLP-1 clinical trials, where CT and MRI systems are used.
OUR SOLUTION
TAEUS technology uses a pulsed energy source—specifically, radio frequency (“RF”)—to transmit energy deep into tissue and generate ultrasonic waves based on the tissue composition (or tissue chemistry), differentiating lean and fatty tissues. These waves are then detected with ultrasound sensors at the skin surface and used to create high-contrast images (and other forms of data) using our proprietary algorithms. Unlike conventional ultrasound, which creates images based on the scattering properties of tissue structure, thermoacoustic imaging provides tissue absorption maps that differentiate lean and fatty tissues. Acoustic waves (ultrasound) are only utilized to transmit the absorption signal to the imaging system outside of the body.
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Our TAEUS Technology Platform for Clinical Applications
To increase the versatility of our thermoacoustic technology, we are developing TAEUS technology as a platform for multiple applications. Unlike the near-infrared light pulses used in our earlier photoacoustic systems, our TAEUS technology uses RF pulses to stimulate tissues, using a small fraction of the energy that is typically transmitted into the body during an MRI scan. Using RF energy enables TAEUS technology to penetrate deep into tissue, enabling tissue composition at clinically relevant depths. The RF pulses are absorbed by tissue and converted into ultrasound signals, which are detected by an external ultrasound receiver and a digital acquisition system that is part of the TAEUS system. The detected ultrasound can then be processed into ultrasound overlays or quantitative data that may be translated into clinically useful metrics using our proprietary algorithms and displayed to complement conventional gray-scale ultrasound images.
After required regulatory approvals, our TAEUS technology can be added as a standalone system or as an accessory to existing ultrasound systems, helping to improve clinical decision-making on the front lines of patient care, without requiring substantially new clinical workflows or large capital investments. We also intend to offer a license for our TAEUS technology to OEMs, such as ultrasound and thermoablative capital equipment makers, for incorporation in their new products.
We believe that our TAEUS technology has the potential to add a number of new capabilities to conventional ultrasound, CT or MRI Imaging systems In our ex-vivo and in-vivo testing, we have demonstrated that the TAEUS platform has the following capabilities and potential clinical applications:
| ● | Tissue composition assessment | |
| ● | Temperature monitoring | |
| ● | Vascular imaging | |
| ● | Tissue perfusion analysis |
TAEUS Liver Device
ENDRA’s first clinical product is designed to interface with a conventional ultrasound scanner, utilizing the scanner’s B-mode imaging to guide the selected region for assessment of liver fat content. The following sub-systems comprise ENDRA’s first generation product.
| ● | Energy Generation: The RF source consists of a low power waveform generator and a high gain amplifier. Together, these components generate the characteristic pulses of energy required to excite thermoacoustic signals in tissue. | |
| ● | Energy Delivery into Tissue: The RF applicator transmits pulses of energy generated by the RF source into tissue. The applicator is positioned at the skin surface in proximity to the target region for measurement and is designed to efficiently couple pulsed RF energy into target tissues. |
| ● | Signal Detection: A “receive only” ultrasound transducer specifically designed and optimized for thermoacoustic imaging. The transducer sub-system detects thermoacoustic signals induced by the RF source within tissue. The transducer assembly is connected to high-speed electronics for signal amplification, digitization, and processing. | |
| ● | Computation and Display: The computer provides processing capability to both utilize the conventional ultrasound data for navigation to the measurement site of interest, and the calculations required to convert digitized thermoacoustic signals into estimates of fat content in liver tissue. The entire sub-system will reside in a single enclosure, on wheels, and sit adjacent to the patient exam bed. A small digital touchscreen display is used for both operator input and the display of data. |
TAEUS platforms may provide two-dimensional imaging with a transducer composed of multiple receive elements. ENDRA is currently developing an improved version of its first-generation liver device. The RF source and applicator are similar to those in the first-generation product, but the multi-element transducer would allow for multiple applications including reading tissue composition, response to thermoablative procedures, vascular flow, tissue perfusion, and other potential applications.
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TARGET MARKETS
We intend to initially focus on four potential markets for the TAEUS liver device: 1) Pharmaceutical Companies and CROs, 2) High-end Primary Care Networks, 3) Bariatric and Metabolic Clinics and 4) Primary and Internal Medicine at large. We expect that there will also be minimal focus on Hepatology and Radiology customers.
Pharmaceutical Companies and Clinical Research Organizations (CROs)
A growing number of pharmaceutical companies are engaged in the development of GLP-1 and related metabolic disease therapies and recruiting patients for Phase 3 clinical trials remains one of the most critical and challenging aspects of drug development.
| ● | GLP-1 Trials: The typical patient count for Phase 3 GLP-1 trials ranges between 1,000 and 3,000. However, patient recruitment is complicated by screening failure rates, which can range between 20% and 50%. This means that to secure 1,000 eligible participants, as many as 2,000 individuals must be screened. | |
| ● | MASH Trials: Similarly, Phase 3 clinical trials for MASH drugs require between 1,000 and 2,000 participants. Given the complexity of the disease and eligibility requirements, the screening process must cover between 2,500 and 10,000 candidates to meet the required participation levels. |
These high screening failure rates contribute to increased costs and extended timelines for clinical trials.
The financial burden of conducting late-stage clinical trials is substantial. One key component of the cost structure is the use of Magnetic Resonance Proton Density Fat Fraction (“MR PDFF”), a diagnostic tool commonly used in metabolic disease studies. One in three Phase 2 or 3 GLP-1 studies incorporates MR PDFF during the trials. The cost for CROs to conduct these exams typically falls between $1,500 and $2,500 per patient, with a minimum of two to three exams of each patient required per trial. There is a partial reimbursement, but it’s minimal. These costs underscore the financial considerations that pharmaceutical companies must account for when planning large-scale trials.
High-End Primary Care Networks (Concierge Medicine)
High-End Primary Care Networks, also known as concierge medicine, have expanded in recent years, reflecting increased demand for personalized and preventative care models.
One area where concierge medicine can differentiate itself is through advanced metabolic health monitoring, particularly liver fat fraction assessment. Early detection and proactive management of liver fat accumulation can provide significant health benefits, particularly for patients at risk of metabolic disorders, obesity, and diabetes—conditions frequently encountered in concierge practices.
Concierge medicine thrives on offering innovative health solutions that traditional primary care settings may not provide. New technologies are of high interest in this sector, and cost is less of a concern, making our offering an attractive investment for concierge networks. By incorporating liver fat fraction monitoring into routine patient assessments, it is possible that concierge physicians can:
| ● | Offer personalized preventative care; | |
| ● | Enhance cardiometabolic risk management; | |
| ● | Strengthen patient engagement and retention; and | |
| ● | Set a new standard in concierge medicine. |
Bariatric and Metabolic Clinics
Bariatric and metabolic clinics are on the front lines of tackling obesity and related metabolic diseases, providing critical care to thousands of patients across the U.S. A substantial and growing number of clinics are expanding their scope beyond weight loss to treat a broad range of metabolic disorders including the prescription of GLP-1 receptor agonists to help regulate appetite and blood sugar levels.
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While these clinics are leading the way in metabolic disease management, one major challenge persists—the high cost of diagnosing and monitoring metabolic conditions. Traditional methods, such as MRI-based liver fat fraction assessments, are expensive, time-consuming, and often impractical for routine use.
Clinics generally rely on basic biometric markers such as Body Mass Index (“BMI”) and ultrasound exams. BMI and ultrasound are not accurate predictors of liver fat. Given the inaccuracy of biometric markers and ultrasound liver fat assessments, bariatric and metabolic clinics need more affordable, scalable solutions to monitor metabolic diseases effectively.
Primary and Internal Medicine Practices
Obesity, diabetes, and liver disease are on the rise in the U.S., placing an increasing burden on healthcare providers. Primary care and internal medicine physicians are on the front lines, responsible for screening patients and monitoring their response to lifestyle changes and drug therapies. However, the prevailing approach to diagnosing and tracking metabolic conditions remains costly and inefficient, largely due to the reliance on ineffective ultrasound or expensive MRI-based liver fat fraction assessments.
Imaging centers and diagnostic labs play a crucial role in liver disease detection. They are essential for screening obesity, diabetes, and metabolic disorders at scale. However, most of these laboratories focus on blood-based markers for diabetes and liver disease. While blood tests provide valuable insights, they do not directly measure liver fat fraction or structural changes in the liver—critical indicators of metabolic health.
CLINICAL STUDIES, REGULATORY APPROVALS, AND COMMERCIALIZATION
Regulatory Market Access Approval Pathway and Human Study
Each of our TAEUS platform applications will require regulatory approvals before we are able to sell or license the application. Based on certain factors, such as the installed base of ultrasound systems, availability of other imaging technologies, such as CT and MRI, economic strength and applicable regulatory requirements, we intend to seek approval of our liver device for sale in the European Union, and the United States and may later seek approval in other markets.
We previously collaborated with certain research hospitals in North America and Europe for the conduct of clinical studies comparing our TAEUS clinical system to MRI PDFF in the measurement of liver fat. These agreements provided for clinical trials to collect data and user feedback to inform the further development of our TAEUS clinical system.
FDA De Novo Request
In the third quarter of 2023, we submitted a De Novo request to the FDA that included as support clinical data gathered from human studies comparing liver fat measurements by our TAEUS liver device to measurements by MRI-PDFF. In the fourth quarter of 2023, the FDA sent an Additional Information request related to our De Novo application. In order to fully respond to the FDA’s questions, we were required to compile additional clinical data, provide additional device test data, and respond to cybersecurity related questions in a new De Novo submission. In light of the need for additional clinical data, the original De Novo application was formally closed by the FDA on April 24, 2024 in line with FDA internal procedures. In light of the cost reduction measures described above under “Recent Developments”, we have halted the clinical activity necessary to support a new De Novo application and do not presently intend to restart such activity unless and until we have increased resources available for such purpose.
Sales and Marketing
We previously established commercial infrastructure in Europe; however, in connection with cost reduction initiatives, we have reduced certain commercial activities and are prioritizing regulatory and clinical milestones, particularly in the United States.
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We expect to pursue commercialization through a focused direct sales model, supplemented over time by partnerships and channel relationships, subject to regulatory approvals and resource availability.
We plan to implement a new low barrier-to-entry, multi-year, subscription-based business model with monthly recurring revenue.
Based on our assessment of the medical capital equipment market, we intend to price our initial liver TAEUS system competitively taking into the consideration multiple factors such as TAEUS’s clinical value, customer ROI and competitive differentiation compared to alternatives.
ENGINEERING, DESIGN AND MANUFACTURING
We use suppliers of components and contract manufacturers to design, assemble and test the TAEUS liver system. Suppliers are vetted before engaging in work with the Company and are reviewed annually, as part of our quality management system, to assure their performance meets our needs. We maintain internal processes to monitor designs, inventory and supply of key components needed to manufacture our TAEUS liver system. We plan production in accordance with anticipated commercialization and sales timelines and availability and lead times of needed materials.
REGULATION
European Union
The primary regulatory environment in Europe is the European Union. In the European Union, applications incorporating our TAEUS technology are regulated as Class IIa medical devices. Our MASLD TAEUS application has received, and we expect our future applications will need to receive, certification from a Notified Body required to CE mark our applications as a result of successful review of one or more submissions prepared by our contract engineering and manufacturer(s), so that such applications can be marketed and distributed within the European Economic Area. Each of our applications will be required to be regularly recertified for CE marking, which require period ISO audits and MDR conformity audits. The audit process, which will include on-site visits at our facility, and possibly the contract manufacturer’s(s’) facility(ies), will require us to provide the contract manufacturer(s) with information and documentation concerning our quality management system and all applicable documents, policies, procedures, manuals, and other information. Additionally, in order to import our devices into various EU countries, we must comply with the Restriction of Hazardous Substances Directive (“RoHS”) and the Registration, Evaluation, Authorisation and Restriction of Chemicals (“REACH”). We have undertaken a number of steps that both we and our suppliers are compliant with RoHS and REACH in order to do business in the European Union.
In the European Union, the manufacturer of medical devices is subject to current Good Manufacturing Practice, specifically ISO 13485, as set forth in the relevant recognized standards, laws and guidelines of the European Union and its member states. Compliance with ISO 13485 is assessed by a Notified Body accredited by a Competent Authority under the MDR. For a Class IIa device, typically, quality system evaluation is performed by the Notified Body, which also provides the certifications necessary to fix a CE mark to the products. The Notified Body may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining certification for each application, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body. Further inspections may occur over the life of the application.
We also must comply with data privacy regulations in the European Union and the UK. The collection and use of health data and other personal data including data collected in clinical trials is governed in the EU by the General Data Protection Regulation (“GDPR”), which imposes substantial obligations upon companies and new rights for individuals. The GDPR also forms part of the law of Great Britain (England and Wales, Scotland and Northern Ireland) by virtue of section 3 of the European Union (Withdrawal) Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (“UK GDPR”). Failure to comply with the GDPR may result in fines of the higher of (i) €20,000,000 or (ii) 4% of the preceding fiscal year’s total annual global revenues of the noncompliant company, among other administrative penalties, depending on the nature and severity of the violation. Although we do not expect to process any personal data from the operation of our products, the GDPR has increased our responsibility and potential liability in relation to personal data involved in the operation of our products, and we may be required to implement additional measures in order to comply with the GDPR and with other laws, rules, regulations and standards in the EU and UK relating to privacy and data protection. This may be onerous and if our efforts to comply with GDPR or other applicable laws, rules, regulations and standards are not successful, or are perceived to be unsuccessful, it could adversely affect our business.
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FDA Regulation
Each of our products must be approved, granted or cleared by the FDA before it is marketed in the United States. Before and after approval, grant or clearance in the United States, our applications are subject to extensive regulation by the FDA under the Federal Food, Drug and Cosmetic Act (the “FD&C Act”) and/or the Public Health Service Act, as well as by other regulatory bodies. The FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices and pharmaceutical products.
Section 513(f)(2) of the FD&C Act allows manufacturers to submit a De Novo request to the FDA for devices “automatically” classified into Class III by operation of section 513(f)(1). Pursuant to the Food and Drug Administration Modernization Act (the “FDAMA”), in order to submit a De Novo request, a device first has to be found not substantially equivalent (“NSE”) to legally-marketed predicate devices through a premarket notification (510(k)). Section 513(f)(2) was modified by section 607 of Food and Drug Administration Safety and Innovation Act, which created an alternative mechanism for submitting a De Novo request that does not require that a device be reviewed first under a 510(k) and found NSE prior to submission of a De Novo request. If a device manufacturer believes their device is appropriate for classification into Class I or Class II and determines, based on currently available information, there is no legally marketed predicate device, they may submit a De Novo request without a preceding 510(k).
We believe that our device is appropriate for classification into Class II and, based on available information, that there is no legally marketed predicate device. Hence, we expect that our device will require FDA De Novo grant prior to being legally marketed, and plan to submit any De Novo request without a preceding 510(k).
ENVIRONMENTAL
Our manufacturing processes involve the use, generation, and disposal of hazardous materials and wastes, including alcohol, adhesives, and cleaning materials. As such, we are subject to stringent federal, state, and local laws relating to the protection of the environment, including those governing the use, handling, and disposal of hazardous materials and wastes. We believe we are in material compliance; however, future regulatory changes may increase costs.
COMPETITION
While we believe that we are the only company developing RF-based thermoacoustic ultrasound products, we face direct and indirect competition from a number of competitors, many of whom have greater financial, sales and marketing and other resources than we do, and offer alternatives to RF-based thermoacoustic technology for measuring the fat content of liver with ultrasound machines.
Manufacturers of ultrasound and MRI systems include multi-national corporations such as GE Healthcare, Royal Philips, Siemens Healthineers, Canon Corporation, and Fujifilm Corporation. There is another smaller but emerging market of low-end hand-held ultrasound competitors that could pursue some liver-related applications. In the SLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l. In the thermal ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St. Jude Medical, Inc.
HUMAN CAPITAL
As of December 31, 2025, we had 11 employees, 9 of whom are employed on a full-time basis. Geographically, 10 people were in the United States and one was in Canada. Following the cost reductions measures described under “Recent Developments” above, our number of employees has been reduced to 4, and 3 former employees have transitioned to contractor roles. None of our employees are covered by a collective bargaining agreement, and we believe our relationship with our employees is good.
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We also engage contractors, technical and scientific advisors and other experts, on an as-needed basis, to supplement existing staff. We believe that these advisors provide us with necessary expertise in clinical ultrasound applications, ultrasound technology, and intellectual property.
OTHER POTENTIAL APPLICATIONS OF OUR TECHNOLOGY
We are exploring additional potential applications of TAEUS technology, including thermal ablation monitoring, vascular imaging, and tissue perfusion analysis.
These applications remain under development and there can be no assurance as to their technical feasibility, regulatory approval, or commercial viability.
INTELLECTUAL PROPERTY
We rely on a combination of patent, copyright, trademark and trade secret laws and agreements with employees and third parties to establish and protect our proprietary intellectual property rights. We require our officers, employees and consultants to enter into standard agreements containing provisions requiring confidentiality of proprietary information and assignment to us of all inventions made during the course of their employment or consulting relationship. We also enter into nondisclosure agreements with our commercial counterparties and limit access to, and distribution of, our proprietary information.
We are committed to developing and protecting our intellectual property and, where appropriate, filing patent applications to protect our technology. Our issued and pending patents claims are directed at the following areas related to our technology:
| ● | Methods to induce and enhance thermoacoustic signal generation; | |
| ● | System configurations, devices and novel hardware for transmission of RF pulses into tissue and detection of acoustic signals; | |
| ● | Methods for integrating our devices with existing conventional ultrasound systems; and | |
| ● | Methods and algorithms for signal processing, image formation and analysis. |
As of December 31, 2025, we maintained a patent portfolio consisting of 42 patents issued in the United States and 45 issued patents in foreign jurisdictions, 4 patent applications pending in the United States and 14 patent applications pending internationally relating to our technology. These patents and patent applications largely cover certain innovations relating to fat imaging, fat quantitation, and temperature monitoring in the liver and other tissues.
Each of our utility patents generally has a term of 20 years from its respective priority (earliest filing) date. Design patents have a term of 14 years from the filing date of the respective application. Among our issued utility patents in the U.S., the first patent is set to expire in 2033 and the last patent is set to expire in 2043.
DIGITAL ASSET TREASURY STRATEGY
The Company’s DAT strategy focuses on cryptocurrency, and specifically a strategy of holding one to five decentralized finance digital assets, beginning with $HYPE, the native digital asset of the Hyperliquid network (“HYPE”). Additionally, we intend to monitor ongoing developments in the regulatory environment around cryptocurrencies, including pending federal legislation, and may modify or expand our DAT strategy to the extent we determine compliant with federal rules and regulations and not giving rise to a requirement that the Company register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). While HYPE serves as our initial primary treasury reserve asset, we intend to accumulate a long-term position in one to five decentralized finance digital assets, including HYPE, that are intrinsically linked to a blockchain system, and the value of which is derived from or is reasonably expected to be derived from the use of the blockchain system.
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Other than acquiring cryptocurrency with our liquid assets that exceed working capital requirements, our DAT strategy may also involve issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the majority of proceeds to purchase cryptocurrency from time to time, subject to market conditions. We have not set any specific target for the amount of cryptocurrency we seek to hold, although under our DAT strategy we will maintain a majority of our holdings in one to five decentralized finance digital assets, including HYPE and other blockchain-linked cyptocurrencies. We will continue to monitor market conditions in determining whether to engage in financings to purchase additional cryptocurrency. This overall strategy also contemplates that we may (i) periodically sell cryptocurrency for general corporate purposes, including to generate cash for treasury management (which may include debt repayment, if appropriate at such time), for acquisitions, or for strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions that are collateralized by our cryptocurrency holdings, and (iii) pursue strategies to create income streams or otherwise generate funds using our cryptocurrency holdings (for example, generating premium income by selling call options related to cryptocurrencies).
Asset Manager
In connection with the Company’s DAT strategy, the Company entered into an Amended and Restated Investment Management Agreement (the
“Investment Management Agreement”) with Arca, pursuant to which Arca provides active asset management services in accordance with the investment strategy and investment objectives, policies, guidelines and restrictions as agreed to from time to time by the Company and Arca. Arca has discretion to manage funds allocated to the Company’s DAT strategy, focusing on decentralized finance, including, without limitation, by purchasing one to five decentralized finance digital assets, such as HYPE, directly or indirectly through the use of derivative instruments. The Investment Management Agreement may be terminated by either the Company or Arca upon not more than sixty (60) days’ but not less than thirty (30) days’ written notice to the other party.
Custody
The Company holds substantially all of its DAT assets in custody accounts at Anchorage Digital Bank, N.A. (“Anchorage”), a U.S.-based, institutional- grade custodian. As the Company develops its DAT strategy, it may expand its holdings to multiple similar custodians. In connection with its DAT strategy, Company entered into a Master Custody Service Agreement with Anchorage (the “Custody Agreement”), pursuant to which it will act as custodian of the Company’s digital assets it deposits with Anchorage. Services provided by Anchorage will include storage of digital assets and related settlement and support services. Under the Custody Agreement, Anchorage does not have the authority to assign, hypothecate, pledge, encumber or otherwise dispose of our digital assets, subject to a lien to secure payment to Anchorage in respect of its services. The Custody Agreement has an initial term of one year, at which time it will automatically renew for successive renewal terms unless either party provides no less than 30 days’ prior written
notice.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in this Annual Report, including our financial statements and the related notes, before investing in our securities. The risks and uncertainties described below are not the only ones we face but include the most significant factors currently known by us that make investing in our securities speculative or risky. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our securities could decline, and you may lose some or all of your investment. The risks and uncertainties described below reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
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RISK FACTOR SUMMARY
Below is a bulleted summary of our principal risk factors, however this list does not fully represent all of our known risk factors. We encourage you to carefully review the full risk factors contained in this Annual Report in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:
Risks Related to our Business
| ● | We have a history of operating losses, we may never achieve or maintain profitability, and we will need to raise significant additional capital if we are going to continue as a going concern. | |
| ● | Our activities to evaluate and pursue potential strategic alternatives may not result in any transaction or enhance stockholder value. |
| ● | We may not be able to successfully execute our business model. |
| ● | Our efforts may never result in the successful development of commercial applications based on our TAEUS technology, on which our success is substantially dependent. |
| ● | Our TAEUS platform applications may not achieve adequate market acceptance by the physicians, patients, third-party payors and others in the medical community. | |
| ● | If customers are not trained and/or the Company’s products are used by non-licensed practitioners, it could result in product misuse and potential adverse treatment outcomes, which could harm the Company’s reputation, result in product liability litigation, distract management and result in additional costs, all of which could harm the Company’s business. |
| ● | We may not become commercially viable if there is an inadequate level of reimbursement by governmental programs and other third-party payors for our planned products or associated procedures. |
| ● | We have limited resources and depend on third parties to design and manufacture, and seek regulatory approval of, our TAEUS applications. |
| ● | We will need to develop marketing and distribution capabilities both internally and through our relationships with third parties in order to sell any of our TAEUS products receiving regulatory approval. |
| ● | Competition in the medical imaging market is intense and we may be unable to successfully compete. |
| ● | The medical device market is characterized by rapid innovation. To compete effectively, the Company may need to develop and/or acquire new products, seek regulatory clearance, market them successfully, and identify new markets for the Company’s technology. |
| ● | We intend to market our TAEUS liver device in the EU and are subject to the risks of doing business outside of the United States. |
| ● | There is no assurance that, if approved, the Company’s TAEUS applications will be widely adopted by customers or their patients |
| ● | If we are unable to attract and retain qualified personnel, we may not be able to successfully manage our business and achieve our objectives. |
| ● | Misdiagnosis, warranty and other claims, as well as product field actions and regulatory proceedings, initiated against us could increase our costs, delay or reduce our sales and damage our reputation. |
| ● | Public health crises could adversely impact our business, including our pre-sales activities, clinical trials and ability to obtain regulatory approvals. |
Risks Related to Intellectual Property and Other Legal Matters
| ● | If we are unable to protect our intellectual property, which entails significant expense and resources, then our financial condition, results of operations and the value of our technology and products could be adversely affected. |
| ● | Policing unauthorized use of our proprietary rights can be difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use. |
| ● | Intellectual property rights may not provide adequate protection, which may permit third parties to compete against us more effectively. |
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Risks Related to Government Regulation
| ● | If we fail to obtain and maintain necessary regulatory clearances or approvals for our TAEUS applications, or if clearances or approvals for future applications and indications are delayed or not issued, our commercial operations will be harmed. |
| ● | Disruptions at the FDA, including due to a reduction in the FDA’s workforce and/or inadequate funding for the FDA, could prevent the FDA from performing normal functions on which our business relies, which could negatively impact our business. |
| ● | Healthcare reform measures could hinder or prevent our planned products’ commercial success. |
| ● | If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected. |
Risks Related to Owning Our Securities
| ● | Our stock is subject to minimum requirements to remain listed on the Nasdaq Capital Market, including a minimum bid price requirement and stockholders’ equity requirement, and may be delisted if it does not maintain compliance with those requirements. |
| ● | Nasdaq has proposed enhanced listing standards, which could adversely affect our ability to maintain our Nasdaq listing and access to capital markets. |
| ● | Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in volatility in the price of our securities. |
| ● | Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future for reasons unrelated to our operating performance or prospects, and as a result, investors in our common stock could incur substantial losses. |
| ● | We may be subject to securities litigation, which is expensive and could divert management attention. |
| ● | If we are unable to implement and maintain effective internal control over financial reporting, including by remediating current material weaknesses in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decrease. |
| ● | Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. | |
| ● | Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our at-the-market offering program or equity incentive plan, could result in dilution of the percentage ownership of our stockholders and could cause the price of our securities to fall. |
| ● | Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable. |
Risks Related to Our Digital Asset Treasury Strategy
| ● | We have limited experience in managing a digital asset treasury, and our expectations regarding the DAT strategy and our ability to execute such strategy successfully are subject to inherent uncertainties. |
| ● | The prices of digital assets, including the HYPE tokens and other DeFi-related assets we hold, are extremely volatile. Fluctuations in the price of these assets may significantly impact our financial condition and the reported value of our assets. |
| ● | Digital asset holdings are generally less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity to the same extent as cash in the event of an immediate need for operational funding. |
| ● | Our strategy involves active management, including staking, options overlays, and participation in DeFi protocols. These activities involve technical risks, including smart contract vulnerabilities, “slashing” penalties in staking, and the potential failure of decentralized exchanges or protocols. |
| ● | While we utilize third-party custodians (such as Anchorage Digital Bank), the loss of private keys, security breaches, or the insolvency of a custodian could result in the total loss of our digital asset holdings. |
| ● | Digital asset markets are subject to evolving and potentially unfavorable regulatory developments in the U.S. and abroad. Changes in laws or regulations could restrict our ability to hold, trade, or utilize digital assets as part of our treasury. |
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| ● | If our digital asset holdings are determined to be “investment securities,” we could be classified as an “investment company” under the Investment Company Act. Such a determination would subject us to significant additional regulation and could have a material adverse effect on our business. |
| ● | The accounting for digital assets is complex and subject to change. Furthermore, the U.S. and foreign tax treatment of digital assets is uncertain and could result in unexpected tax liabilities. |
| ● | Our common stock price may become highly correlated to the market price of the digital assets we hold, which could lead to extreme volatility in our share price that is unrelated to the performance of our TAEUS medical technology. |
| ● | Absent of federal regulations, there is a possibility that certain cryptocurrencies may be classified as “securities.” Any classification of a cryptocurrency as a “security” would subject us to additional regulation and could materially impact the operation of our business. |
| ● | We, in connection with our DAT strategy, are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers. |
| ● | We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations. |
General Risk Factors
| ● | Our business is affected by macroeconomic conditions. |
| ● | Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail. |
| ● | The ongoing military action in Ukraine and the Middle East could have negative impact on the global economy, which could materially adversely affect our business, operations, operating results and financial condition. |
| ● | Our business could be negatively impacted by corporate social responsibility and sustainability matters. |
Risks Related to Our Business
We have a history of operating losses and will need to raise significant additional capital to continue our business and operations. If we are unable to raise capital or secure financing on favorable terms, or at all, to meet our capital and operating needs, we will be forced to delay or reduce our product development program and commercialization efforts, which would have a material adverse effect on our business.
We are experiencing financial and operating challenges. We have only generated limited revenues to date and have a history of losses from operations. As of December 31, 2025, we had an accumulated deficit of $110.4 million. Our independent registered public accounting firm, in its report on our financial statements for the year ended December 31, 2025, has raised substantial doubt about our ability to continue as a going concern. To remain viable, we will require additional capital in the near term to proceed with the commercialization of our planned TAEUS applications and to meet our growth targets. Our near-term capital needs include supporting the hiring of personnel, payroll and benefits, continued scientific and potential product research and development, clinical studies to support an FDA De Novo submission, expenses associated with the development of relationships with strategic partners, intellectual property development and prosecution, funding the costs of seeking regulatory approval of TAEUS applications, expanding our sales and marketing infrastructure, capital expenditures, working capital, responses to business opportunities, and general and administrative expenses.
We are actively exploring additional sources of liquidity and may seek to raise such capital through, among other means, public or private equity offerings (including sales of our common stock under our at-the-market equity offering program), debt financings, corporate collaborations and/or licensing arrangements. However, general market conditions or the market price of our common stock may not support these capital raising transactions on terms favorable to us, or at all. If we are unable to obtain adequate financing or financings on terms satisfactory to us when we require it, we will be forced to undertake capital preservation measures that may include delaying or reducing our product development programs and commercialization efforts, materially curtailing or eliminating our operations, selling or disposing of our rights or assets, pursuing a sale or other strategic transactions, or undergoing restructuring or insolvency proceedings. Factors that could limit our ability to raise additional capital include, among other matters:
| ● | the expectation that we will continue to incur losses and generate negative cash flows from operations; |
| ● | our substantially limited liquidity and capital resources to meet our obligations as they become due; |
| ● | the potential that our common stock will be delisted by Nasdaq in the event we fail to regain compliance with the minimum stockholders’ equity requirement; and |
| ● | risks and uncertainties that are described in more detail in the Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations sections in this Annual Report on Form 10-K. |
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Additionally, on October 10, 2025, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investors, which included a provision that the Company shall not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock equivalents at a price per share less than $6.57 until October 10, 2026, subject to certain exceptions.
To date, we have financed our operations through the net proceeds from offerings of shares of common and preferred stock, warrants and convertible notes. Our future funding requirements will depend on many factors, including, but not limited to:
| ● | the costs, timing and outcomes of regulatory reviews associated with our future products, including TAEUS applications; |
| ● | the progress, timing, costs and outcomes of our clinical studies, including the ability to timely enroll patients in such clinical trials; |
| ● | the costs and expenses of expanding our sales and marketing infrastructure; |
| ● | the costs and timing of developing variations of our TAEUS applications and, if necessary, obtaining regulatory clearance of such variations; |
| ● | the degree of success we experience in commercializing our products, particularly our TAEUS applications; |
| ● | the extent to which our TAEUS applications are adopted by hospitals for use by primary care physicians, hepatologists, radiologists and oncologists for diagnosis of fatty liver disease and the thermal ablation of lesions; |
| ● | the number and types of future products we develop and commercialize; |
| ● | the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; |
| ● | the extent and scope of our general and administrative expenses; | |
| ● | the outcome, timing and cost of regulatory approvals, including the potential that the FDA or comparable regulatory authorities may require that we perform more studies than those that we currently expect; |
| ● | the amount of sales and other revenues from technologies and products that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party reimbursement; |
| ● | the terms and timing of any potential future collaborations, licensing or other arrangements that we may establish; |
| ● | cash requirements of any future acquisitions and/or the development of other products; |
| ● | the costs of operating as a public company; |
| ● | the cost and timing of completion of commercial-scale, outsourced manufacturing activities; |
| ● | the time and cost necessary to respond to technological and market developments; |
| ● | the success of our DAT strategy; |
| ● | regulatory developments regarding digital assets and digital asset markets; |
| ● | the accounting treatment for digital assets; and |
| ● | the trading price of digital assets that we own and the liquidity in the markets in which they are traded. |
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Our activities to evaluate and pursue potential strategic alternatives may not result in any transaction or enhance stockholder value.
We have begun evaluating and exploring a variety of strategic alternatives focused on maximizing stockholder value, including, but not limited to, strategic investments, mergers, business combinations, in-licensing or collaboration arrangements, asset sales, or sale or merger of the Company. Our ability to successfully execute on any strategic alternative is dependent on a number of factors and we may not be able to execute upon a transaction or other strategic alternative upon favorable terms within an advantageous timeframe and recognize significant value for our assets, if at all. Additionally, the negotiation and consummation of a transaction or other strategic alternative may be costly and time-consuming. Any executed strategic alternative may not maximize or even enhance stockholder value, could result in total costs and expenses that are greater than expected, could make it more difficult to attract and retain qualified personnel and may disrupt our operations, each of which could have a material adverse effect on our business.
The market price of our common stock may reflect a market assumption that a strategic alternative will occur, and a failure to complete a strategic alternative could result in negative investor perceptions and could cause a decline in the market price of our common stock, which could adversely affect our ability to access the equity and financial markets, as well as our ability to explore and enter into different strategic alternatives. There can be no certainty that any strategic alternative will be completed, be on attractive terms, enhance stockholder value or deliver the anticipated benefits, and successful integration or execution of the strategic alternatives will be subject to additional risks. In addition, potential strategic alternatives that require stockholder approval may not be approved by our stockholders. If we do not successfully consummate a strategic alternative, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation, the amount of cash that will need to be reserved for commitments and contingent liabilities. Depending on these factors, the amount available for distribution to our common stockholders could be as low as zero and result in a total loss of investment to our stockholders.
We may not be able to successfully execute our TAEUS business model.
We are a company with limited operating history and we may not have the necessary resources, expertise and experience to successfully execute our TAEUS business model on a global scale, such as obtaining the necessary approvals or clearances from the regulatory agencies of our target markets. Our ability to execute our model is dependent on a number of factors, including the ability of our senior management team to execute our model, our ability to incentivize, train and support international distribution partners in different geographic regions, our ability to begin or maintain our pace of product development, manufacturing and commercialization, our ability to meet the changing needs of the medical imaging market, and the ability of our employees to perform at a high-level. If we are unable to execute our model, or if our model does not drive the growth that we anticipate, or if our TAEUS market opportunity is not as large as we have estimated, it could adversely affect our business and our prospects.
Our TAEUS platform applications may not achieve adequate market acceptance by physicians, patients, third-party payors and others in the medical community.
Our TAEUS applications that receive regulatory approval may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If our TAEUS applications do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from sales. The degree of market acceptance of products based on our TAEUS platform will depend on a number of factors, including:
| ● | potential or perceived advantages or disadvantages compared to alternative products; |
| ● | pricing relative to competitive products and availability of third-party coverage or reimbursement; |
| ● | the timing of bringing our product to market as compared to possible other new entrants to the market; |
| ● | our ability to effectively raise market awareness and explain product benefits and whether we have resources sufficient to do so; |
| ● | relative convenience, dependability and ease of administration; and |
| ● | willingness of the target patient population to try new products and of physicians to utilize such products. |
Our revenues will be adversely affected if, due to these or other factors, the products we are able to commercialize do not gain significant market acceptance.
If customers are not trained and/or the Company’s products are used by non-licensed practitioners, it could result in product misuse and potential adverse treatment outcomes, which could harm the Company’s reputation, result in product liability litigation, distract management and result in additional costs, all of which could harm the Company’s business.
If the Company’s products are used by non-licensed or untrained practitioners, it could result in product misuse and adverse treatment outcomes, which could harm the Company’s reputation and the Company’s business. The Company’s products may be purchased or operated by physicians with varying levels of training, and in many states, by non-physicians. Outside the U.S., many jurisdictions do not require specific qualifications or training for purchasers or operators of its products. The Company will not be able to supervise the procedures performed with the Company’s applications, nor does the Company require that direct medical supervision occur that is determined by state law. The Company and its distributors intend to offer but do not require product training to the purchasers or operators of the Company’s products. In addition, the Company may sell its systems to companies that rent its systems to third parties and that provide a technician to perform the procedures. The lack of training and the purchase and use of its products by non-physicians may result in product misuse and adverse treatment outcomes, which could harm the Company’s reputation and its business, and, in the event these actions result in product liability litigation, distract management and subject the Company to liability, including legal expenses.
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We may not become commercially viable if there is an inadequate level of reimbursement by governmental programs and other third-party payors for our planned products or associated procedures.
Medical imaging products are purchased principally by hospitals, physicians and other healthcare providers around the world that typically bill various third-party payors, including governmental programs (e.g., Medicare and Medicaid in the United States), private insurance plans and managed care programs, for the services provided to their patients.
Third-party payors and governments may approve or deny coverage for certain technologies and associated procedures based on independently determined assessment criteria. Reimbursement decisions by payors for these services are based on a wide range of methodologies that may reflect the services’ assessed resource costs, clinical outcomes and economic value. These reimbursement methodologies and decisions confer different, and sometimes conflicting, levels of financial risk and incentives to healthcare providers and patients, and these methodologies and decisions are subject to frequent refinements. Third-party payors are also increasingly adjusting reimbursement rates, often downwards, indirectly challenging the prices charged for medical products and services. There can be no assurance that our products will be covered by third-party payors, that adequate reimbursement will be available or, even if payment is available, that third-party payors’ coverage policies will not adversely affect our ability to sell our products profitably.
We have limited data regarding the efficacy of our TAEUS platform applications. If any of our applications that receive regulatory approval do not perform in accordance with our expectations, we are unlikely to successfully commercialize our applications.
Although we have completed a number of studies with respect to our TAEUS liver device, we have limited data regarding the efficacy of other TAEUS platform applications. Since our success depends in large part on the medical and third-party payor community’s acceptance of our TAEUS applications, even if we receive regulatory approval for our applications, we believe that we will need to obtain additional clinical data from users of our applications to persuade medical professionals to use our applications. We may also be required to conduct post-approval clinical testing to obtain such additional data. Clinical testing is expensive, can take a significant amount of time to complete and can have uncertain outcomes. Negative results of these clinical studies could have a material, adverse impact on our business.
We cannot be certain that results from limited human studies of our TAEUS liver device will be indicative of future studies or that any of our TAEUS applications will be successfully commercialized.
To successfully commercialize any application based on our TAEUS platform technology, we expect it will be necessary to conduct various pre-clinical and human studies to demonstrate that the product is safe and effective for human use. For instance, we have conducted a number of human studies with respect to our TAEUS liver device. These studies have initially demonstrated a meaningful correlation between the measurement of liver fat by our TAEUS FLIP product and by MRI-PDFF. However, there can be no assurance that results from these studies are indicative of results that would be achieved in future studies of this or any future TAEUS applications, which may be required in order for our applications incorporating our technology to obtain or maintain regulatory approval. Even if clinical trials or other studies demonstrate the safety and effectiveness of any applications of our technology and the necessary regulatory approvals are obtained, the commercial success of any of such application will depend upon their acceptance by patients, the medical community, and third-party payers and on our partners’ ability to successfully manufacture and commercialize a device for such application.
Our limited commercial experience makes it difficult to evaluate our business, predict our future results or forecast our financial performance and growth.
We discontinued our initial pre-clinical Nexus 128 product in 2019 and our TAEUS liver device has previously obtained CE mark certification but has not yet been fully commercialized. This limited commercial experience makes it difficult to evaluate our business, predict our future results or forecast our financial performance and growth. If our assumptions regarding the risks and uncertainties we face, which we use to plan our business, are incorrect or change due to circumstances in our business or our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
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We may in the future form or seek, strategic alliances and collaborations or enter into licensing arrangements, and we may not realize the benefits of such alliances, collaborations or licensing arrangements.
We intend in the future to form or seek additional strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our technologies and applications.
Any of these relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, restrict our ability to collaborate with other third parties or otherwise disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Further, strategic alliances and collaborations are subject to numerous risks, which may include the following:
| ● | collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration; |
| ● | collaborators may not pursue development and commercialization of our technologies and applications or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; |
| ● | collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our applications and technologies; |
| ● | collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; |
| ● | disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our technologies and applications, or that result in costly litigation or arbitration that diverts management attention and resources; |
| ● | collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable applications or technologies; and |
| ● | collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property. |
As a result, if we enter into collaboration agreements and strategic partnerships or license our applications or technologies, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related to our applications could delay the development and commercialization of our technologies and applications in certain geographies or for certain applications, which would harm our business prospects, financial condition and results of operations.
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We have limited resources and depend on third parties to design and manufacture, and seek regulatory approval of, our TAEUS applications. If any third party fails to successfully design, manufacture or obtain regulatory approval of TAEUS applications, our business will be materially harmed.
We do not currently have, nor do we plan to acquire, the infrastructure or capability to design or manufacture our TAEUS applications. To support our design and manufacturing efforts, we have contracted StarFish Product Engineering, Inc., a medical device contract manufacturing company, rather than design or manufacture our TAEUS applications ourselves. We have limited control over the efforts and resources that these and any other third-party OEMs will devote to developing and manufacturing our TAEUS applications and their capabilities to serve our needs, including quality control, quality assurance and qualified personnel. In addition, for any future applications of our TAEUS technology we currently expect to depend on OEMs to acquire CE marks for the device or devices that they develop and manufacture which are necessary to permit marketing of those devices in the European Union followed by corresponding FDA approval.
An OEM may not be able to successfully design and manufacture the products it develops based on our TAEUS technology, may not devote sufficient time and resources to support these efforts or may fail in gaining the required regulatory approvals of our TAEUS applications. The failure by an OEM to perform in accordance with our expectations would substantially harm the value of our TAEUS technology, brand and business.
We will need to develop marketing and distribution capabilities both internally and through our relationships with third parties in order to sell any of our TAEUS products receiving regulatory approval. If we experience problems in developing these capabilities, our ability to sell our products could be limited.
We have limited experience selling our products and will need to develop marketing, sales and distribution capabilities in order to sell our TAEUS applications that receive the necessary regulatory approval. We have limited experience managing a sales force and customer support operations and may be unable to attract, retain and manage the collaborative manufacturing and distribution arrangements or the specialized workforce necessary to successfully commercialize our products. In addition, our sales and marketing organization must effectively explain the uses and benefits of our products as compared to alternatives in order to promote market acceptance and demand for our products. Although we have begun to hire a small internal sales and marketing team to engage and support channel partners and clinical customers, further developing these functions will be time-consuming and expensive and our efforts may not be successful.
We intend to partner with others to assist us with some or all of these functions. However, we may be unable to find appropriate third parties with which to enter into these arrangements and any such third parties may not perform as expected.
Furthermore, third-party distributors that are in the business of selling other medical products may not devote a sufficient level of resources and support required to generate awareness of our TAEUS applications and grow or maintain product sales. If these distributors are unwilling or unable to market and sell our products, or if they do not perform to our expectations, we could experience delayed or reduced market acceptance and sales of our products. In addition, disagreements with our distributors or non-performance by these third parties could lead to costly and time-consuming litigation or arbitration and disrupt distribution channels for a period of time and require us to re-establish a distribution channel.
If we are unable to manage the growth of our business, our future revenues and operating results may be harmed.
Because of our small size, growth in accordance with our business plan, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we expand our activities, there will be additional demands on these resources. The failure to continually upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including issues relating to our research and development activities and retention of experienced scientists, managers and technicians, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan. If we are unable to implement these actions in a timely manner, our results may be adversely affected.
Competition in the medical imaging market is intense and we may be unable to successfully compete.
In general, competition in the medical imaging market is very significant and characterized by extensive research and development and rapid technological change. Competitors in this market include very large companies with significantly greater resources than we have. To successfully compete in this market, we will need to develop TAEUS applications that offer significant advantages over alternative imaging products and procedures for such applications.
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While we believe the technology behind our TAEUS platform is unique in the industry, developments by other medical imaging companies of new or improved products, processes or technologies may make our products or proposed products obsolete or less competitive. Alternative medical imaging devices may be more accepted or cost-effective than our products. Competition from these companies for employees with experience in the medical imaging industry could result in higher turnover of our employees. If we are unable to respond to these competitive pressures, we could experience delayed or reduced market acceptance of our products, higher expenses and lower revenue. If we are unable to compete effectively with current or new entrants to these markets, we will be unable to generate sufficient revenue to maintain our business.
Our competitors include producers of CT and MRI systems that include multinational corporations such as Royal Philips, Siemens AG and Fujifilm Corporation, many of whom also manufacture and sell ultrasound equipment. In the MASLD diagnosis market we will compete with makers of surgical biopsy tools, such as Cook Medical and Sterylab S.r.l. In the thermal ablation market, we will compete with manufacturers of surgical temperature probes, such as Medtronic plc and St. Jude Medical, Inc. These competitors and other potential competitors have substantially greater financial, technical and other resources, such as larger R&D staff, more robust manufacturing capabilities and more experienced marketing and manufacturing organizations. These competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than TAEUS applications that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than us. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against those of our competitors.
The medical device market is characterized by rapid innovation. To compete effectively, the Company may need to develop and/or acquire new products, seek regulatory clearance, market them successfully, and identify new markets for the Company’s technology.
The medical device industry is subject to continuous technological development and product innovation. If the Company does not continue to innovate and develop new products and applications, the Company’s competitive position may deteriorate as other companies successfully design and commercialize new products and applications or enhancements to the Company’s current products.
To successfully expand the Company’s product offerings, the Company may need to, among other things:
| ● | develop or otherwise acquire new products that either add to or significantly improve the Company’s current product offerings; |
| ● | obtain regulatory clearance for these new products; |
| ● | convince the Company’s existing and prospective customers that the Company’s product offerings are an attractive revenue-generating addition to their practice; |
| ● | sell the Company’s product offerings to a broad customer base; |
| ● | identify new markets and alternative applications for the Company’s technology; |
| ● | protect the Company’s existing and future products with defensible intellectual property; and |
| ● | satisfy and maintain all regulatory requirements for commercialization. |
Changes in the healthcare industry could result in a reduction in the size of the market for our products or may require us to decrease the selling price for our products, either of which could have a negative impact on our financial performance.
Trends toward managed care, healthcare cost containment, and other changes in government and private sector initiatives in Europe and the United States are placing increased emphasis on lowering the cost of medical services, which could adversely affect the demand for or the prices of our products. For example:
| ● | major third-party payors of hospital and non-hospital-based healthcare services could revise their payment methodologies and impose stricter standards for reimbursement of imaging procedures charges and/or a lower or more bundled reimbursement; |
| ● | there has been a consolidation among healthcare facilities and purchasers of medical devices who prefer to limit the number of suppliers from whom they purchase medical products, and these entities may decide to stop purchasing our products or demand discounts on our prices; and |
| ● | there are proposed and existing laws and regulations in international and domestic markets regulating pricing and profitability of companies in the healthcare industry. |
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These trends could lead to pressure to reduce prices for our products and could cause a decrease in the demand for our products in any given market that could adversely affect our revenue and profitability, which could harm our business.
We intend to market our approved TAEUS applications globally, and currently market our TAEUS liver probe in the EU, and are therefore subject to the risks of doing business outside of the United States.
Because we intend to market our approved TAEUS applications globally and currently market our TAEUS liver probe in the EU, our business is subject to risks associated with doing business globally. Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including:
| ● | changes in a specific country’s or region’s political and cultural climate or economic condition; |
| ● | local outbreaks of sickness or disease; |
| ● | war or terrorist attack, including cyberterrorism; | |
| ● | unexpected changes in laws and regulatory requirements in local jurisdictions; |
| ● | difficulty of effective enforcement of contractual provisions in local jurisdictions; |
| ● | inadequate intellectual property protection in certain countries; |
| ● | trade-protection measures, import or export licensing requirements such as Export Administration Regulations promulgated by the United States Department of Commerce and fines, penalties or suspension or revocation of export privileges; |
| ● | effects of applicable local tax structures and potentially adverse tax consequences; and |
| ● | significant adverse changes in currency exchange rates. |
There is no assurance that, if approved, the Company’s TAEUS applications will be widely adopted by customers or their patients.
Market acceptance of our TAEUS applications will be affected by a variety of factors, including but not limited to usability, performance, reliability and customer preference. It is possible that demand for this device will not be as strong as anticipated. The Company may be unable to establish and manage a sufficient or effective sales force in a timely or cost-effective manner, and any sales force the Company does establish may not be capable of generating demand for our TAEUS applications, therefore hindering the Company’s ability to generate revenues and achieve or sustain profitability. The Company can offer no assurance that the sales model for our TAEUS applications will be well-received by customers or lead to sustainable demand.
If we are unable to attract and retain qualified personnel, we may not be able to successfully manage our business and achieve our objectives.
To execute our growth plan, we must attract and retain highly qualified personnel. Competition for skilled personnel is intense, especially for engineers with high levels of experience in designing and developing medical devices. In addition, we will need to identify and hire sales executives and competition for commercial and marketing talent is significant. We may experience difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed.
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Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the FD&C Act and similar laws of other countries, or the rules and regulations of the FDA and other similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; comply with manufacturing standards we establish; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. For any products for which we obtain regulatory approval and begin commercializing in Europe or the United States, respectively, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
Misdiagnosis, warranty and other claims, as well as product field actions and regulatory proceedings, initiated against us could increase our costs, delay or reduce our sales and damage our reputation, adversely affecting our financial condition.
Our business exposes us to the risk of malpractice, warranty or product liability claims inherent in the sale and support of medical device products, including those based on claims that the use or failure of one of our products resulted in a misdiagnosis or harm to a patient. Although to date we have not been involved in any medical malpractice or product liability litigation, we may incur significant liability if such litigation were to occur. If we cannot successfully defend ourselves against product liability or related claims, we may incur substantial liabilities or be required to limit the distribution of our products. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
| ● | decreased demand for our products; |
| ● | injury to our reputation and negative media attention; |
| ● | initiation of investigations by regulators and adverse impacts to our ability to obtain regulatory approvals; |
| ● | costs to defend the related litigation; |
| ● | a diversion of management’s time and our resources; |
| ● | substantial monetary awards to trial participants or patients; |
| ● | product recalls, withdrawals or labeling, marketing or promotional restrictions; |
| ● | loss of revenue; |
| ● | exhaustion of any available insurance and our capital resources; |
| ● | the inability to commercialize a product at all or for particular applications; and |
| ● | a decline in the price of our securities. |
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Although we currently maintain liability insurance in amounts that we believe are commercially reasonable, any liability we incur may exceed our insurance coverage. Our insurance policies may also have various exclusions, and we may be subject to a claim for which we have no coverage. Liability insurance is expensive and may cease to be available on acceptable terms, if at all. A malpractice, warranty, product liability or other claim or product field action not covered by our insurance or exceeding our coverage could significantly impair our financial condition. In addition, a product field action or a liability claim against us could significantly harm our reputation and make it more difficult to obtain the funding and commercial relationships necessary to maintain our business.
Our internal computer systems, or those used by third-party manufacturers or other contractors or consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our future manufacturers and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our research and development programs and our business operations. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our products could be delayed.
Public health crises can adversely impact our business, including our pre-sales activities, clinical trials and ability to obtain regulatory approvals.
Public health crises such as pandemics or similar outbreaks could adversely impact our business. For instance, the COVID-19 pandemic impacted our clinical trial activities by delaying patient enrollment and visits due to the prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions, and the inability to access sites for initiation and monitoring. In addition, the COVID-19 pandemic had an effect on the business at the FDA and other health authorities by causing them to reallocate resources to addressing the pandemic, which resulted in delays of reviews and approvals of submissions such as that for our NAFLD TAEUS application. The level and nature of the disruption caused by COVID-19 and any other pandemic is unpredictable, may be cyclical and long-lasting and vary from location to location.
Risks Related to Intellectual Property and Other Legal Matters
If we are unable to protect our intellectual property, which entails significant expense and resources, then our financial condition, results of operations and the value of our technology and products could be adversely affected.
Much of our value arises from our proprietary technology and intellectual property for the design, manufacture and use of medical imaging systems, including development of our TAEUS applications. We rely on patent, copyright, trade secret and trademark laws to protect our proprietary technology and limit the ability of others to compete with us using the same or similar technology. Third parties may infringe or misappropriate our intellectual property, which could harm our business. Additionally, any patents issued to us may be challenged by third parties as being invalid, or third parties may independently develop similar or competing technology that avoids our patents. Should such challenges be successful, competitors might be able to market products and use manufacturing processes that are substantially similar to ours. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our TAEUS platform, brand and business. See the section of this Annual Report titled “Intellectual Property” under “Item 1. Business” for further information on our intellectual property portfolio.
Expenses related to a patent portfolio include periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous procedural provisions during the patent application process. We may or may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which a failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Policing unauthorized use of our proprietary rights can be difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use.
Policing unauthorized use of our intellectual property is difficult, costly and time-intensive. We may fail to stop or prevent misappropriation of our technology, particularly in countries where the laws may not protect our proprietary rights to the same extent as do the laws of the United States. Proceedings to enforce our patent and other intellectual property rights in non-U.S. jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. If we cannot prevent other companies from using our proprietary technology or if our patents are found invalid or otherwise unenforceable, we may be unable to compete effectively against other manufacturers of ultrasound systems, which could decrease our market share. In addition, the breach of a patent licensing agreement by us may result in termination of a patent license.
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We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by consultants, vendors or former or current employees, despite the existence generally of confidentiality agreements and other contractual restrictions. Monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be adequate.
If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.
In addition to our patent activities, we rely upon, among other things, unpatented proprietary technology, processes, trade secrets and know-how. Any involuntary disclosure to or misappropriation by third parties of our confidential or proprietary information could enable competitors to duplicate or surpass our technological achievements, potentially eroding our competitive position in our market. We seek to protect confidential or proprietary information in part by confidentiality agreements with our employees, consultants and third parties. While we require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. These agreements may be terminated or breached, and we may not have adequate remedies for any such termination or breach. Furthermore, these agreements may not provide meaningful protection for our trade secrets and know-how in the event of unauthorized use or disclosure. To the extent that any of our staff was previously employed by other pharmaceutical, medical technology or biotechnology companies, those employers may allege violations of trade secrets and other similar claims in relation to their former employee’s therapeutic development activities for us.
We may in the future be a party to intellectual property litigation or administrative proceedings that could be costly and could interfere with our ability to sell our TAEUS applications.
The medical device industry has been characterized by extensive litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. It is possible that U.S. and foreign patents and pending patent applications or trademarks controlled by third parties may be alleged to cover our products, or that we may be accused of misappropriating third parties’ trade secrets. Other medical imaging market participants, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell and/or export our products or to use product names. We may become a party to patent or trademark infringement or trade secret claims and litigation as a result of these and other third-party intellectual property rights being asserted against us. The defense and prosecution of these matters are both costly and time consuming. Vendors from whom we purchase hardware or software may not indemnify us in the event that such hardware or software is accused of infringing a third party’s patent or trademark or of misappropriating a third party’s trade secret.
Further, if such patents, trademarks, or trade secrets are successfully asserted against us, this may harm our business and result in injunctions preventing us from selling our products, license fees, damages and the payment of attorney fees and court costs. In addition, if we are found to willfully infringe third-party patents or trademarks or to have misappropriated trade secrets, we could be required to pay treble damages in addition to other penalties. Although patent, trademark, trade secret, and other intellectual property disputes in the medical device area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we do not obtain necessary licenses, we may not be able to redesign our TAEUS applications to avoid infringement.
Similarly, interference or derivation proceedings provoked by third parties or brought by the U.S. Patent and Trademark Office (“USPTO”) may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications. We may also become involved in other proceedings, such as re-examination, inter partes review, or opposition proceedings, before the USPTO or other jurisdictional body relating to our intellectual property rights or the intellectual property rights of others. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our TAEUS applications or using product names, which would have a significant adverse impact on our business.
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Additionally, we may need to commence proceedings against others to enforce our patents or trademarks, to protect our trade secrets or know-how, or to determine the enforceability, scope and validity of the proprietary rights of others. These proceedings would result in substantial expense to us and significant diversion of effort by our technical and management personnel. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. We may not be able to stop a competitor from marketing and selling products that are the same or similar to our products or from using product names that are the same or similar to our product names, and our business may be harmed as a result.
Risks Related to Government Regulation
Failure to comply with laws and regulations could harm our business.
Our business is or in the future may be subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, securities laws and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, adverse publicity, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions and administrative actions. If any governmental sanctions, fines or penalties are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results and financial condition could be harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and our resources and substantial costs. Enforcement actions and sanctions could further harm our business, operating results and financial condition.
Disruptions at the FDA, including due to a reduction in the FDA’s workforce and/or inadequate funding for the FDA, could prevent the FDA from performing normal functions on which our business relies, which could negatively impact our business.
The ability of the FDA to review and approve new products or review other regulatory submissions can be affected by a variety of factors, including statutory, regulatory and policy changes, inadequate government budget and funding levels or a reduction in the FDA’s workforce and its ability to hire and retain key personnel. Such changes and other disruptions at the FDA may increase the time to meet with the FDA and receive FDA feedback, review and/or approve our submissions, conduct inspections, issue regulatory guidance, or take other actions that facilitate the development, approval and marketing of regulated products, which would adversely affect our business. In addition, government proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies. For example, the Trump Administration recently established the Department of Government Efficiency, which implemented a federal government hiring freeze and announced certain additional efforts to reduce federal government employee headcount and the size of the federal government. It is unclear how these executive actions or other potential actions by the Trump Administration or other parts of the federal government will impact the FDA or other regulatory authorities that oversee our business. These budgetary pressures may reduce the FDA’s ability to perform its responsibilities. If a significant reduction in the FDA’s workforce occurs, the FDA’s budget is significantly reduced or a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our De Novo submission or take other actions critical to the development or marketing of our TAEUS applications, if approved, which could have a material adverse effect on our business.
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If we fail to obtain and maintain necessary regulatory clearances or approvals for our TAEUS applications, or if clearances or approvals for future applications and indications are delayed or not issued, our commercial operations will be harmed.
The medical devices that we manufacture and market will be subject to regulation by numerous worldwide regulatory bodies, including the EMA, FDA and other comparable regulatory agencies. Additionally, third parties designing, manufacturing or conducting human studies of our devices will be subject to local regulations, such as those of Health Canada. These agencies and regulations require manufacturers of medical devices to comply with applicable laws and regulations governing development, testing, manufacturing, labeling, marketing and distribution of medical devices. Devices are generally subject to varying levels of regulatory control, based on the risk level of the device. Governmental regulations specific to medical devices are wide-ranging and govern, among other things:
| ● | product design, development and manufacture; |
| ● | laboratory, pre-clinical and clinical testing, labeling, packaging storage and distribution; |
| ● | premarketing clearance or approval; |
| ● | record keeping; |
| ● | product marketing, promotion and advertising, sales and distribution; and |
| ● | post-marketing surveillance, including reporting of deaths or serious injuries and recalls and correction and removals. |
The European Union has revised its regulatory system for medical devices by implementing regulation (EU) 2017/745 on medical devices (“Medical Device Regulation” or “MDR”) and regulation (EU) 2017/746 on in vitro diagnostic medical devices. The MDR became effective on May 26, 2021 (the “Date of Application” or “DoA”). The changes to the regulatory system implemented by the MDR include stricter requirements for clinical evidence and pre-market assessment of safety and performance, refined classifications to indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality management system assessment procedures and additional requirements for the quality management system, additional requirements for traceability of products and transparency as well a refined responsibility of economic operators.
We are currently in a transitional period, where our existing certified products will be required to continue to comply with applicable medical device directives (including the Medical Devices Directive and the Active Implantable Medical Devices Directive) and with the Medical Device Regulation to obtain CE mark certification in order to continue or commence marketing medical devices. The CE mark is applied following certification from a Notified Body or declaration of conformity. It is an international symbol of adherence to quality assurance standards and compliance with applicable European Medical Devices Directives or the MDR, as the case may be. CE mark approvals issued prior to May 26, 2021 for Class IIa medical devices will, subject to certain conditions (including, among others, continued compliance with the MDR, no significant changes to design or intended purpose, a quality management system, and engagement with a notified body to obtain conformity assessment), remain valid until December 31, 2028. In March 2020, we received CE mark approval for our TAEUS FLIP (Fatty Liver Imaging Probe) System. The CE marking indicates that TAEUS complies with all applicable regulations in the EU, and other CE mark geographies, including the 27 EU member states. We believe that future TAEUS applications will qualify for sale in the European Union as Class IIa medical devices. The MDR requires a clinical evaluation for all medical devices and clinical trials for selected medical devices to be (re-)certified under the rules of the MDR. Depending on the classification of our applications, future CE mark certifications or recertification of our applications may require additional clinical evaluations or trials, as the case may be.
We are also required to comply with the regulations of each other country where we commercialize products, such as the requirement that we obtain approval from the FDA before we can launch new products in the United States.
Our MASLD TAEUS device is being reviewed under a “de novo” process for a risk-based classification determination whether the device is of low to moderate risk and that it can be appropriately regulated as a Class II device and thereby eligible for 510(k) clearance. While the 510(k) pathway for product marketing typically requires only non-clinical testing proof of substantial equivalence to a lawfully marketed predicate device for a given indication, the FDA has requested clinical studies to support a reclassification to a lower risk class via the de novo process. Even with the clinical data we expect to provide with the de novo submission for our MASLD TAEUS device, the FDA may decide to reject the request to classify the device into Class II. If that happens, the device will be regulated as a Class III device and we will be required to fulfill more rigorous PMA requirements. Thus, although at this time we do not anticipate that we will be required to do so, it is possible that our MASLD TAEUS device may require approval by means of a PMA.
We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business.
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Even if we obtain regulatory approval for our TAEUS device, our product will remain subject to regulatory oversight.
Even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses for the product, which may limit the market for the product. Therefore, even if we believe we have successfully developed our TAEUS technology, we may not be permitted to market TAEUS applications in the United States if we do not obtain FDA regulatory clearance to market such applications. Delays in obtaining clearance or approval could increase our costs and harm our revenues and growth.
In addition, we are required to timely file various reports with the FDA, including reports required by the medical device reporting regulations that require us to report to certain regulatory authorities if our devices may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not filed timely, regulators may impose sanctions and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
If we initiate a correction or removal for one of our devices to reduce a risk to health posed by the device, we would be required to submit a publicly available Correction and Removal report to the FDA and, in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our devices. Furthermore, the submission of these reports has been and could be used by competitors against us in competitive situations and cause customers to delay purchase decisions or cancel orders and would harm our reputation.
The FDA and the Federal Trade Commission (the “FTC”) also regulate the advertising and promotion of our planned products to ensure that the claims we make are consistent with our regulatory clearances, that there are adequate and reasonable data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and make other corrections or restitutions.
The FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions:
| ● | adverse publicity, warning letters, fines, injunctions, consent decrees and civil penalties; |
| ● | repair, replacement, refunds, recall or seizure of our products; |
| ● | operating restrictions, partial suspension or total shutdown of production; |
| ● | refusing our De Novo submissions, requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products; |
| ● | withdrawing 510(k) clearance or premarket approvals that have already been granted; and |
| ● | criminal prosecution. |
If any of these events were to occur, our business and financial condition would be harmed.
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We have experienced and may in the future experience delays and other difficulties in enrolling a sufficient number of patients in our clinical trials which could delay or prevent the receipt of necessary regulatory approvals.
We may not be able to initiate or complete as planned any clinical trials if we are unable to identify and enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory authorities. We also may be unable to engage a sufficient number of clinical trial sites to conduct our trials.
We may face challenges in enrolling patients to participate in our clinical trials. Patients suffering from diseases within target indications may enroll in competing clinical trials, which could negatively affect our ability to complete enrollment of our trials. Additionally, enrollment may be delayed by unforeseen circumstances, as occurred with the COVID-19 pandemic. Enrollment challenges in clinical trials often result in increased development costs for a product candidate, significant delays and potentially the abandonment of the clinical trial.
We may have other delays in completing our clinical trials and we may not complete them at all.
Since we lack significant experience in completing clinical trials and bringing a medical device through commercialization, we have hired outside consultants with such experience. Clinical trials for our TAEUS device may be delayed or terminated as a result of many factors, including the following:
| ● | patients failing to complete clinical trials due to dissatisfaction with the procedure, side effects, or other reasons; |
| ● | failure by regulators to authorize us to commence a clinical trial; |
| ● | suspension or termination by regulators of clinical research for many reasons, including concerns about patient safety, the failure of study sites and/or investigators in our clinical research program to comply with GCP requirements, or our failure, or the failure of our contract manufacturers, to comply with current cGMP requirements; |
| ● | delays or failure to obtain clinical supply for our products necessary to conduct clinical trials from contract manufacturers; |
| ● | treatment candidates demonstrating a lack of efficacy during clinical trials; |
| ● | inability to continue to fund clinical trials or to find a partner to fund the clinical trials. |
Any delay or failure to complete clinical trials could have a material adverse effect on our cost to develop and commercialize, and our ability to generate revenue from, our TAEUS device.
Our TAEUS applications may require recertification or new regulatory clearances or premarket approvals and we may be required to recall or cease marketing our TAEUS applications until such recertification or clearances are obtained.
Most countries outside of the United States require that product approvals be recertified on a regular basis, generally every five years. The recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and, where needed, conduct appropriate testing to document continued compliance. Where recertification applications are required, they must be approved in order to continue selling our products in those countries.
In the United States, material modifications to the intended use or technological characteristics of our TAEUS applications will require new 510(k) clearances or premarket approvals or require us to recall or cease marketing the modified devices until these clearances or approvals are obtained. Based on FDA published guidelines, the FDA requires device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance; however, the FDA can review a manufacturer’s decision. Any modification to an FDA-cleared device that would significantly affect its safety or efficacy or that would constitute a major change in its intended use would require a new 510(k) clearance or possibly a premarket approval.
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We may not be able to obtain recertification or additional 510(k) clearances or premarket approvals for our applications or for modifications to, or additional indications for, our TAEUS technology in a timely fashion, or at all. Delays in obtaining required future governmental approvals would harm our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth. If foreign regulatory authorities or the FDA require additional approvals, we may be required to recall and to stop selling or marketing our TAEUS applications, which could harm our operating results and require us to redesign our applications. In these circumstances, we may be subject to significant enforcement actions.
If any OEMs fail to comply with the FDA’s Quality System Regulations or other regulatory bodies’ equivalent regulations, manufacturing operations could be delayed or shut down and the development of our TAEUS platform could suffer.
The manufacturing processes of OEMs are required to comply with the FDA’s Quality System Regulations and other regulatory bodies’ equivalent regulations, which cover the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of our TAEUS applications. They may also be subject to similar state requirements and licenses and engage in extensive recordkeeping and reporting and make available their manufacturing facilities and records for periodic unannounced inspections by governmental agencies, including the FDA, state authorities and comparable agencies in other countries. If any OEM fails such an inspection, our operations could be disrupted and our manufacturing interrupted. Failure to take adequate corrective action in response to an adverse inspection could result in, among other things, a shut-down of our manufacturing operations, significant fines, suspension of marketing clearances and approvals, seizures or recalls of our products, operating restrictions and criminal prosecutions, any of which would cause our business to suffer. Furthermore, these OEMs may be engaged with other companies to supply and/or manufacture materials or products for such companies, which would expose our OEMs to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a third-party manufacturers’ facility. If the FDA or a foreign regulatory agency does not approve these facilities for the manufacture of our products, or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would impede or delay our ability to develop, obtain regulatory approval for or market our products, if approved. Additionally, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our product and cause our results of operations to suffer.
Our TAEUS applications may in the future be subject to product recalls that could harm our reputation.
Governmental authorities in Europe and the United States have the authority to require the recall of commercialized products in the event of material regulatory deficiencies or defects in design or manufacture. A government-mandated or voluntary recall by us could occur as a result of component failures, manufacturing errors or design or labeling defects. Recalls of our TAEUS applications would divert managerial attention, be expensive, harm our reputation with customers and harm our financial condition and results of operations. A recall announcement would negatively affect the price of our securities.
Healthcare reform measures could hinder or prevent our planned products’ commercial success.
There have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system in ways that could harm our future revenues and profitability and the future revenues and profitability of our potential customers. In the EU, the Medical Devices Directive is being replaced with the more expansive MDR, which may increase the costs of obtaining and maintaining required regulatory approvals for our products. We cannot predict what other healthcare initiatives, if any, will be implemented by EU member countries, or the effect any future legislation or regulation will have on us.
In the United States, federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, one of the most significant healthcare reform measures in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (the “Affordable Care Act”), was enacted in 2010. The Affordable Care Act contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs.
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It remains unclear whether changes will be made to the Affordable Care Act, or whether it will be repealed or materially modified. For example, the Tax Cuts and Jobs Act of 2017 modified certain aspects of the Affordable Care Act and the Trump Administration and U.S. Congress may take further action regarding the Affordable Care Act. Therefore, we cannot assure you that the Affordable Care Act, as currently enacted or as may be further amended or discontinued in the future, will not harm our business and financial results and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future or their full impact. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may harm:
| ● | our ability to set a price that we believe is fair for our products; |
| ● | out ability to generate revenues and achieve or maintain profitability; and |
| ● | the availability of capital. |
If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. Other jurisdictions such as the European Union have similar laws. The regulations that will affect how we operate include:
| ● | the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; |
| ● | the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government; |
| ● | federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; |
| ● | the federal Physician Payment Sunshine Act, created under the Affordable Care Act, and its implementing regulations, which require manufacturers of drugs, medical devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services, or HHS, information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; |
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| ● | the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; and |
| ● | state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers. |
The Affordable Care Act, among other things, amends the intent requirement of the Federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal and similar foreign healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could harm our ability to operate our business and our results of operations.
Compliance with environmental laws and regulations could be expensive. Failure to comply with environmental laws and regulations could subject us to significant liability.
Our research and development and manufacturing operations may involve the use of hazardous substances and are subject to a variety of federal, state, local and foreign environmental laws and regulations relating to the storage, use, discharge, disposal, remediation of, and human exposure to, hazardous substances and the sale, labeling, collection, recycling, treatment and disposal of products containing hazardous substances. In addition, our research and development and manufacturing operations produce biological waste materials, such as human and animal tissue, and waste solvents, such as isopropyl alcohol. These operations are permitted by regulatory authorities, and the resultant waste materials are disposed of in material compliance with environmental laws and regulations. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. Compliance with environmental laws and regulations may be expensive and non-compliance could result in substantial liabilities, fines and penalties, personal injury and third part property damage claims and substantial investigation and remediation costs. Environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations will not occur in the future or have not occurred in the past as a result of human error, accidents, equipment failure or other causes. The expense associated with environmental regulation and remediation could harm our financial condition and operating results.
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Risks Related to Owning Our Securities, Our Financial Results and Our Need for Financing
Our stock is subject to minimum requirements to remain listed on the Nasdaq Capital Market, including a minimum bid price requirement and stockholders’ equity requirement, and may be delisted if it does not maintain compliance with those requirements.
On May 27, 2025, the Company received a notification letter from the Staff notifying the Company that its stockholders’ equity had fallen below the $2,500,000 required minimum for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Requirement”). The notification letter stated that the Company had until July 11, 2025 to provide Nasdaq with a specific plan to achieve and sustain compliance. The Company submitted its plan to regain compliance on July 11, 2025 and subsequently provided the Staff with additional materials. On October 31, 2025, the Company received written notice that, based on review of the compliance plan and additional materials, the Staff had granted the Company an extension to November 24, 2025 to regain compliance with the Minimum Stockholders’ Equity Requirement.
As a result of the Company’s closing of a private placement offering for gross proceeds of approximately $4.9 million on October 15, 2025, the Company regained compliance with Minimum Stockholders’ Equity Requirement, subject to Nasdaq’s continued monitoring of the Company’s ongoing compliance with the Minimum Stockholders’ Equity Requirement. Under such monitoring, if at the time of the Company’s periodic report following having regained compliance, the Company does not evidence continued compliance, it may be subject to delisting. As disclosed in this Annual Report on Form 10-K, our stockholders’ equity as of December 31, 2025 was below Minimum Stockholders’ Equity Requirement. Accordingly, we expect the Staff will issue a “Delist Determination Letter” and, once issued, we intend to request a hearing before a Nasdaq hearing panel regarding our continued listing with respect to the Minimum Stockholders’ Equity Requirement. There can be no assurance that the Company will be able to regain compliance with the Minimum Stockholders’ Equity Requirement.
If our common stock ceases to be listed for trading on the Nasdaq Capital Market, we would expect that our common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group. If Nasdaq were to delist our common stock, it would be more difficult for our stockholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock or warrants are not listed on a national securities exchange.
Nasdaq has proposed enhanced listing standards, which could adversely affect our ability to maintain our Nasdaq listing and access to capital markets.
On January 13, 2026, Nasdaq filed a rule proposal with the SEC to adopt a new continued listing requirement that would require all companies listed on Nasdaq to maintain a minimum market value of listed securities of $5.0 million. Under the proposed rule, if a company’s market value of listed securities falls below this threshold for 30 consecutive trading days, Nasdaq may immediately suspend trading and initiate delisting proceedings without affording the company a compliance cure period. This proposed rule, if adopted, would be in addition to Nasdaq’s existing continued listing requirements. If the proposed rule is adopted and the market value of our common stock were to be below the proposed $5.0 million threshold or we otherwise fail to satisfy Nasdaq’s continued listing standards, we could face delisting proceedings on an accelerated basis. The delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities. The comment period for the proposed rule closed on February 19, 2026. The effective date of the proposed rule is not known, if approved and adopted.
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Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in volatility in the price of our securities.
Our operating results will be affected by numerous factors such as:
| ● | variations in the level of expenses related to our proposed products; |
| ● | status of our product development efforts; |
| ● | execution of collaborative, licensing or other arrangements, and the timing of payments received or made under those arrangements; |
| ● | intellectual property prosecution and any infringement lawsuits to which we may become a party; |
| ● | regulatory developments affecting our products or those of our competitors, including the timing and success of obtaining various regulatory approvals for our products’ testing, production and marketing; |
| ● | our ability to obtain and maintain FDA clearance and approval from foreign regulatory authorities for our products, which have not yet been approved for marketing; |
| ● | market acceptance of our TAEUS applications; |
| ● | the availability of reimbursement for our TAEUS applications; |
| ● | our ability to attract new customers and grow our business with existing customers; |
| ● | the timing and success of new product and feature introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; |
| ● | the amount and timing of costs and expenses related to the maintenance and expansion of our business and operations; |
| ● | changes in our pricing policies or those of our competitors; |
| ● | general economic, industry and market conditions; |
| ● | the hiring, training and retention of key employees, including our ability to expand our sales team; |
| ● | litigation or other claims against us; |
| ● | our ability to obtain additional financing; and |
| ● | advances and trends in new technologies and industry standards. |
Any or all of these factors could adversely affect our cash position requiring us to raise additional capital which may be on unfavorable terms and result in substantial dilution. Additionally, the risks surrounding our business, as well as the limited market for our common stock, have resulted, and will likely continue to result, in volatility in the price of our common stock.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future for reasons unrelated to our operating performance or prospects, and as a result, investors in our common stock could incur substantial losses.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. The stock market in general and the market for healthcare companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. Additionally, securities of certain companies have experienced significant and extreme volatility in stock price due to a sudden increase in demand for stock resulting in aggregate short positions in the stock exceeding the number of shares available for purchase, forcing investors with short exposure to pay a premium to repurchase shares for delivery to share lenders. This is known as a “short squeeze.” These short squeezes have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share declines steadily as interest in those stocks abates. While we have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that they will not be in the future, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
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We may be subject to securities litigation, which is expensive and could divert management attention.
In the past, companies that have experienced volatility in the market price of their securities have been subject to an increased incidence of securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
There is a limited market for our common stock.
Although our common stock is traded on the Nasdaq Capital Market, the volume of trading has historically been limited. Our average daily trading volume of our shares from January 1, 2025 to December 31, 2025 was approximately 531,026 shares. Thinly-traded stock can be more volatile than stock trading in a more active public market. While we have made efforts to increase trading in our stock, we cannot predict the extent to which an active public market for our common stock will develop or be sustained. Therefore, a holder of our common stock who wishes to sell his or her shares may not be able to do so immediately or at an acceptable price.
If securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, the price of our securities and trading volume could decline.
The trading market for our securities is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the securities or industry analysts who cover us or may cover us in the future change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any securities or industry analyst who covers us or may cover us in the future were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our common stock to decline.
If we are unable to implement and maintain effective internal control over financial reporting, including by remediating current material weaknesses in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our securities may decrease and we may become subject to litigation or enforcement actions.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting.
Currently, we have material weaknesses in our internal control over financial reporting and, as a result, we may not detect errors on a timely basis and our financial statements may be materially misstated. Specifically, we have insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting. We intend to improve our internal control over financial reporting; however, the process is time-consuming, costly and complicated. We are constrained in the improvements we are able to make due to our limited resources. Until our internal controls are improved our ability to maintain effective internal controls over financial reporting will be limited.
Until such time as we are no longer a smaller reporting company, our auditors will not be required to attest as to our internal control over financial reporting. If we continue to identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or, if required, if our independent registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (the “SEC”) or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.
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We are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
We have not paid dividends in the past and have no plans to pay dividends for the foreseeable future.
We plan to reinvest all of our earnings, to the extent we have earnings, in order to further develop our technology and potential products and to cover operating costs. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we will, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
We incur significant costs as a result of being a public company that reports to the SEC and our management is required to devote substantial time to meet compliance obligations.
As a public company listed in the United States, we incur significant legal, accounting and other expenses relating to our compliance obligations. We are subject to reporting requirements of the Exchange Act and the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq that impose significant requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. In addition, there are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act Wall Street Reform and Protection Act that contribute to our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and also place undue strain on our personnel, systems and resources. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Furthermore, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan and our at-the-market equity offering program, could result in dilution of the percentage ownership of our stockholders and could cause the price of our securities to fall.
We expect that significant capital will be needed in the future to continue our planned operations. To the extent we raise capital by issuing common stock, convertible securities or other equity securities, our stockholders may experience substantial dilution, and new investors could gain rights superior to our existing stockholders.
Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable.
Certain provisions of our Fourth Amended and Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”) and Amended and Restated Bylaws (our “Bylaws”) and applicable provisions of Delaware law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. The provisions in our Certificate of Incorporation and Bylaws:
| ● | authorize our board of directors to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us; |
| ● | limit who may call stockholder meetings; |
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| ● | do not provide for cumulative voting rights; |
| ● | provide that all vacancies in our board of directors may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
| ● | provide that stockholders must comply with advance notice procedures with respect to stockholder proposals and the nomination of candidates for director; |
| ● | provide that stockholders may only amend our Certificate of Incorporation upon a supermajority vote of stockholders; and |
| ● | provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal claims. |
In addition, section 203 of the Delaware General Corporation Law limits our ability to engage in any business combination with a person who beneficially owns 15% or more of our outstanding voting stock unless certain conditions are satisfied. This restriction lasts for a period of three years following any such person’s share acquisition. These provisions may have the effect of entrenching our management team and may deprive stockholders of the opportunity to sell their shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.
Risks Related to Our Digital Asset Treasury Strategy
The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of cryptocurrencies we hold and adversely affect our business.
The emergence or growth of digital assets other than cryptocurrencies we may hold could have a material adverse effect on our financial condition. There are numerous alternative digital assets and many entities, including consortia and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets. For example, some cryptocurrency networks utilize proof-of-work mining. Others use a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. If the mechanisms for validating transactions in alternative digital assets are perceived as superior to the mechanisms used by the digital assets in which we invest, those digital assets could gain market share.
Other alternative digital assets could include “stablecoins,” which are designed to maintain a constant price because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an alternative to other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of cryptocurrencies we hold to decrease, which could have a material adverse effect on our business, financial condition and results of operations.
The accounting treatment of cryptocurrency holdings could have significant accounting impacts, including increasing the volatility of our results.
In December 2023, the FASB issued ASU 2023-08, which upon our adoption will require us to measure in-scope cryptocurrency assets at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our cryptocurrency in net income each reporting period. ASU 2023-08 will also require us to provide certain interim and annual disclosures with respect to our cryptocurrency holdings. The standard is effective for our interim and annual periods beginning January 1, 2025, with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which we adopt the guidance. Due in particular to the volatility in the price of cryptocurrencies, we expect the adoption of ASU 2023-08 to have a material impact on our financial results in future periods, increase the volatility of our financial results, and affect the carrying value of our cryptocurrency on our balance sheet, and it could also have adverse tax consequences, which in turn could have a material adverse effect on our financial results and the market price of our common stock. Additionally, as a result of ASU 2023-08 requiring a cumulative-effect adjustment to our opening balance of retained earnings as of the beginning of the annual period in which we adopt the guidance and not permitting retrospective restatement of our historical financial statements, our future results will not be comparable to results from periods prior to our adoption of the guidance.
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The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict.
Changes in our ownership of cryptocurrency could have accounting, regulatory and other impacts, as well. While we currently intend to primarily own cryptocurrency directly, we may investigate other potential approaches to owning cryptocurrencies, including indirect ownership (for example, through ownership interests in a fund that owns cryptocurrencies and deemed ownership via ownership of cryptocurrency derivative assets). If we were to own all or a portion of our cryptocurrencies in a different manner, the accounting treatment for our cryptocurrencies, our ability to use our cryptocurrencies as collateral for additional borrowings, and the regulatory requirements to which we are subject, may correspondingly change. For example, the volatile nature of cryptocurrencies may force us to liquidate our holdings to use it as collateral, which could be negatively impacted by any disruptions in the cryptocurrency market, and if liquidated, the value of the collateral would not reflect potential gains in market value of our cryptocurrency.
Our management relies upon the advice of an asset manager through an asset management agreement to assist in building a narrowly focused investment strategy and the execution of the Company’s strategy and may not yield the desired return.
We have engaged an asset manager to manage our cryptocurrency holdings. Our management, Digital Asset Advisory Board and asset manager will have broad discretion in the management of our digital asset treasury and their decisions on the execution of such strategy may not be successful.
Cryptocurrency price volatility may materially depress asset valuations, necessitating substantial cash reserves or liquidity buffers to maintain operational resilience. These risks are compounded by the lack of comprehensive regulation governing cryptocurrency trading platforms, which face material exposure to fraud, market manipulation, security breaches, and operational failures that could materially and adversely affect the value of our cryptocurrency holdings.
We may invest in more cryptocurrencies in the future, which could materially and adversely affect our business, financial condition and results of operations, primarily due to the inherent price volatility of cryptocurrency and the impact of accounting standards. Cryptocurrencies can be highly susceptible to sharp price swings, which can significantly impact our financial statements, especially under mark-to-market accounting. To mitigate these risks, companies holding significant amounts of cryptocurrencies must maintain substantial capital reserves to absorb potential declines in asset value without compromising their overall financial health. This heightened need for liquidity reflects the increased risk associated with holding cryptocurrencies and underscores the importance of robust risk management strategies when navigating the uncertainties of the digital asset market.
Digital asset trading platforms handling cryptocurrencies and particularly small-cap cryptocurrencies are relatively new and often operate without the oversight typical of regulated securities or commodities markets. Many platforms, particularly those based outside the United States, are subject to limited or inconsistent regulatory standards and often do not provide transparent information about their ownership, management, or compliance practices. This lack of oversight increases the risk of fraudulent activities such as artificial trading volume, wash trading, and market manipulation—issues that have been documented in unregulated cryptocurrency markets and could similarly affect cryptocurrency trading. Reports have indicated that a significant portion of trading volume on unregulated digital asset trading platforms may be artificially inflated or non-economic in nature.
Manipulative behavior on cryptocurrency exchanges can distort market prices and lead to unexpected losses for investors. As a result, reduced market confidence in these platforms could negatively impact the liquidity and value of cryptocurrencies. We may hold substantial amounts of cryptocurrencies and must be vigilant about these risks, as trading activity that is not reflective of genuine market interest can lead to volatility and potential losses.
The operational integrity of digital asset trading platforms is another critical risk factor. Many of these platforms may lack robust security measures, making them vulnerable to hacking, fraud, and other operational problems. As we may hold large quantities of cryptocurrencies, we must consider the risk of security breaches, which could materially and adversely affect our business, financial condition and results of operations.
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Cryptocurrency holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the crypto markets have been characterized by significant volatility in price; limited liquidity and trading volumes compared to sovereign currencies markets; relative anonymity; a developing regulatory landscape; potential susceptibility to market abuse and manipulation; compliance and internal control failures at exchanges; and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our cryptocurrency at favorable prices or at all. Further, cryptocurrency which we hold with our custodians does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, pursuant to the asset management agreement we intend to enter into with the asset manager, we are currently and may generally be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered cryptocurrency or otherwise generate funds using our cryptocurrency holdings, including in particular during times of market instability or when the price of cryptocurrency has declined significantly. If we are unable to sell our cryptocurrency, enter into additional capital raising transactions using cryptocurrency as collateral, or otherwise generate funds using our cryptocurrency holdings, or if we are forced to sell our cryptocurrency at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
Cryptocurrencies do not pay interest or dividends.
Cryptocurrencies do not pay interest or other returns and we can only generate cash from our cryptocurrency holdings if we sell our cryptocurrency or implement strategies to create income streams or otherwise generate cash by using our cryptocurrency holdings. Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our cryptocurrency holdings, and any such strategies may subject us to additional risks.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our cryptocurrency, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our cryptocurrency and our financial condition and results of operations could be materially adversely affected.
Security breaches and cyberattacks are of particular concern with respect to cryptocurrency. Blockchain-based cryptocurrencies and the entities that provide services to participants in the cryptocurrency ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021, it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
| ● | a partial or total loss of our cryptocurrency in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our cryptocurrency; |
| ● | harm to our reputation and brand; |
| ● | improper disclosure of data and violations of applicable data privacy and other laws; or |
| ● | significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure. |
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader cryptocurrency ecosystem or in the use of the cryptocurrency network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to cryptocurrency, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine, Israel-Hamas and Israel-Iran conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the cryptocurrency industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
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We face significant risks relating to disruptions, forks, 51% attacks, hacks, network disruptions, or other adverse events or other compromises to the cryptocurrency blockchains, which could materially and adversely impact our business, financial condition and results of operations.
Blockchain networks are maintained by decentralized networks of participants, and as such are susceptible and vulnerable to a variety of risks, including disruptions, security breaches, and fundamental technical issues. Both networks are vulnerable to attacks by malicious actors who gain control of a significant portion of the network’s mining hash rate, a scenario commonly referred to as a 51% attack. In such an event, the attacker could double-spend transactions, reverse previously confirmed transactions, or otherwise disrupt the normal operations of the network. Successful 51% attacks have historically undermined trust in affected blockchain networks and could materially decrease the value of cryptocurrency assets.
Additionally, forks, or splits in the underlying protocol, may occur when participants fail to reach consensus on proposed upgrades or changes. Forks can lead to the creation of duplicate networks, confusion among market participants, dilution of the original network’s value, and disruption of the network’s operations. Hard forks, in particular, can materially and adversely impact the perceived stability and value of digital assets, leading to reduced demand and price declines.
Further, hacks and other security breaches targeting the core infrastructure of blockchain networks or major participants, such as exchanges and custodians, could severely impact the reputation and market confidence in these networks. Exploits of protocol-level vulnerabilities could also compromise the integrity of the cryptocurrency blockchains, resulting in a substantial loss of value.
The success and growth of cryptocurrency assets depend significantly on their continued security, stability, and scalability. Any technical failures, consensus breakdowns, governance disputes, or regulatory interventions that diminish confidence in the networks or impair their functionality could lead to a material decline in their market prices, which could materially and adversely impact our business, financial condition and results of operations. A sustained or significant decrease in the price or liquidity of cryptocurrencies, whether due to 51% attacks, forks, hacks, network disruptions, or other adverse events, could negatively impact our business, financial condition, and results of operations. Furthermore, even the perception that any of these events could occur may lead to significant market volatility and price declines, adversely affecting our business, financial condition and results of operations.
Our custodially-held cryptocurrencies may become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.
We plan to hold substantially all of our cryptocurrency in custody accounts at a U.S.-based, institutional-grade custodian that has demonstrated a record of regulatory compliance and information security. As we further execute on our strategy, we intend to expand our holdings to multiple similar custodians.
If our custodially-held cryptocurrencies are considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such cryptocurrencies and this may ultimately result in the loss of the value related to some or all of such assets. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, and the filing and subsequent settlement of a civil fraud lawsuit have highlighted the counterparty risks applicable to owning and transacting in digital assets. These bankruptcies, closures, liquidations and other events have likely negatively impacted the adoption rate and use of cryptocurrencies. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of cryptocurrencies, limit the availability to us of financing collateralized by such assets, or create or expose additional counterparty risks. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our cryptocurrencies. Even if we are able to prevent our cryptocurrencies from being considered the property of a custodian’s bankruptcy estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our cryptocurrencies held by the affected custodian during the pendency of the insolvency proceedings. Any such outcome could have a material adverse effect on our financial condition and the market price of our listed securities.
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Absent of federal regulations, there is a possibility that certain cryptocurrencies may be classified as “securities.” Any classification of a cryptocurrency as a “security” would subject us to additional regulation and could materially impact the operation of our business.
Cryptocurrency refers to digital assets that are issued by and transmitted through an open-source protocol, collectively maintained by a peer-to-peer network of decentralized user nodes. We believe that digital assets intrinsically linked to a blockchain system, and the value of which is derived from or is reasonably expected to be derived from the use of the blockchain system, such as HYPE, are not securities, but neither the SEC nor any other U.S. federal or state regulator has formally taken such a position. Despite the Trump Administration’s Executive Order titled “Strengthening American Leadership in Digital Financial Technology” which includes as an objective “protecting and promoting the ability of individual citizens and private sector entities alike to access and to maintain self-custody of digital assets,” cryptocurrency has not yet been classified with respect to U.S. federal securities laws. Therefore, while (for the reasons discussed below) we believe that HYPE and other cryptocurrencies intrinsically linked to a blockchain system are digital commodities and not a “securities” within the meaning of the U.S. federal securities laws, and registration of the Company under the 1940 Act, is therefore not required under the applicable securities laws, we acknowledge that a regulatory body or federal court may determine otherwise. Therefore, our belief, even if reasonable under the circumstances, would not preclude legal or regulatory action based on such a finding that cryptocurrency is a “security,” which would require us to register as an investment company under the 1940 Act.
As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if cryptocurrency was determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations, financial condition, and prospects.
We, in connection with our DAT strategy, are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, exchange-traded funds and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our cryptocurrency treasury strategy, our use of leverage, the manner in which our cryptocurrency is intended to be custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Consequently, our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our cryptocurrency holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding cryptocurrency.
We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As cryptocurrency and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of cryptocurrency. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of cryptocurrency or the ability of individuals or institutions such as us to own or transfer cryptocurrency.
If cryptocurrency is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of cryptocurrency and in turn adversely affect the market price of our common stock. Moreover, the risks of us engaging in a cryptocurrency treasury strategy have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
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General Risk Factors
Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the national or global economy and financial markets. For example, governmental statements, actions or policies, political unrest and global financial crises can cause extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, political unrest or additional global financial crises, including those resulting from the COVID-19 pandemic and the ongoing Russia-Ukraine war, the war in the Middle East and the conflict between China and Taiwan, could result in a variety of risks to our business, including weakened demand for our products, if approved, or our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate, further political developments and financial market conditions could adversely impact our business.
Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.
We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. Any failure of a depository institution to return these deposits on demand, or if a depository institution is subject to other adverse conditions in the financial or credit markets, could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.
Our business and operations are subject to risks related to climate change and natural disasters.
The effects of global climate change present risks to our business. Natural disasters, extreme weather and other conditions caused by or related to climate change could adversely impact our supply chain, the courier delivery services we use, the availability and cost of raw materials and components, energy supply, transportation, or other inputs necessary for the operation of our business. Climate change and natural disasters could also result in physical damage to our facilities as well as those of our suppliers, health care providers and other business partners, which could cause disruption in our business and operations. Our facilities and our laboratory equipment would be costly to replace and could require substantial lead time to repair or replace. Although we believe we possess adequate insurance for the disruption of our business from causalities, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Risk Management and Strategy
We have established procedures for evaluating, recognizing, and managing significant risks stemming from potential unauthorized events occurring on or through our electronic information systems. These procedures comprise an important part of our overall enterprise risk management system and are aimed at preventing, detecting, or mitigating data breaches, theft, misuse, unauthorized access, or any other security incidents or vulnerabilities affecting digitally stored data. Internally we have an Internet, Email and Computer Use Policy and all of our employees have been trained on the policy and related tools. Additionally, we employ processes to manage and identify risks arising from cybersecurity threats linked to supplier and customer relationships and our utilization of third-party technology and systems. Our operations involve collecting and storing information in cloud systems, such as Google Drive, and we rely on third-party providers, such as Google, whose systems may encounter interruptions and/or cybersecurity incidents.
We adhere to a risk management framework based
on applicable laws and regulations to handle cybersecurity risks across our products, services, infrastructure and corporate assets. We
regularly conduct risk assessments to gauge the effectiveness of our systems, identifying areas for improvement. These processes enable
us to make informed, risk-based decisions and prioritize cybersecurity measures and risk mitigation strategies. Our risk mitigation efforts
encompass a range of technical and operational actions. Our cybersecurity risk management program is supported by
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Governance
Our cybersecurity risks and related responses
are evaluated by senior leadership and any notable developments are reviewed by our
As of the date of this report, we have
Item 2. Properties
Our principal office is located at 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105-1570. We lease approximately 6,315 square feet of office and light industrial/research space under a lease that is due to expire in March 2029. The rent was $15,278 per month through December 31, 2025 and $14,399 per month effective January 1, 2026, subject to moderate annual increases after 2026.
We also maintain an office in London, Ontario, Canada under a lease that is terminable by either party with 60 days’ written notice. The rent is approximately $900 per month per the agreement with the landlord, subject to moderate annual increases at the discretion of the landlord.
We believe that, with respect to both of our facilities, equivalent suitable space is available at similar rents.
Item 3. 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 conditions.
We may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information
Our common stock has been listed on the Nasdaq Capital Market under the symbol “NDRA” since June 28, 2017 upon the separation of units sold in our initial public offering. Prior to that date, our common stock traded together with warrants issued in our initial public offering as units beginning on May 9, 2017. Our publicly traded warrants expired on May 12, 2022.
As of March 31, 2026, there were 26 holders of record of our common stock.
Dividend Policy
We have never paid cash dividends on our securities and we do not anticipate paying any cash dividends on our shares of common stock in the foreseeable future. We intend to retain any future earnings for reinvestment in our business. Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our board of directors deems relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
There were no sales of unregistered securities during the year ended December 31, 2025, other than as previously reported in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K filed with the SEC.
Issuer Purchases of Equity Securities
There were no repurchases of our common stock during the three months ended December 31, 2025.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Annual Report. This discussion and analysis contain forward-looking statements that are based on our management’s current beliefs and assumptions, which statements are subject to substantial risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” in Item 1A of this Annual Report. Please also see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factor Summary” at the beginning of this Annual Report.
Overview
We are developing a thermo-acoustic medical device designed specifically for accurate liver fat measurement for metabolic disease detection and management and GLP-1 drug eligibility and management. Our goal is to create the next-generation enhanced ultrasound technology platform designed to establish key biomarkers for metabolic diseases management and emerging GLP-1 therapies.
Our business model will primarily be a low barrier-to-entry, multi-year, subscription-based business model with monthly recurring revenue (MRR), while also offering a traditional product sale with annual upgrade and maintenance fees. These sales are expected to be made by a direct sales force to four markets:
| 1. | Pharmaceutical Companies and Clinical Research Organizations (“CROs”) - to assist them in the efficient screening & monitoring subjects for new GLP-1, NASH/MASH and Insulin Sensitizers clinical trials. |
| 2. | High-End Primary Care Clinics - to assist them screening patients for obesity, diabetes and liver disease as well as monitor response to lifestyle changes and drug therapies. |
| 3. | Bariatric and Metabolic Clinics - for obesity and other metabolic diseases detection and therapies response monitoring |
| 4. | Primary & Internal Medicine at Large - to screen patients for obesity, diabetes and liver disease and monitor response to lifestyle change and drug therapy |
Each of our solutions 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.
In 2026, we implemented cost reduction measures, including a reduction in headcount and prioritization of development activities over clinical ones, to extend our operating runway and focus resources on product improvements and regulatory strategy for our TAEUS liver application. These actions are expected to impact the timing of certain development activities, including delaying the timing of a future De Novo submission to the U.S. Food and Drug Administration (“FDA”) relating to our TAEUS liver application.
Financial Operations Overview
Revenue
No revenue has been generated by our TAEUS technology, which we have not commercially sold as of December 31, 2025.
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Research and Development Expenses
Our research and development expenses primarily include wages, fees and equipment for the development of our TAEUS technology platform. 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 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. 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. We have significantly reduced our sales and marketing expenses as part of our cost reduction measures. In the event we obtain FDA approval of our TAEUS liver device, we will seek to expand our sales & marketing efforts, primarily by adding a direct sales force and related expenses and costs.
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
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.
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Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments, warrant liability and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.
Share-based Compensation
The Company’s 2016 Omnibus Incentive Plan (the “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. In addition, on December 9, 2025, the stockholders approved the Second Amendment to the Omnibus Plan (the “Omnibus Plan Amendment The Omnibus Plan Amendment increased the pool of shares available for issuance by 3,200,000 shares of common stock. Due to these increases, the pool of shares issuable under the Omnibus Plan shares increased from 1,738 shares to 3,048,799 shares as of December 31, 2025. In light of the increase effected by the Omnibus Plan Amendment, no automatic increase to the pool was effected as of January 1, 2026.
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.
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 is charged to expense, if applicable, in the financial statements.
Recent Accounting Pronouncements
See Note 2 of the accompanying financial statements for a discussion of recently issued accounting standards.
Results of Operations
Years ended December 31, 2025 and 2024
Revenue
We had no revenue during the years ended December 31, 2025 and 2024.
Cost of Goods Sold
We had no cost of goods sold during the years ended December 31, 2025 and 2024.
Research and Development
Research and development expenses were $1,849,996 for the year ended December 31, 2025, as compared to $3,190,293 for the year ended December 31, 2024, a decrease of $1,340,297 or 42%. The costs include primarily wages, fees, consultants, contractors and equipment 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 small trials to test our results.
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Sales and Marketing
Sales and marketing expenses were $189,470 for the year ended December 31, 2025, as compared to $571,040 for the year ended December 31, 2024, a decrease of $381,570, or 67%. The costs include primarily headcount and pre-selling activities for our TAEUS product line. Sales and marketing expenses decreased largely due to the reduction of Sales & Marketing personnel until the clinical trials are complete.
General and Administrative
Our general and administrative expenses for the year ended December 31, 2025 were $3,723,635, compared to $7,055,814 for the year ended December 31, 2024, a decrease of $3,332,179, or 47%.
The primary driver of this decrease was our inventory reserve. In 2024, in connection with a strategic shift under the direction of our new management team, we determined that we needed to redesign our TAEUS liver system to require less space, be simpler to use and be more cost effective. As a result, we performed a thorough assessment of the valuation of inventory as of December 31, 2024 and determined to record a non-cash charge to reserve against all inventory, as it may not be usable in connection with our redesigned system. This reserve totaled $2,525,179 as of December 31, 2024. Our reserve was $0 as of December 31, 2025.
Also included in general and administrative expenses for the years ended December 31, 2025 and 2024 were wages and related expenses of $1,197,556 and $1,365,860, respectively, and professional fees of $1,728,107 and $2,177,046, respectively.
Other Expenses
Other expenses were $1,264,309 for the year ended December 31, 2025 primarily driven by changes in fair value of digital assets, non-cash warrant expense, changes in fair value of warrant liability and gain on settlement on warrant exercise.
For the year ended December 31, 2024, we had other expense of $690,800 primarily driven by non-cash warrant expense, changes in fair value of warrant liability and gain on settlement on warrant exercise.
Net Loss
As a result of the foregoing, for the year ended December 31, 2025, we recorded a net loss of $7,027,410, compared to a net loss of $11,507,947 for the year ended December 31, 2024.
Near-Term Liquidity and Capital Resources
Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future. As of December 31, 2025, we had an accumulated deficit of $110,465,509 and had $762,365 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. In 2026, we implemented cost reduction measures, including a reduction in headcount and prioritization of development activities over clinical ones, to extend our operating runway and focus resources on product improvements and regulatory strategy for our TAEUS liver application. These actions are expected to impact the timing of certain development activities, including delaying the timing of a future De Novo submission to the FDA relating to our TAEUS liver application. Additionally, in March 2026, we announced that the Board had initiated a process to evaluate a range of strategic alternatives including, but not limited to strategic investments, mergers, business combinations, in-licensing or collaboration arrangements, asset sales, or sale or merger of the Company.
46
If we are unable to obtain adequate financing or financings in the near term or if the strategic alternatives review process does not result in any transaction or other strategic outcome, we will be forced to undertake additional measures, which may include materially curtailing or eliminating our operations, or undergoing restructuring or insolvency proceedings.
We need additional capital to allow us to continue to execute our clinical trials and commercialization plans through 2026 and beyond. We are considering potential financing options that may be available to us, including sales of our common stock through our at-the-market sales program (the “ATM Program”) with Lucid Capital Markets, LLC, which are limited due to registration statement rules relating to public float. Except for the ATM Program, we have no commitments to obtain any additional funds, and there can be no assurance funds will be available in sufficient amounts or on acceptable terms. If we are unable to obtain sufficient additional financing in a timely fashion and on terms acceptable to us, our financial condition and results of operations may be materially adversely affected and we may not be able to continue operations or execute our stated commercialization plan.
The consolidated financial statements included in this Form 10-K 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 year ended December 31, 2025, we incurred net losses of $7,027,410 and used cash in operations of $5,182,558. In light of our cash balance as of December 31, 2025, we will need to raise additional capital in order to fund operations through the next twelve months. 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 year ended December 31, 2025, we used $5,182,558 of cash in operating activities primarily as a result of our net loss of $7,027,410, offset by share-based compensation of $329,409, change in fair value of warrant liability of ($319,537), fair value of vested advisory warrants of $665,030, digital asset staking compensation of ($5,121), changes in fair value of digital assets of $995,161, amortization of right of use assets of $113,249, depreciation expense of $44,045, and net changes in operating assets and liabilities of $22,616.
During the year ended December 31, 2024, we used $7,400,547 of cash in operating activities primarily as a result of our net loss of $11,507,947, offset by a non-cash charge for inventory reserve of $2,387,134, share-based compensation of $571,924, the net effect of warrants of $799,284 (which includes warrant expense of $7,323,685, changes in fair value of warrant liability of ($3,447,737) and gain on settlement on warrant exercise of ($3,076,664)), amortization of right of use assets of $159,683, depreciation expense of $46,489, fixed assets write-off of $8,808, and net changes in operating assets and liabilities of $134,079.
Investing Activities
During the year ended December 31, 2025, we used $17,280 in investing activities related to purchases of fixed assets, and purchased $3,000,000 of digital intangible assets.
During the year ended December 31, 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.
Financing Activities
During the year ended December 31, 2025, our financing activities provided $4,514,482 in proceeds from fundraising activities, $1,218,241 in proceeds from issuances of common stock for cash.
During the year ended December 31, 2024, our financing activities provided $1,148,470 in proceeds from issuances of common stock and warrants, $6,688,930 in proceeds from warrant issuances and exercises. We also used $28,484 to repay a loan from TD Bank under the Canadian Emergency Business Account.
47
Long-Term Liquidity
We have not completed the commercialization of any of our TAEUS technology platform applications. To the extent we continue the development and commercialization of our TAEUS technology, we would expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses may increase as we:
| ● | advance the engineering design and development of our TAEUS technology; |
| ● | acquire parts and build finished goods inventory of the TAEUS system; |
| ● | complete regulatory filings required for marketing approval in the United States, including clinical studies to support our planned De Novo application with the FDA; |
| ● | seek to hire a sales and marketing team to market and sell our products; |
| ● | advance development of other 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 ATM Program, the use of which is 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 TAEUS application or to complete the development of any other TAEUS application and we will need to raise 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 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. As described above under “Near-Term Liquidity and Capital Resources,” the Board initiated a process to review strategic alternatives for the Company.
Off-Balance Sheet Transactions
At December 31, 2025, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
48
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
ENDRA Life Sciences Inc.
December 31, 2025
F-1
 |
Houston Office:
7915 FM 1960 West,
Ste. 220
www.rbsmllp.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ENDRA Life Sciences Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ENDRA Life Sciences Inc. and Subsidiaries (collectively, the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025 and 2024 in conformity with accounting principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, has an accumulated deficit and has stated that substantial doubt exists about Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans in regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Crypto Assets Held
Critical Audit Matter Description
Crypto assets are generally accessible only by the possessor of the unique private key relating to the digital wallet or node in which the crypto assets are held. Accordingly, private keys must be safeguarded and secured in order to prevent an unauthorized party from accessing the crypto assets within a digital wallet. The Company primarily holds crypto assets for its own use in wallets. The loss, theft, or otherwise compromise of access to the private keys required to access the crypto assets could adversely affect the Company’s ability to access the crypto assets within its environment. This could result in loss of crypto assets held.
We identified crypto assets held as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the existence and rights & obligations of crypto assets in the wallet. The nature and extent of audit effort required to address the matter includes significant involvement of more experienced engagement team members related to the matter.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to crypto assets held in wallet included the following, among others:
| 1. | We noted the controls within the Company’s private key management process including controls related to physical access, key generation, and segregation of duties across the processes. |
| 2. | We tested the effectiveness of management’s reconciliation control of internal books and records to external blockchains. |
| 3. | We independently obtained evidence from public blockchains to test the existence of crypto asset balances. |
| 4. | We obtained confirmation from Custodian confirming the number of tokens held in the wallet as on the reporting date. |
| 5. | We obtained evidence that management has control of the private keys required to access crypto assets held through observing the wallets signed in using selected private keys or through observing the movement of selected crypto asset transactions. |
| 6. | We evaluated the reliability of audit evidence obtained from public blockchain |
We applied auditor judgment in determining the nature and extent of audit evidence required, especially related to assessing the existence of the digital assets and whether the Company controls the digital assets. We evaluated the sufficiency and appropriateness of audit evidence obtained by assessing the results of procedures performed over the digital assets.
/s/ RBSM LLP
We have served as the Company’s auditor since 2015.
RBSM LLP
Houston, Texas
March 31, 2026
PCAOB ID Number 587
F-3
ENDRA Life Sciences Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Fixed assets, net | ||||||||
| Right of use assets | ||||||||
| Prepaid expenses, long term | ||||||||
| Digital Assets | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Lease liabilities, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Debt | ||||||||
| Lease liabilities | ||||||||
| Warrant Liability | ||||||||
| Total Long Term Debt | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Series A Convertible Preferred Stock, $ | ||||||||
| Series B Convertible Preferred Stock, $ | ||||||||
| Series C Preferred Stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Stock payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ENDRA Life Sciences Inc.
Consolidated Statements of Operations
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Operating Expenses | ||||||||
| Research and development | $ | $ | ||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other (expenses) income | ||||||||
| Other income | ||||||||
| Digital asset staking compensation | ||||||||
| Change in fair value of digital assets | ( | ) | ||||||
| Warrant expense | ( | ) | ( | ) | ||||
| Changes in fair value of warrant liability | ||||||||
| Gain on settlement of warrant exercise | ||||||||
| Total other expenses | ( | ) | ( | ) | ||||
| Loss from operations before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares – basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ENDRA Life Sciences Inc.
Consolidated Statements of Stockholders’ Equity
| Series A Convertible | Series B Convertible | Additional | Total | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common stock | Paid in | Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2023 | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Deficit | Equity | ||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Preferred Stock conversion To Common Stock | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||||||
| Common Stock issued for Cash | - | - | ||||||||||||||||||||||||||||||||||||||
| Common Stock issued for Warrant Exercise | - | - | ||||||||||||||||||||||||||||||||||||||
| Common Stock issued for Cashless Warrant Exercise | - | - | ||||||||||||||||||||||||||||||||||||||
| Fair value of vested Common Stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Fair value of vested Stock Options | - | - | - | |||||||||||||||||||||||||||||||||||||
| Stock Payable Towards preference Dividend | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Series A Convertible | Series B Convertible | Additional | Total | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common stock | Paid in | Stock | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2025 | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Deficit | Equity | ||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | - | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Common stock issued for cash | - | - | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for fundraising | - | - | ||||||||||||||||||||||||||||||||||||||
| Fair value of vested advisory warrant | - | - | - | |||||||||||||||||||||||||||||||||||||
| Fair value of vested stock options | - | - | - | |||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock units | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | - | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ENDRA Life Sciences Inc.
Consolidated Statements of Cash Flows
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Fixed assets write off | ||||||||
| Inventory reserve | ||||||||
| Stock compensation expense | ||||||||
| Amortization of right of use assets | ||||||||
| Fair value of vested advisory warrant | ||||||||
| Digital asset staking compensation | ( | ) | ||||||
| Changes in fair value of digital assets | ||||||||
| Warrant Expense | ||||||||
| Changes in fair value of warrant liability | ( | ) | ( | ) | ||||
| Gain or Loss on Settlement of warrant exercise | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease/(increase) in prepaid expenses | ( | ) | ||||||
| Decrease in inventory | ||||||||
| Increase/(decrease) in accounts payable and accrued liabilities | ( | ) | ||||||
| Decrease in lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of fixed assets | ( | ) | ( | ) | ||||
| Proceeds from sale of fixed assets | ||||||||
| Purchase of Digital Intangible Assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from fundraising activities | ||||||||
| Proceeds from issuance of common stock for cash | ||||||||
| Proceeds from issuance of common stock for cashless warrant exercise - | ||||||||
| Repayment of loan | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash items | ||||||||
| Interest paid | $ | $ | ||||||
| Income tax paid | $ | $ | ||||||
| Supplemental disclosures of non-cash items | ||||||||
| Stock dividend payable | $ | $ | ( | ) | ||||
| Right of use asset | $ | $ | ||||||
| Lease liability | $ | $ | ||||||
| Cashless warrants | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ENDRA Life Sciences Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2025 and 2024
Note 1 - Nature of the Business
ENDRA Life Sciences Inc. (“ENDRA” or the “Company”) is designing a medical device for accurate liver fat measurement for use in metabolic disease detection and management and GLP-1 drug eligibility and management in circumstances where other technologies are unavailable or impractical.
In 2025, the Company expanded its business strategy to include a Digital Asset Treasury (“DAT”) initiative, managed in collaboration with Arca Investment Management (“Arca”), which seeks to optimize capital preservation and generate non-dilutive returns through investments in decentralized finance (“DeFi”) assets. This financial strategy operates in tandem with the Company’s core medical technology mission: the commercialization of the TAEUS platform via a recurring subscription model, with a specific focus on the burgeoning GLP-1 and metabolic disease markets.
ENDRA was incorporated on
Note 2 - Summary of Significant Accounting Policies and Going Concern
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Management makes estimates that affect certain accounts including inventory reserve, deferred income tax assets, accrued expenses, fair value of equity instruments, fair value of warrant liability 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 financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
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.
In 2024, The Company determined that it needed
to redesign its system so that it requires less space, is simpler to use and is more cost effective. Based on this, the Company performed
a thorough assessment of the valuation of inventory as of December 31, 2024 and reserved
F-8
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 December 31, 2025 and 2024 the
Company recorded a right of use asset of $
Digital Assets
The Company maintains a digital asset treasury strategy (“DAT Strategy”) under which it may acquire, hold, and deploy certain digital assets as part of its treasury and capital management activities. The Company’s digital assets consist primarily of [Bitcoin/Ethereum/other], which are recorded on the consolidated balance sheets as “Digital assets.”
Measurement of Digital Assets
Digital assets are accounted for as indefinite-lived intangible assets and, effective January 1, 2025, are measured at fair value in accordance with ASC 350-60, Intangibles—Goodwill and Other—Crypto Assets. The Company determines the fair value of its digital assets based on quoted market prices in active markets (Level 1 inputs) as of the reporting date.
Changes in the fair value of digital assets are recognized in the consolidated statements of operations within “Change in fair value of digital assets.” Realized gains and losses from the sale of digital assets are also recorded within this line item. Transaction costs associated with the acquisition or disposition of digital assets are expensed as incurred within operating expenses.
Digital Asset Staking
The Company may participate in staking activities whereby it validates transactions on blockchain networks and earns rewards in the form of additional digital assets.
Digital asset staking rewards are recognized as revenue within “Digital asset staking compensation” in the consolidated statements of operations when the Company has (i) performed the required validation services, (ii) earned the right to receive the rewards, and (iii) the amount can be reasonably estimated. Staking rewards are measured at the fair value of the digital assets received at the time they are earned.
Digital assets received from staking activities are initially recorded at fair value and subsequently included in the Company’s digital asset holdings, where they are remeasured at fair value at each reporting period.
Custody and Safeguarding
The Company utilizes third-party custodians to safeguard its digital assets. The Company recognizes digital assets on its balance sheet when it has control over the assets, including when assets are held by a custodian on the Company’s behalf.
Presentation
Digital assets are classified as noncurrent assets on the consolidated balance sheets unless management intends to sell them within one year. Changes in fair value and staking compensation are presented separately within operating income (loss), unless otherwise required by the nature of the Company’s operations.
F-9
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 principle 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.
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 years ended December 31, 2025 and 2024, the Company incurred $
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.
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Shares issuable upon conversion of Series A Convertible Preferred Stock | ||||||||
| Restricted Stock Units | ||||||||
| Potential equivalent shares excluded | ||||||||
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.
F-10
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 options and warrants is estimated using the Black-Scholes option pricing model or other appropriate valuation techniques. Key assumptions include expected volatility, risk-free interest rate, expected term, and dividend yield. These inputs are based on observable market data where available (Level 2) or, when necessary, management’s estimates (Level 3). Fair value measurements are reassessed at each reporting date, and any changes are reflected in the financial statements.
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. On January 1, 2025, the pool
of shares issuable under the Omnibus Plan automatically increased by
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. Accounting guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has limited historical experience with forfeitures and were based on management’s estimates.
F-11
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 December 31, 2025 of $
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 December 31, 2025 and 2024, inventory consisted of raw materials, subassemblies to be used in the assembly of TAEUS systems, and finished goods. As of December 31, 2025 and 2024, the Company had no orders pending for the sale of a TAEUS system.
As of December 31, 2025 and 2024, the Company had recorded inventory
reserves totaling $
As of December 31, 2025 and 2024, the Company had inventory valued
at $
Note 4 - Fixed Assets
As of December 31, 2025 and 2024, fixed assets consisted of the following:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Property, leasehold and capitalized software | $ | $ | ||||||
| TAEUS development and testing | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | $ | $ | ||||||
Depreciation expense for the years ended December 31, 2025 and 2024 was $
Note 5 - Accounts Payable and Accrued Liabilities
As of December 31, 2025 and 2024, current liabilities consisted of the following:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued employee benefits | ||||||||
| Insurance premium financing and other accruals | ||||||||
| Total | $ | $ | ||||||
F-12
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
Note 7 - Capital Stock
Reverse Stock Splits
On August 16, 2024, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment to its certificate of incorporation, which effectuated as of August 20, 2024 at 12:01 a.m. Eastern Time a reverse split of the Company’s common stock by a ratio of one-for-50 (the “August 2024 Reverse Stock Split”).
On November 4, 2024, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment to its certificate of incorporation, which effectuated as of November 7, 2024 at 12:01 a.m. Eastern Time a reverse split of the Company’s common stock by a ratio of one-for-35 (the “November 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 both the August 2024 Reverse Stock Split and the November 2024 Reverse Stock Split.
The August 2024 Reverse Stock Split and 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.
Capital Stock
At December 31, 2025, the authorized capital of
the Company consisted of
As of December 31, 2025, there were
F-13
During the year ended December 31, 2025, the Company issued a total
of
Private Placement offering (described below):
| ● |
Other issuances:
| ● |
| ● |
During the year ended December 31, 2024, the Company issued a total
of
Private placement (described below):
| ● |
| ● |
Other issuances:
| ● |
| ● |
| ● |
| ● |
| ● |
Series B warrant exercises:
| ● |
F-14
Recent Offerings
On October 15, 2025, the Company closed a private
placement offering (the “Private Placement”) of an aggregate of
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
The Company received net proceeds from the Offering, after deducting
offering expenses payable by the Company, of $
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 effectiveness of the amendment to the Company’s certificate of incorporation filed for the August 2024 Reverse Stock Split
(the “Initial Exercise Date”). Each Series A Warrant will expire
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 $
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 $
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 $
F-15
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
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 $
Note 8 - Common Stock Options, Restricted Stuck Units 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. There were no issuances of stock options in the year ended December 31, 2025. A summary of option activity under the Company’s Omnibus Plan as of December 31, 2025, and changes during the year then ended, is presented below:
| Weighted | ||||||||||||
| Weighted | Average | |||||||||||
| Average | Remaining | |||||||||||
| Number of Options | Exercise Price | Contractual Term (Years) | ||||||||||
| Balance outstanding at December 31, 2024 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited | - | |||||||||||
| Cancelled or expired | ( | ) | - | |||||||||
| Balance outstanding at December 31, 2025 | $ | |||||||||||
| Exercisable at December 31, 2025 | $ | |||||||||||
F-16
Restricted Stock Units
On June 11, 2025, the Company granted a total
of
During the year ended December 31, 2025, the Company
recognized $
Unrecognized stock-based compensation expense
related to these RSUs will be recognized over the remaining vesting period, which is
Restricted Common Stock
On November 30, 2023, the Company issued
Note 9 - Common Stock Warrants
As described above in “Recent Offerings”
(Note 7), in 2025, the Company issued
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 $
F-17
In connection with the 2025 Private Placement,
the Company also issued placement agent warrants (“Placement Agent Warrants” to purchase up to
In connection with the 2024 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
Warrant Exercises
On May 2, 2023, the Company conducted a registered
offering in which the Company issued
Between June 4, 2024 and June 7, 2024,
Between August 19, 2024 and December 31, 2024,
the Company issued a total of
During the year ended December 31, 2025, no warrants were exercised.
The following table summarizes all stock warrant activity of the Company for the year ended December 31, 2025 :
| Weighted | Weighted | |||||||||||
| Number of | Average Exercise | Average Contractual | ||||||||||
| Warrants | Price | Term (Years) | ||||||||||
| Balance outstanding at December 31, 2024 | $ | |||||||||||
| Issued | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited | - | |||||||||||
| Expired | - | |||||||||||
| Balance outstanding at December 31, 2025 | $ | |||||||||||
| Exercisable at December 31, 2025 | $ | |||||||||||
F-18
Common Stock Warrants
As described above in “Recent Offerings”
(Note 7), the Company issued
Warrants classified as
liabilities are remeasured at fair value at each balance sheet date until exercised or expired, with changes in fair value recognized
in the statement of operations. During the years ended December 31, 2025 and 2024, the Company recognized a gain of $
Measurement
The Company established
the initial fair value for the Series Warrant liability on August 20, 2024, the date the Series Warrants were initially exercisable. 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.
| December 31, 2025 | ||||||||
| Input | (Initial Measurement) | December 31, 2024 | ||||||
Exercise price | $ | $ | ||||||
| Stock price | $ | $ | ||||||
| Volatility | ||||||||
| Discount rate | ||||||||
| Dividends | ||||||||
| Expected life (years) | ||||||||
Note 10 - Digital Assets
The Company holds digital assets as part of its treasury strategy. As of December 31, 2025, the Company’s digital asset holdings consist of HYPE tokens.
Initial Purchase
On October 23, 2025, the Company purchased approximately
Accounting Policy
The Company accounts for its digital assets in accordance with ASC 350-60, Accounting for and Disclosure of Crypto Assets. Digital assets are measured at fair value each reporting period, with changes in fair value recognized in earnings.
Fair value is determined using observable market prices derived from active trading venues. The Company uses the market price reported in custody statements provided by Anchorage Digital Bank, the Company’s digital asset custodian.
F-19
Digital Asset Balance
| December 31, 2025 | ||||
| Digital assets at fair value | $ | |||
| Unrealized gain (loss) recognized in earnings | $ | ( | ) | |
Staking Activities
The Company participates in staking activities related to its HYPE holdings. Staking rewards represent additional tokens earned from participation in blockchain validation activities.
Staking rewards are recognized as income when the Company obtains control of the tokens, which occurs when the tokens are credited to the Company’s custody account. The rewards are measured at fair value at the time of receipt.
For the year ended December 31, 2025, the Company recognized $
Note 11 - Related Party Transactions
In September 2024 the Company began using IS Bookkeeping
& Payroll which is a division of Impact Solve, LLC (dba Impact Solutions) an accounting and chief financial officer service firm.
As described below in note 11, the Company’s Chief Financial Officer works in a part-time capacity for the Company through Impact
Solutions. In 2025 and 2024, IS Bookkeeping & Payroll provided human resources and payroll processing services to the Company totaling
$
In October 2025, the Company conducted a private placement offering
in which the Company sold
Note 12 - 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
On March 15, 2021, the Company entered into an
amendment to the lease, increasing the total rentable square feet to
On December 1, 2024, the Company entered into
an amendment to the lease, decreasing the total rentable square feet to
F-20
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 December 31, 2025 was
As of December 31, 2025, the maturities of operating lease liabilities are as follows:
| Operating | ||||
| Lease | ||||
| 2026 | ||||
| 2027 and beyond | ||||
| Total | $ | |||
| Less: amount representing interest | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ( | ) | ||
| Long-term lease obligations | $ | |||
For the years ended December 31, 2025 and 2024, the Company incurred
rent expenses of $
Employment and Consulting Agreements
Alexander Tokman - Effective August
13, 2024, the Board appointed Alexander Tokman as the Company’s 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 $
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. The Company
pays Impact Solutions a base monthly fee of $
Litigation
From time to time the Company may become a party
to litigation in the normal course of business. During the year ended December 31, 2025, the Company recognized $
F-21
Note 13 - Income Taxes
The components of earnings before income taxes for the years ended December 31, 2025 and 2024 were as follows:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Income (loss) before income taxes | ||||||||
| Domestic | ( | ) | ( | ) | ||||
| Foreign | ( | ) | ( | ) | ||||
| Total income (loss) before income taxes | $ | ( | ) | $ | ( | ) | ||
Income tax provision (benefit) consists of the following for the years ended December 31, 2025 and 2024:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Income tax provision (benefit): | ||||||||
| Current | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ||||||||
| Total Current | ||||||||
| Deferred | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ||||||||
| Total Deferred | ||||||||
| Total income tax provision (benefit) | $ | $ | ||||||
A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows:
| For the Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Rate Reconciliation | ||||||||||||||||
| Expected tax at statutory rates | $ | ( | ) | % | $ | ( | ) | % | ||||||||
| Permanent Differences | $ | - | % | ( | ) | % | ||||||||||
| State Income Tax, Net of Federal benefit | $ | ( | ) | % | ( | ) | % | |||||||||
| State Rate Change-Federal Impact | $ | ( | ) | % | ( | ) | % | |||||||||
| State Rate Change Adjustment | $ | - | % | % | ||||||||||||
| Foreign taxes at rate different than US Taxes | $ | ( | ) | % | ( | ) | % | |||||||||
| Current Year Change in Valuation Allowance | $ | - | % | - | % | |||||||||||
| Prior Year True-Ups | $ | ( | ) | % | ( | ) | % | |||||||||
| Income tax provision (benefit) | $ | % | $ | % | ||||||||||||
F-22
Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred Tax Assets/(Liab.) Detail | ||||||||
| Deferred Tax Assets (Liabilities): | ||||||||
| Stock Based Comp | $ | |||||||
| Accrued Bonus | $ | |||||||
| Accrued Expenses | $ | |||||||
| Depreciation | $ | |||||||
| ROU (Asset) | $ | ( | ) | ( | ) | |||
| ROU Liability | $ | |||||||
| Changes in fair value of digital asset | $ | |||||||
| Capitalized R&D | $ | |||||||
| R&D Credit | $ | |||||||
| Net Operating Losses (US) | $ | |||||||
| Net Operating Losses (Foreign) | $ | |||||||
| Net deferred tax assets (liabilities) | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets (liabilities) | $ | $ | ||||||
The domestic U.S. net operating loss carryforward
increased from $
The Internal Revenue Code includes a provision,
referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns for 2022 and after remain open to examination. We and our subsidiaries are also subject to income tax in multiple states and foreign jurisdictions. Generally, foreign income tax returns after 2022 remain open to examination. No income tax returns are currently under examination. As of December 31, 2025 and 2024, the Company does have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2025 and 2024, there were penalties or interest recorded in income tax expense.
Note 14 - Segment Reporting
Operating segments are defined as components of
an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision
making group, in deciding how to allocate resources in assessing performance. The Company has
F-23
The accounting policies of the biotech segment
are the same as those described in the summary of significant accounting policies.
To date, the Company has not generated any product revenue. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as it advances product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval.
As such, the CODM uses cash forecast models in deciding how to invest into the biotech segment. Such cash forecast models are reviewed to assess the entity-wide operating results and performance. Net loss is used to monitor budget versus actual results. Monitoring budgeted versus actual results is used in assessing performance of the segment and in establishing management’s compensation, along with cash forecast models.
The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2025, and 2024:
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Operating Expenses | ||||||||
| Research and development | $ | $ | ||||||
| Sales and marketing | $ | $ | ||||||
| General and administrative | $ | $ | ||||||
| Total operating expenses | $ | $ | ||||||
| Operating loss | $ | ( | ) | $ | ( | ) | ||
| Other segment items (a) | $ | ( | ) | $ | ( | ) | ||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Reconciliation of net loss | ||||||||
| Adjustments and reconciling items | ||||||||
| Consolidated net loss | $ | ( | ) | $ | ( | ) | ||
| (a) |
Note 15 - Subsequent Events
The Company has evaluated events through March 31, 2026, the filing date of this Annual Report on Form 10-K and determined that there have been no additional subsequent events that occurred that would require adjustments to our disclosures in the consolidated financial statements, other than the following:
On February 23, 2026, the Company completed a
sale and transfer of $
On February 26, 2026, the Company issued a total
of
On March 16, 2026, the Company completed a sale
and transfer of $
On March 19, 2026, the Company implemented a
reduction in workforce as part of efforts to extend its cash runway and align resources with its strategic priorities. In connection
with this action, the Company expects to incur pre-tax cash charges of approximately $
On March 25, 2026, the Company announced that it had initiated a process to evaluate a range of strategic alternatives aimed at maximizing shareholder value. The Company continues to evaluate these alternatives; however, there can be no assurance as to the outcome or timing of this process.
F-24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, management performed, with the participation of our principal executive 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 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 and principal financial officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting, as described below.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
49
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. Management identified the following material weakness as of December 31, 2025: insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting. Because of this material weakness, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2025.
Continuing Remediation Efforts
To remediate its internal control weakness, management intends to implement the following measures, 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 |
| ● | Complete the development of and maintain adequate written accounting policies and procedures. |
As we are not an “accelerated filer” under SEC rules, we are not required to provide an auditor’s attestation of management’s assessment of internal control over financial reporting as of December 31, 2025.
Changes in Internal Control of Financial Reporting
During the three months ended December 31, 2025, except as described above under “Continuing Remediation Efforts,” there were no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
During the three months ended December 31, 2025,
none of our directors or officers
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
50
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names and ages of all of our executive officers and directors. Our officers are appointed by, and serve at the pleasure of, the board of directors.
| Name | Age | Position | ||
| Alexander Tokman | 64 | Chief Executive Officer and Chairman | ||
| Richard Jacroux | 58 | Chief Financial Officer | ||
| Louis J. Basenese | 48 | Director | ||
| Anthony DiGiandomenico | 59 | Director | ||
| Michael Harsh | 71 | Director |
Biographical information with respect to our executive officers and directors is provided below. There are no family relationships between any of our executive officers or directors.
Alexander Tokman joined ENDRA’s Board of Directors in 2008 and was appointed as the Company’s Chief Executive Officer and Chairman of the Board of Directors on August 13, 2024. Mr. Tokman is a growth-driven executive with 24+ years of cross-functional leadership and P&L management experience centered around the development and commercialization of new technology products and services for Medical Device, Biotech, Consumer Electronics, AI and AgTech markets. He has a demonstrated track record in driving breakthrough revenue growth and valuations for start-ups, micro-caps and Fortune 100 companies and implementing improved strategies and operating mechanisms to accelerate business turnarounds.
Prior to his appointment as ENDRA’s Chief Executive Officer, he served as a President of a privately held AI/Computer Vision SaaS company and was a CEO-in-Residence at the Allen Institute for Artificial Intelligence (AI2). Mr. Tokman also currently serves as an independent board director for a technology company commercializing a dedicated breast CT imaging platform, and he’s on the board of the American Academy of Thermography, a non-profit organization focused on bringing novel infrared imaging applications for disease diagnosis. Prior to that, he successfully led an IoT technology microcap for over 12 years and spent over 10 years as an executive with GE Healthcare, where he led several global businesses and successful commercialization of multiple business segments, including PET/CT. Mr. Tokman received both undergraduate and graduate Engineering degrees from the University of Massachusetts.
Mr. Tokman’s executive experience in companies engaged in the development and commercialization of new technology products makes him well-suited to serve on our Board of Directors.
Richard Jacroux was appointed Chief Financial Officer by the Board on August 7 2024, and serves as Principal Financial Officer and Principal Accounting Officer for the Company. Mr. Jacroux has over 20 years of experience in financial management and accounting and began his career at Ernst & Young LLP. Prior to ENDRA, Mr. Jacroux served as Chief Financial Officer of IUNU, Inc. and Buddy Platform, LTD. In 2023, he founded Impact Solve, LLC (dba Impact Solutions), an accounting and fractional chief financial officer service firm. He has also served as an adjunct professor at the University of Washington for more than 5 years. Mr. Jacroux received a BA in business administration and accounting from the University of Washington, and an MBA from the Kellogg School of Management.
Louis J. Basenese joined our Board of Directors in April 2020. As of January 2025, Mr. Basenese is the Executive Vice President - Market Strategy at Prairie Operating Corp. Prior to that, Mr. Basenese served as President, Chief Market Strategist at Public Ventures, LLC, a registered broker-dealer, Member FINRA/SIPC, from June 2022 to January 2025. Previously, he was Founder and Chief Analyst of Disruptive Tech Research, LLC, an independent equity research and advisory firm focused exclusively on disruptive technology companies that has served the investment management community from June 2014 through September 2022. Since 2005, Mr. Basenese has also managed The Basenese Group, LLC, a consulting business focused on communications and business development for private and public small and microcap businesses.
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Mr. Basenese holds an M.B.A. in Finance from the Crummer Graduate School of Business at Rollins College and a Bachelor of Arts from the University of Florida. He is also a former Series 7 and Series 66 license holder.
Mr. Basenese’s experience with investor relations and business development of technology-focused companies, as well as financing and strategic planning, provides him with the qualifications and skills necessary to serve as a member of our Board of Directors.
Anthony DiGiandomenico joined our Board of Directors in 2013. A co-founder of MDB Capital Group LLC, Mr. DiGiandomenico focuses on corporate finance and capital formation for growth-oriented companies. He has participated in all areas of corporate finance including private capital, public offerings, PIPEs, business consulting and strategic planning, and mergers and acquisitions.
Mr. DiGiandomenico has also worked on a wide range of transactions for growth-oriented companies in biotechnology, nutritional supplements, manufacturing and entertainment industries. Prior to forming MDB Capital Group LLC in 1997, Mr. DiGiandomenico served as President and CEO of the Digian Company, a real estate development company. Mr. DiGiandomenico has also served on the board of directors of Cue Biopharma, Inc., an immunotherapy company, and on the board of directors of Provention Bio, Inc., a clinical-stage biopharmaceutical company.
Mr. DiGiandomenico holds an MBA from the Haas School of Business at the University of California, Berkeley and a BS in Finance from the University of Colorado.
Mr. DiGiandomenico’s financial expertise, general business acumen and significant executive leadership experience position him well to make valuable contributions to our Board of Directors.
Michael Harsh joined our Board of Directors in 2015. He is a Portfolio Executive for the National Institutes of Health (NIH) Rapid Acceleration of Diagnostics (RADx) COVID-19 Response Program and a co-founder and Chief Product Officer of Terapede Systems, a digital Xray startup that focuses on developing an ultra-high resolution medical flat panel X-ray detector. He co-founded Terapede in 2015. Prior to Terapede, Mr. Harsh had a 36-year career with General Electric (“GE”). He held numerous positions within GE and served as Vice President and Chief Technology Officer of GE Healthcare, a multi-billion dollar division of GE, where he led its global science and technology organization and research and development teams in diagnostics, healthcare IT and life sciences. In 2004, Mr. Harsh was named Global Technology Leader - Imaging Technologies at the GE Global Research Center, where he led the research for imaging technologies across the company as well as the research associated with computer visualization and superconducting systems.
Additionally, Mr. Harsh is a member of the boards of directors of Compute Health (NYSE: CPUH-UN), Imagion Biosystems (IBX.AX), and EmOpti, as well as a member of the Radiological Society of North America (RSNA), Research & Education Foundation Board of Trustees. He had previously served as a director for FloDesign Sonics until its acquisition by MilliporeSigma, a division of the Merck Group. He is also a McKinsey Senior Advisor and a consultant in the medical device industry.
Mr. Harsh is a graduate of Marquette University, where he earned a bachelor’s degree in Electrical Engineering. He holds numerous U.S. patents in the field of medical imaging and instrumentation. In 2008, Mr. Harsh was elected to the American Institute for Medical and Biological Engineering College of Fellows for his significant contributions to the medical and biological engineering field.
Mr. Harsh’s extensive industry, executive and board experience position him well to serve on our Board of Directors.
Board Independence
The Board of Directors has determined that each of Mr. Basenese, Mr. DiGiandomenico, and Mr. Harsh is an independent director within the meaning of the director independence standards of The Nasdaq Stock Market (“Nasdaq”). Furthermore, the Board has determined that all of the members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are independent within the meaning of the director independence standards of Nasdaq and the rules of the SEC applicable to each such committee.
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Committees
Audit Committee. Our Audit Committee consists of Mr. Basenese, Mr. DiGiandomenico, and Mr. Harsh. The Board of Directors has determined that each member of the Audit Committee is independent within the meaning of the Nasdaq director independence standards and applicable rules of the SEC for audit committee members. The Board of Directors has elected Mr. DiGiandomenico as Chairperson of the Audit Committee and has determined that he qualifies as an “audit committee financial expert” under the rules of the SEC. The Audit Committee is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities with respect to financial reports and other financial information. The Audit Committee (1) reviews, monitors and reports to the Board of Directors on the adequacy of the Company’s financial reporting process and system of internal controls over financial reporting, (2) has the ultimate authority to select, evaluate and replace the independent auditor and is the ultimate authority to which the independent auditors are accountable, (3) in consultation with management, periodically reviews the adequacy of the Company’s disclosure controls and procedures and approves any significant changes thereto, (4) provides the audit committee report for inclusion in our proxy statement for our annual meeting of stockholders and (5) recommends, establishes and monitors procedures for the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters and the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee met four times in 2025 as well as acted by written consent.
Compensation Committee. Our Compensation Committee presently consists of Mr. Basenese, Mr. DiGiandomenico, and Mr. Harsh, each of whom is a non-employee director as defined in Rule 16b-3 of the Exchange Act. The Board has also determined that each member of the Compensation Committee is also an independent director within the meaning of Nasdaq’s director independence standards. Mr. Basenese serves as Chairperson of the Compensation Committee. The Compensation Committee (1) discharges the responsibilities of the Board of Directors relating to the compensation of our directors and executive officers, (2) oversees the Company’s procedures for consideration and determination of executive and director compensation, and reviews and approves all executive compensation, and (3) administers and implements the Company’s incentive compensation plans and equity-based plans. The Compensation Committee did not meet separately from the board of directors in 2025 but acted by unanimous written consent.
Corporate Governance and Nominating Committee. Our Corporate Governance and Nominating Committee consists of Mr. Harsh and Mr. Basenese. The Board of Directors has determined that each member of the Corporate Governance and Nominating Committee is an independent director within the meaning of the Nasdaq director independence standards and applicable rules of the SEC. Mr. Harsh serves as Chairperson of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee (1) recommends to the Board of Directors persons to serve as members of the Board of Directors and as members of and chairpersons for the committees of the Board of Directors, (2) considers the recommendation of candidates to serve as directors submitted from the stockholders of the Company, (3) assists the Board of Directors in evaluating the performance of the Board of Directors and the Board committees, (4) advises the Board of Directors regarding the appropriate board leadership structure for the Company, (5) reviews and makes recommendations to the Board of Directors on corporate governance and (6) reviews the size and composition of the Board of Directors and recommends to the Board of Directors any changes it deems advisable. The Corporate Governance and Nominating Committee did not meet separately from the Board of Directors in 2025 but acted by written consent.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all such filings. Based solely on our review of the copies of the reports that we received and written representations that no other reports were required, we believe that our executive officers, directors and greater than 10% stockholders complied with all applicable filing requirements on a timely basis during 2025, other than Form 4 reports filed by each of Louis J. Basenese, Anthony DiGiandomenico and Michael Harsh in connection with June 11, 2025 RSU awards that were filed on July 1, 2025.
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Code of Business Conduct and Ethics
We have in place a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our directors, officers and employees. The Code of Ethics is designed to deter wrongdoing and to promote:
| ● | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| ● | full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications that we make; |
| ● | compliance with applicable governmental laws, rules and regulations; |
| ● | the prompt internal reporting of violations of the Code of Ethics to an appropriate person identified in the Code of Ethics; and |
| ● | accountability for adherence to the Code of Ethics. |
A current copy of the Code of Ethics is available at www.endrainc.com. A copy may also be obtained, free of charge, from us upon a request directed to ENDRA Life Sciences, Inc., 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105, attention: Investor Relations. We intend to disclose any amendments to or waivers of a provision of the Code of Ethics required to be disclosed by applicable SEC rules by posting such information on our website available at www.endrainc.com and/or in our public filings with the SEC.
Insider Trading Policy
The Company has
Nasdaq Rule 5608 Clawback Policy
The Company has adopted an incentive-based compensation recovery policy as required by the rules of the Nasdaq Stock Market, which is filed as Exhibit 97 to this report.
Item 11. Executive Compensation
Our compensation philosophy is to offer our executive officers compensation and benefits that are competitive and meet our goals of attracting, retaining and motivating highly skilled management, which is necessary to achieve our financial and strategic objectives and create long-term value for our stockholders. We believe the levels of compensation we provide should be competitive, reasonable and appropriate for our business needs and circumstances. Our board of directors uses benchmark compensation studies in determining compensation elements and levels. The principal elements of our executive compensation program have to date included base salary, annual bonus opportunity and long-term equity compensation in the form of restricted stock units and stock options. We believe successful long-term Company performance is more critical to enhancing stockholder value than short-term results. For this reason and to conserve cash and better align the interests of management and our stockholders, we emphasize long-term performance-based equity compensation over base annual salaries.
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The following table sets forth information concerning the compensation earned by the individual that served as our principal executive officer during 2025, our two most highly compensated executive officers other than the individual who served as our principal executive officer during 2025, and up to two additional individuals for whom disclosure would have been provided but for the fact that such individual was not serving as an executive officer at the end of the last completed fiscal year (collectively, the “named executive officers”):
2025 Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards (1) | Options Awards ($) (2) | Non-equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Alexander Tokman (4) | 2025 | 300,000 | 90,724 | - | - | - | 390,724 | |||||||||||||||||||||
| Chief Executive Officer (since August 13, 2024) | 2024 | 114,231 | - | 954 | - | 100,000 | 215,185 | |||||||||||||||||||||
| Michael Thornton (5) | 2025 | 221,726 | - | - | - | - | 221,726 | |||||||||||||||||||||
| Former Chief Technology Officer | 2024 | 221,690 | - | - | - | 392 | (3) | 222,082 | ||||||||||||||||||||
| Richard Jacroux (6) | 2025 | 133,355 | 45,364 | - | - | - | 178,719 | |||||||||||||||||||||
| Chief Financial Officer (since August 8, 2024) | 2024 | 95,900 | - | - | - | - | 95,900 | |||||||||||||||||||||
| (1) | 2025 Stock Awards reflects PRSU awards with aggregate grant date fair value of $90,724 for Mr. Tokman and $45,364 for Mr. Jacroux, which vest subject to the achievement of performance criteria related to certain clinical milestones. The aggregate grant date fair value was calculated assuming 100% achievement of the performance criteria. |
| (2) | The amounts shown in this column indicate the grant date fair value of option awards granted in the subject year computed in accordance with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating these amounts, see notes 2 and 8 to the financial statements included in Part II, Item 8 of this Annual Report. The shares underlying these option awards vest and become exercisable in three equal annual installments beginning on the first anniversary of their respective grant dates. |
| (3) | Represents insurance premiums paid by the Company with respect to life insurance for the benefit of the named executive officer. |
| (4) | Prior to appointment as Chief Executive Officer, Mr. Tokman served on the Board and provided consulting services to the Company. As a Board member, in January 2024, he was awarded an annual option grant to purchase 600 shares with a per share exercise price of $1.59. This grant was subject to adjustment due to the Company’s August 2024 Reverse Stock Split and the November 2024 Reverse Stock Split. After adjustment, this grant is for 1 share with a per share exercise price of $2,782.50. The amount shown above, $954, indicates the grant date fair value of option awards granted in the subject year computed in accordance with FASB ASC Topic 718. Board fees and consulting fees paid to Mr. Tokman in 2024 total $25,000 and $75,000, respectively, and are included in All Other Compensation. |
| (5) | Mr. Thornton is paid in Canadian Dollars. This figure is calculated using an average exchange rate of 1.3702 Canadian Dollars to US Dollars. |
| (6) | The Company contracts with Impact Solve, LLC (dba Impact Solutions) for Mr. Jacroux’s services. Mr. Jacroux began performing services for the Company prior to his appointment as Chief Financial Officer in March 2024 and was paid $36,600 for those services, which is included in the total above. Does not include $18,693 of fees paid to IS Bookkeeping & Payroll, a division of Impact Solutions, of which Mr. Jacroux is the founder, in respect of services provided by employees of Impact Solutions other than Mr. Jacroux. |
Employment Agreements and Change of Control Arrangements
The following is a summary of the employment arrangements with our named executive officers.
Alexander Tokman. Effective August 13, 2024, Mr. Tokman and the Company entered into an employment agreement, (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. Additionally, Mr. Tokman is eligible to participate in our health and welfare programs and 401(k) plan, and other benefit programs on the same basis as other employees.
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Michael Thornton - The Company had 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. 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. Under this employment agreement, Mr. Thornton was eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers. On November 28, 2025, the Company entered into a Consulting Agreement with Mr Thornton (the “Consulting Agreement”), in connection with which Mr. Thornton resigned as the Company’s Chief Technology Officer. Pursuant to the Consulting Agreement, Mr. Thornton will provide commercialization services and certain deliverables to the Company, as may be requested by the Company from time to time, and the Company shall pay Mr. Thornton at a rate of (i) $150 per hour for the first five hours per calendar week and (ii) $100 per hour for any hours in excess of five hours per calendar week. The Consulting Agreement provides that all of Mr. Thornton’s outstanding Options and Restricted Stock Units (each term as defined in the Company’s 2016 Omnibus Incentive Plan) shall remain outstanding and continue to vest in accordance with their terms for so long as Mr. Thornton is providing services under the Consulting Agreement. The Consulting Agreement has an indefinite term and may be cancelled by either party with 15 days’ notice to the other party.
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 Solutions pursuant to an Advisory Services Agreement dated November 28, 2025 (the “Advisory Services Agreement”). The Advisory Services Agreement provides for services (the “Services”) to be provided to the Company by Mr. Jacroux pursuant to work orders to be agreed upon by Mr. Jacroux and the Company from time to time. The Advisory Services Agreement provides that the Company shall reimburse Impact Solutions for reasonable travel and any additional expenses that the parties may agree to in writing in advance. Fees for the Services will be set forth in each applicable work order agreed to in advance by the Company and Impact Solutions. The initial work order, effective as of the date of the Advisory Services Agreement, provides for Mr. Jacroux to serve as the Company’s Principal Financial Officer and Principal Accounting Officer for an initial discounted base fee of $8,650 per month and at a rate of $124.70 per hour for hours beyond 16 per week, subject to an increase to a base fee of $10,800 per month and a rate of $156.00 per hour for hours beyond 16 per week effective January 1, 2026. The Advisory Services Agreement includes customary non-solicitation provisions, confidentiality provisions and representations and warranties included in similar agreements.
Outstanding Equity Awards at 2025 Fiscal Year End
The following table provides information regarding equity awards held by the named executive officers as of December 31, 2025.
| Stock Awards | Option Awards | |||||||||||||||||||||||
| Equity incentive plan awards: number of unearned shares, units or other rights that have not vested | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise | Option Expiration | |||||||||||||||||||
| (#) | ($) | Exercisable | Unexercisable | Price ($) | Date | |||||||||||||||||||
| Alexander Tokman | - | 173,250 | 1/2/2026 | |||||||||||||||||||||
| Chief Executive Officer | 1 | 108,150 | 3/25/2029 | |||||||||||||||||||||
| - | 92,400 | 4/5/2031 | ||||||||||||||||||||||
| - | 66,500 | 1/2/2030 | ||||||||||||||||||||||
| 2 | 31,500 | 12/11/2029 | ||||||||||||||||||||||
| - | 28,000 | 1/4/2031 | ||||||||||||||||||||||
| - | 25,900 | 1/3/2032 | ||||||||||||||||||||||
| 3 | 0 | (1) | 13,300 | 3/28/2032 | ||||||||||||||||||||
| 3 | 2 | (2) | 7,035 | 1/30/2033 | ||||||||||||||||||||
| - | 2,782.50 | 1/2/2034 | ||||||||||||||||||||||
| 26,921 | 90,724 | (3) | ||||||||||||||||||||||
| Michael Thornton | 3 | 78,750 | 12/13/2026 | |||||||||||||||||||||
| Former Chief Technology Officer | 16 | 31,500 | 6/6/2027 | |||||||||||||||||||||
| 1 | 92,400 | 6/6/2027 | ||||||||||||||||||||||
| 8 | 92,400 | 6/6/2027 | ||||||||||||||||||||||
| 19 | 0 | (1) | 13,300 | 6/6/2027 | ||||||||||||||||||||
| 25 | 0 | (2) | 7,035 | 6/6/2027 | ||||||||||||||||||||
| Richard Jacroux | 13,461 | 45,364 | (4) | - | - | - | - | |||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||||||
| (1) | Represents unvested portion of stock option award which vests in three equal annual installments beginning on March 28, 2022. |
| (2) | Represents unvested portion of stock option award which vests in three equal annual installments beginning on January 30, 2023. |
| (3) | 2025 Stock Awards includes PRSU awards with aggregate grant date fair value of $90,724, which vest subject to the achievement of performance criteria related to certain clinical milestones. The aggregate grant date fair value was calculated assuming 100% achievement of the performance criteria. |
| (4) | 2025 Stock Awards includes PRSU awards with aggregate grant date fair value of $45,364, which vest subject to the achievement of performance criteria related to certain clinical milestones. The aggregate grant date fair value was calculated assuming 100% achievement of the performance criteria. |
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Equity Compensation Plan Table
The following table presents information on the Company’s equity compensation plans as of December 31, 2025. All outstanding awards relate to our common stock.
| Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants | Weighted- Average Exercise Price of Outstanding Options, Warrants and | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in | ||||||||||
| and Rights | Rights | Column (a)) | ||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
| Equity compensation plans approved by security holders | 216 | (1) | $ | 30,862.14 | 3,048,799 | (2) | ||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 216 | $ | 30,862.14 | 3,048,799 | ||||||||
| (1) | Consists of outstanding stock options exercisable for shares of common stock issued under the 2016 Plan. |
| (2) | Pursuant to the Omnibus Plan Amendment, the number of shares available for future issuance under the 2016 Plan was 3,048,799 shares. |
Director Compensation
Effective January 30, 2023, the Company adopted a non-employee director compensation policy (the “Compensation Policy”) pursuant to which each of our non-employee directors receives, upon his or her initial election to the Board of Directors, a stock option exercisable for 2,500 shares of common stock with a per share exercise price equal to the closing price of the common stock on the Nasdaq on the grant date. All such stock options vest in three equal annual installments beginning on the one-year anniversary of the grant date. Under the Compensation Policy, on the first trading day of each calendar year, each non-employee director is awarded a stock option exercisable for 600 shares of common stock, with a per share exercise price equal to the closing price of the common stock on the Nasdaq on the grant date, which becomes exercisable in three equal annual installments beginning on the first anniversary of the grant date. Additionally, pursuant to the Compensation Policy, each non-employee director is paid an annual cash retainer of $40,000, prorated for partial years of service and paid quarterly in arrears. The Company did not issue the annual stock option awards in January 2025 as the Board of Directors intends to update the Compensation Policy. Rather, in 2025, each non-employee member of the Board was awarded 5,384 restricted stock units at a valuation of $18,144.
The following table sets forth information with respect to compensation earned by or awarded to each of our non-employee directors who served on the
Board of Directors during the fiscal year ended December 31, 2025:
| Fees Earned | Option & | |||||||||||||||
| or Paid in | RSU | All Other | ||||||||||||||
| Name | Cash ($) | Awards ($) (1)(2) | Compensation ($) | Total ($) | ||||||||||||
| Anthony DiGiandomenico | 40,000 | 18,144 | 58,144 | |||||||||||||
| Michael Harsh | 40,000 | 18,144 | 58,144 | |||||||||||||
| Louis Basenese | 40,000 | 18,144 | 58,144 | |||||||||||||
| (1) | The following table shows the number of shares subject to outstanding option awards held by each non-employee director as of December 31, 2025: |
| Shares | ||||
| Subject to | ||||
| Outstanding | ||||
| Option | ||||
| Name | Awards | |||
| Louis Basenese | 7 | |||
| Anthony DiGiandomenico | 11 | |||
| Michael Harsh | 11 | |||
| (2) | In 2025, non-employee members of the Board were awarded 5,384 restricted stock units each at a valuation of $18,144 per board member. |
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ENDRA Policy Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We have no practice or policy of coordinating or timing the release of the Company information around the grant date of our equity incentive awards, and we have not timed the disclosure of material non-public information for the purposes of affecting the value of executive compensation. During fiscal 2025, we did not grant any stock options (or similar awards) to any of our Named Executive Officers during any period beginning four business days before and ending one business day after the filing of any periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of any Form 8-K that disclosed any material non-public information.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
The following tables set forth certain information regarding beneficial ownership of our voting stock as of March 31, 2026 by:
| ● | each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of any class of our voting stock; |
| ● | each named executive officer included in the Summary Compensation Table above; |
| ● | each of our directors; |
| ● | each person nominated to become director; and |
| ● | all executive officers, directors and nominees as a group. |
Unless otherwise noted below, the address of each person listed in the tables is c/o ENDRA Life Sciences Inc. at 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. To our knowledge, each person listed below has sole voting and investment power over the shares shown as beneficially owned except to the extent jointly owned with spouses or otherwise noted below.
Beneficial ownership is determined in accordance with the rules of the SEC. The information does not necessarily indicate ownership for any other purpose. Under these rules, shares of stock which a person has the right to acquire (i.e., by the exercise of any option or warrant) within 60 days after March 24, 2025 are deemed to be beneficially owned and outstanding for purposes of calculating the number of shares and the percentage beneficially owned by that person. However, these shares are not deemed to be beneficially owned and outstanding for purposes of computing the percentage beneficially owned by any other person. The applicable percentages of stock outstanding as of March 31, 2026 is based upon 1,240,751 shares of common stock and 17.488 shares of Series A Preferred Stock outstanding on that date.
Beneficial Ownership
| Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned | Shares of Series A Preferred Stock Beneficially Owned | Percentage of Series A Preferred Stock Beneficially Owned | ||||||||||||
| Louis Basenese | 7 | (1) | * | - | - | |||||||||||
| Anthony DiGiandomenico | 70,890 | (2) | 5.7 | % | - | - | ||||||||||
| Michael Harsh | 11 | (3) | * | - | - | |||||||||||
| Alexander Tokman | 14 | (4) | * | - | - | |||||||||||
| Richard Jacroux | - | - | - | - | ||||||||||||
Michael Thornton | 92 | (5) | - | - | - | |||||||||||
| All directors and executive officers as a group (5 persons) | 70,922 | 5.7 | % | - | - | |||||||||||
| 5% Stockholders: | ||||||||||||||||
| Juan R. Rivero (6) | 17.488 | 100 | % | |||||||||||||
| * | Less than one percent. |
| (1) | Consists of 1 shares of common stock and 6 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of March 31, 2026. |
| (2) | Consists of 59 shares of common stock, 9 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of March 31, 2026 and 70,822 shares purchased in the 2025 Offering. |
| (3) | Consists of 2 shares of common stock, 9 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of March 31, 2026. |
| (4) | Consists of 5 shares of common stock and 9 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of March 31, 2026. |
| (5) | Consists of 20 shares of common stock, 72 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of March 31, 2026. |
| (6) | Mr. Rivero’s address is 14521 Jockey Circle, N. Davie, FL 33330. |
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Policy for Review of Related Person Transactions
The Board of Directors has adopted a written policy with regard to related person transactions, which sets forth our procedures and standards for the review, approval or ratification of any transaction required to be reported in our filings with the SEC or in which one of our executive officers or directors has a direct or indirect material financial interest, with limited exceptions. Our policy is that the Corporate Governance and Nominating Committee shall review the material facts of all related person transactions (as defined in the related person transaction approval policy) and either approve or disapprove of the entry into any related person transaction. In the event that obtaining the advance approval of the Corporate Governance and Nominating Committee is not feasible, the Corporate Governance and Nominating Committee shall consider the related person transaction and, if the Corporate Governance and Nominating Committee determines it to be appropriate, may ratify the related person transaction. In determining whether to approve or ratify a related person transaction, the Corporate Governance and Nominating Committee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms comparable to those available from an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
Related Person Transactions
SEC regulations define the related person transactions that require disclosure to include any transaction, arrangement or relationship in which the amount involved exceeds the lesser of (a) $120,000 or (b) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years in which it was or is to be a participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i) an executive officer, director or director nominee of the Company, (ii) a beneficial owner of more than 5% of any class of the Company’s voting securities, (iii) an immediate family member of an executive officer, director or director nominee or beneficial owner of more than 5% of any class of the Company’s voting securities, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.
Other than as set forth below, since January 1, 2024, the Company has not participated in any such related party transaction.
On March 24, 2024, the Company entered into an agreement for consulting services with Impact Solve, LLC (dba Impact Solutions), an accounting and chief financial officer service firm, controlled by Richard Jacroux. Mr. Jacroux works in a part-time capacity for the Company through Impact Solutions. The Company pays Impact Solutions a base monthly fee of $8,650 plus expenses in respect of his services to the Company, and hours worked in excess of 20 per week are paid at a rate of $150 per hour.
In October 2025, the Company conducted a private placement offering in which the Company sold 70,822 shares of common stock and warrants exercisable for 141,644 shares of common stock to Anthony DiGiandomenico at a combined price of $7.06 per share and two warrants.
Item 14. Principal Accountant Fees and Services
RBSM LLP (“RBSM”) audited our financial statements for the year ended December 31, 2025. The following table sets forth the aggregate fees billed or expected to be billed by RBSM for audit and non-audit services in 2025 and 2024, including “out-of-pocket” expenses incurred in rendering these services. The nature of the services provided for each category is described following the table.
| Fee Category | 2025 | 2024 | ||||||
| Audit Fees (1) | $ | 209,000 | $ | 237,500 | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees (2) | - | $ | - | |||||
| Total | $ | 209,000 | $ | 237,500 | ||||
| (1) | Audit fees include fees for professional services rendered for the audit of our annual statements, quarterly reviews, consents and assistance with and review of documents filed with the SEC. | |
| (2) | Tax fees include fees for professional services rendered for tax compliance, tax advice and tax planning. |
59
PART IV
Item 15. Exhibits, Financial Statements and Schedules
(a) List of documents filed as part of this report:
1. Financial Statements (see “Financial Statements and Supplementary Data” at Item 8 and incorporated herein by reference)
2. Financial Statement Schedules (Schedules to the Financial Statements have been omitted because the information required to be set forth therein is not applicable or is shown in the accompanying Financial Statements or notes thereto)
3. Exhibits
The following is a list of exhibits filed as part of this Annual Report:
60
| * | Indicates management compensatory plan, contract or arrangement. |
Item 16. Form 10-K Summary
None.
61
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. | ||
| Dated: March 31, 2026 | By: | /s/ Alexander Tokman |
| Alexander Tokman | ||
| Chief Executive Officer and Chairman of the Board of | ||
| Directors | ||
| (Principal Executive Officer) | ||
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of ENDRA Life Sciences Inc., hereby severally constitute and appoint each of Alexander Tokman and Richard Jacroux our true and lawful attorney, with full power to him to sign for us and in our names in the capacities indicated below, any amendments to this Annual Report on Form 10-K, and generally to do all things in our names and on our behalf in such capacities to enable ENDRA Life Sciences Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all the requirements of the Securities Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signatures | Title | Date | ||
| /s/ Alexander Tokman | Chief Executive Officer and | March 31, 2026 | ||
| Alexander Tokman | Chairman of the Board of Directors | |||
| (Principal Executive Officer) | ||||
|
/s/ Richard Jacroux |
Chief Financial Officer (Principal | March 31, 2026 | ||
|
Richard Jacroux |
Financial and Accounting Officer) | |||
|
/s/ Louis J. Basenese |
Director | March 31, 2026 | ||
|
Louis J. Basenese |
||||
|
/s/ Anthony DiGiandomenico |
Director | March 31, 2026 | ||
| Anthony DiGiandomenico | ||||
|
/s/ Michael Harsh |
Director | March 31, 2026 | ||
|
Michael Harsh |
62
Exhibit 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ENDRA LIFE SCIENCES INC.
The present name of the corporation is ENDRA LIFE SCIENCES INC. The corporation was incorporated under the name “ENDRA INC.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on July 18, 2007. This Fourth Amended and Restated Certificate of Incorporation of the corporation, which restates and integrates and also further amends the provisions of the corporation’s Certificate of Incorporation, as previously amended, restated, supplemented or otherwise modified (the “Existing Certificate of Incorporation”), was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware and by the written consent of its stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware. The Existing Certificate of Incorporation of the corporation is hereby amended, integrated and restated to read in its entirety as follows:
FIRST: The name of the corporation (the “Corporation”) is:
ENDRA Life Sciences Inc.
SECOND: The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the “DGCL”).
FOURTH: The total number of shares of stock that the Corporation shall have authority to issue shall be 1,010,000,000 shares, consisting of 1,000,000,000 shares of Common Stock, par value $0.0001 per share (the “Common Stock”), and 10,000,000 shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”). Subject to the rights of the holders of any series of Preferred Stock then outstanding, the number of authorized shares of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will entitle the holders thereof to the same rights, powers and preferences. The rights, powers and preferences of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Common Stock shall entitle the holder thereof to receive an equal portion of the net assets of the Corporation available for distribution to the holders of Common Stock, subject to any preferential rights of any then outstanding Preferred Stock.
4.VOTING RIGHTS. Except as otherwise required by law or this Fourth Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), each holder of Common Stock shall have one vote in respect of each share of stock held of record by such holder on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. Except as otherwise required by law or provided herein, holders of Common Stock shall vote together with holders of the Preferred Stock as a single class, subject to any special or preferential voting rights of any then outstanding Preferred Stock. There shall be no cumulative voting.
B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors of the Corporation may determine. Each series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the undesignated Preferred Stock in one or more series, each with such designations, preferences, voting powers (or special, preferential or no voting powers), relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions adopted by the Board of Directors to create such series, and a certificate of said resolution or resolutions (a “Certificate of Designation”) shall be filed in accordance with the DGCL. The authority of the Board of Directors with respect to each such series shall include, without limitation of the foregoing, the right to provide that the shares of each such series may be: (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange and with such adjustments, if any; (v) entitled to the benefit of such limitations, if any, on the issuance of additional shares of such series or shares of any other series of Preferred Stock; or (vi) entitled to such other preferences, powers, qualifications and rights, all as the Board of Directors may deem advisable and as are not inconsistent with law and the provisions of this Certificate of Incorporation.
FIFTH:
1. NUMBER OF DIRECTORS. The number of directors of the Corporation shall be determined exclusively by resolution adopted by a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “Whole Board” means the total number of authorized directors whether or not there exists any vacancies in previously authorized directorships.
2. ELECTION OF DIRECTORS. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the Corporation. Unless required by the Bylaws, the election of the Board of Directors need not be by written ballot.
3. VACANCIES. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, may be filled only by vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director.
2
SIXTH: The following provisions are included for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation; PROVIDED, HOWEVER, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the amendment of the Bylaws by the Corporation’s stockholders shall require the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
3. The books of the Corporation may be kept at such place within or without the State of Delaware as the Bylaws of the Corporation may provide or as may be designated from time to time by the Board of Directors of the Corporation.
SEVENTH: Special meetings of stockholders (i) may be called on the order of a majority of the Whole Board, the Chairman of the Board, the Chief Executive Officer or the President (in the absence of a chief executive officer), and (ii) shall be called by the Secretary upon written request of the holders of record of at least twenty percent (20%) of the outstanding shares of common stock of the Corporation at the time such request is validly submitted by the holders of such requisite percentage of such outstanding shares, subject to and in compliance with this Article SEVENTH and the bylaws of the Corporation. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Business transacted at special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.
EIGHTH: The Corporation shall indemnify (and advance expenses to) its officers and directors to the full extent permitted by the DGCL, as amended from time to time.
NINTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, for any act or omission, except that a director may be liable (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of the directors shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. The elimination and limitation of liability provided herein shall continue after a director has ceased to occupy such position as to acts or omissions occurring during such director’s term or terms of office. Any amendment, repeal or modification of this Article NINTH shall not adversely affect any right of protection of a director of the Corporation existing at the time of such repeal or modification.
TENTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for all “internal corporate claims.” “Internal corporate claims” means claims, including claims in the right of the Corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which Title 8 of the Delaware Code confers jurisdiction upon the Court of Chancery, except for, as to each of (i) through (ii) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article TENTH shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article TENTH (including, without limitation, each portion of any sentence of this Article TENTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
3
ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that, notwithstanding any other provision of the Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision of this Certificate of Incorporation inconsistent with Article FIFTH, Article SIXTH, Article SEVENTH, Article NINTH, Article TENTH or this Article ELEVENTH.
| /s/ Francois Michelon | ||
| Name: | Francois Michelon | |
| Chief Executive Officer | ||
DATED: May 9, 2017
AMENDED: June 17, 2020
AMENDED: December 8, 2022
AMENDED: August 8, 2024
AMENDED: August 20, 2024
AMENDED: November 8, 2024
AMENDED: December 9, 2025
4
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-235883, 333-233466, 333-254711, 333-277058 and 333-291333) of our report dated March 31, 2026 on the consolidated financial statements of ENDRA Life Sciences Inc. and its subsidiaries, appearing in this Annual Report on Form 10-K of ENDRA Life Sciences Inc. for the year ended December 31, 2025. Our report includes an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern.
/s/ RBSM LLP
Houston, Texas 77070
March 31, 2026
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-218894, 333-233178, 333-237415, 333-254713, 333-263992, 333-270616, 333-278346 and 333-286344) of our report dated March 31, 2026 on the consolidated financial statements of ENDRA Life Sciences Inc. and its subsidiaries, appearing in this Annual Report on Form 10-K of ENDRA Life Sciences Inc. for the year ended December 31, 2025. Our report includes an explanatory paragraph expressing substantial doubt regarding the Company’s ability to continue as a going concern.
/s/ RBSM LLP
Houston, Texas 77070
March 31, 2026
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander Tokman, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of ENDRA Life Sciences Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 31, 2026
/s/ Alexander Tokman
| ||
| Name: | Alexander Tokman | |
| Title: | Chief Executive Officer | |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Jacroux, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of ENDRA Life Sciences Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 31, 2026
| /s/ Richard Jacroux | ||
| Name: | Richard Jacroux | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of ENDRA Life Sciences Inc. (the “Company”) for the year ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Alexander Tokman, Chief Executive Officer of the Company, and Richard Jacroux, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to our knowledge that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to ENDRA Life Sciences Inc. and will be retained by ENDRA Life Sciences Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| /s/ Alexander Tokman | /s/ Richard Jacroux | |||
| Name: | Alexander Tokman | Name: | Richard Jacroux | |
| Title: | Chief Executive Officer | Title: | Chief Financial Officer | |
| (Principal Executive Officer) | (Principal Financial Officer and Principal Accounting Officer) | |||
| Date: March 31, 2026 | Date: March 31, 2026 | |||