Luke Zimmerman – Senior Associate-MZ North America Francois Michelon – Chief Executive Officer Michael Thornton – Chief Technology Officer David Wells – Chief Financial Officer.

Brooks O’Neil – Lake Street Capital Markets.

Good day, and welcome to the ENDRA Life Sciences’ Second Quarter 2018 Conference Call and Webcast. Today’s conference call is being recorded. At this time, I would like to turn the conference over to Luke Zimmerman, Senior Associate at MZ North America, ENDRA Life Sciences’ Investor Relations firm. Sir, please go ahead..

Thank you. Good afternoon. I’d like to thank you all for taking time to join us for ENDRA Life Sciences’ second quarter 2018 conference call. Your hosts today are Mr. Francois Michelon, Chief Executive Officer; as well as Mr. David Wells, the Company’s Chief Financial Officer; and Mr. Michael Thornton, the Company’s Chief Technology Officer.

Francois and Michael will provide a business update which will cover partner announcements, product updates and operational milestones, while David will discuss the financial results. A press release detailing these results is across the wires today and is available on the Company’s website endrainc.com.

Following management’s prepared comments, we will open the floor to questions for those of you who are dialing in for today’s call. Before we begin the formal presentation, please take note of the Safe Harbor paragraph that appears at the end of the press release covering the Company’s financial results.

And that any forward-looking statements that we make only apply as of the date made and are subject to inherent risks and uncertainties including those described in the Company’s SEC filings and should not be unduly relied upon.

Except as otherwise required by federal securities laws, the company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements. We would also refer you to the Company’s website for more supporting industry information. At this time, I’d like to turn the call over to Francois Michelon.

Francois, the floor is yours..

Thank you, Luke. And welcome everyone to ENDRA Life Sciences’ second quarter 2018 conference call. The second quarter of 2018 demonstrated progress on the development of our first Thermo-Acoustic Enhanced Ultrasound product, growth of our intellectual property portfolio and positive progress on our Health Canada human study application.

Before I go deeper into our Q2 and subsequent achievements, I’d like to briefly provide listeners who are new to the ENDRA story with a brief summary of our disruptive ultrasound technology.

ENDRA is currently developing a next generation Thermo-Acoustic Enhanced Ultrasound or TAEUS as we call it, to enable clinicians to safely visualize human tissue composition, function and temperature in ways previously possible only with a CT or MRI, but at 50 times lower cost and at the point of patient care.

TAEUS is a platform with multiple potential clinical applications and revenue streams including hardware, software, disposables, service and licensing. Our first TAEUS application is focused on the assessment of fat in the liver, early detection and monitoring of non-alcoholic fatty liver disease also known as NAFLD.

NAFLD is a condition closely associated with obesity, diabetes, hepatitis-C and certain genetic predispositions in which fat accumulates in the liver. It affects over 1 billion people globally and is estimated to cost the U.S healthcare system alone over $100 billion annually.

NAFLD is often asymptomatic and, if left untreated, NAFLD can progress to inflammation also known as NASH, tissue scarring known as fibrosis, cell death known as cirrhosis and liver cancer. By some estimate by 2025, NAFLD is forecast to be the greatest root cause of liver transplants.

Critically for patients, clinicians and insurers, the only tools currently available for diagnosing and monitoring NAFLD are really impractical either an expensive and time consuming MRI, which most people on a global basis don’t have easy access to for an invasive, painful and risky surgical biopsy of the liver.

This is why ENDRA is focused on early stage liver disease. It’s an enormous healthcare problem affecting a lot of people with no practical diagnostic and monitoring tools. Viewed from a broader perspective, the TAEUS platform has the potential to address two of the most pressing needs of global healthcare. First, broadening access to better healthcare.

TAEUS does this by leveraging cost effective broadly available ultrasound. Second by improving safety. Again TAEUS leverages ultrasound, which is non-invasive and which doesn’t depend on potentially allergenic intravenous contrast agents.

ENDRA’s goal is to bring multiple TAEUS capabilities to ultrasound, starting with the liver but overall a $13 billion global market opportunity. Now let’s turn our attention to our progress in the second quarter of 2018 and subsequent months.

We completed TAEUS liver system and safety testing and are awaiting with some delay Health Canada’s investigational testing authorization also known as an ITA to commence recruiting for the clinical study. We believe applications to Health Canada for human studies have seen longer than normal review times due to elevated application volumes.

And as you can imagine ENDRA team shares everyone’s frustration in the overall processing time of this application, but we remain confident that Health Canada will approve our study for two reasons.

First, we very recently received comments from Health Canada requesting clarity on two straight forward matters related to labeling an ENDRA’s study duration. These comments are consistent with the normal application process. We expect to address their questions by the end of the week.

We need to remind ourselves the TAEUS is new technology combining elements of MRI and ultrasound. So while TAEUS has the potential to radically change healthcare, because it’s so different from existing imaging technology. It also needs to be carefully explained, tested and understood by organizations like Health Canada.

In view of this Health Canada’s comments were straightforward. The second very encouraging sign post is that we were notified that our application is being reviewed as a Class II device under the investigational testing pathway. The reason that Class II is encouraging is that reflects a low to medium risk device similar to MRI classification.

Conversely a Class III designation would have required a higher burden of documentation and potentially extended the application review process. So we’re very happy to ever have see the Class II designation both as an encouraging indicator for our Canadian study.

And because all the testing safety analysis and documentation that we prepared for the Canadian application will go into the technical file submission for our planned European CE mark application While we acknowledge the delay in the Canadian clinical study and the human factors data it will yield, will contribute to a push back of our CE registration from our target in the second half of this year into the first half of 2019.

We believe that the Canadian clinical study will directly support our CE application and our subsequent success in Europe. Naturally we’ll announce the Health Canada approval once we receive it.

And investors should also remember that once we receive Health Canada approval, we expect it will only take about three weeks to recruit volunteers and perform the study, which will encompass 20 patients scanned in MRI for 20 minutes followed by an ultrasound liver scan and TAEUS liver fat measurements each of which only takes a few seconds.

It’s also important to emphasize that the ENDRA team and our technology haven’t been sitting still simply waiting for the human study. We’ve used the time to continually improve our TAEUS product, refine our software algorithms, advance our understanding of workflows with our clinical advisors and improve our engineering materials.

In fact, on this last point, we’ve been collaborating with the Duke University professor to engineer high performance ceramic elements that we believe have the potential to improve certain performance parameters of our commercial TAEUS system by over 30%.

Our goal is to fully launch our TAEUS liver device in Europe in the first half of 2019 and we’re ramping up commercial activities accordingly ahead of the CE mark.

For example, building on our meetings in April in Paris, at the early adopters – with the early adopters at the European Association for the study of the liver, we secured exhibit space at notable liver disease and ultrasound industry events in Basel, Geneva, San Francisco and Chicago in the second half of 2018. A goal of these meetings are twofold.

First, raise awareness for ENDRA’s TAEUS technology and our Canadian human study with ultrasound radiologists and hepatologists, collecting their feedback and further building our goal of decks of potential sales prospects.

Second, develop a recruiting pipeline, a potential European ENDRA sales candidates, the complement our GE Partner and distributor channels. As I previously mentioned, ENDRA’s plan is to hire three to four salespeople in Europe to train co-sell and support our channel partners and customers.

Complementing these industry events and the eventual publication of our Canadian human data, we’re creating marketing materials including clinically focused white papers and videos on the technology of TAEUS.

Naturally, until we receive for regulatory approval, all these marketing materials will clearly know that our TAEUS technology is not yet approved for sale. But it’s critical for investors to understand, where parallel processing and certainly ramping up the commercial activities and not waiting for the data.

So in summary, for Q2 and the balance of 2018, we remain committed to the five goals I’ve emphasized on previous calls. First, attract, develop and retain top quality talent. Second, execute our operating plan. Third, protect and grow our intellectual property.

Fourth, adhering on asset light business model by leveraging partnerships in engineering and commercialization to minimize overhead and preserve cash. And fifth, to grow investor awareness and trust to active outbound investor relations activities and ENDRA transparency.

I’ll now turn the call over to our Chief Technology Officer, Michael Thornton will provide a deeper update on our IP portfolio and product development of our TAEUS clinical product targeting NAFLD.

Michael?.

Thank you, Francois. On the IP front, since we last talked to you, ENDRA was granted a total of four U.S. patents, three of which are directly related to our noninvasive fat assessment TAEUS technology. This brings our intellectual property total.

As of today, the 39 issued patents filed patent applications and prepared disclosures up from 33 at the end of 2017. Two of the newly issued patents cover applications for correcting fat induced aberrations and imaging biological structures.

Another one of our issued patents protects our methodology for improving safety a magnetic resonance imaging or MRI as it’s more commonly known. The fourth patent that issued was for the noninvasive assessment of fat to support our TAEUS clinical product.

These patent support and ENDRA’s proprietary approach to assessing fat content and tissue and support the company’s commercialization of a clinical application for non-invasive assessment of liver fat and other fat related applications directly support our plans to commercialize a transformative clinical application focused on Non-Alcoholic Fatty Liver.

We have two registered patent agents on our staff and are maintained a strong focus on protecting key enabling methodologies and technical innovations related to our TAEUS fatty liver application. Moving on to the development front, since we last spoke.

We continue to work with our engineering, manufacturing and regulatory service providers, which we believe is the most capital efficient model for ENDRA, while providing the shortest time to market.

With some supplier and engineering issues resolved, we are making good progress toward implementing our procedures and quality management system as we work toward achieving ISO 1345 certification, which is a requirement for the C technical file submission of our first product.

We’re working toward the first half 2019 target for CE clearance followed by a planned FDA submission for the U.S. market. In addition to what Francois mentioned earlier we’re in active discussions with U.S. sites to organize clinical studies with our fatty liver TAEUS technology.

Well, we do expect to have Health Canada approval imminently, we’ll continue to engage the U.S. clinical sites to support our stated commercialization time line. I will now turn the call over to our Chief Financial Officer, David Wells for his financial summary.

David?.

Thank you Michael I will now provide a summary of our reported second quarter 2018 financial results. We did not generate any revenue for the three months ended June 30, 2018, as compared to $57,772 of revenue for the comparable parable period in 2017.

There was no recognized revenue for this quarter as compared to the same period in 2017, when we are earned revenue from service fees on our installed base of legacy Nexus 128 units. Our operating expenses increased to $1.8 million in the second quarter of 2018, up from $1.1 million for the same period in 2017.

The increase in operating expenses was due primarily to increased research and development expenses related to the development of our TAEUS product, as well as increased general and administrative costs related to our increased headcount.

Our net loss for the three months ended June 30, 2018 was $1.8 million or $0.47 per basic and diluted share as compared to a net loss of $1.4 million in Q2 of 2017. Noting that approximately $750,000 of the 2018 loss was due to non-cash compensation expenses related to prior option in warrant issuances.

Our cash balance as of June 30, 2018 was approximately $2.2 million, as compared to approximately $3.2 million as of March 31, 2018. We strengthened our balance sheet with a private placement of $1.1 million of convertible secured notes and warrants in June of 2018.

Management and existing investors participated in the transaction and the funds will extend our operational runway into Q4 of this year. During the quarter, we used approximately $1.9 million in cash, which again was due mainly to continued development of the TAEUS product. Our spending remains on budget and on track with our internal projections.

We are continually evaluating our capital needs in real time to ensure adequate capital to support our clinical, regulatory and operational activities and will continue to do so as we prepare for EU commercialization.

As has been emphasized before and in summary we believe the combination of our asset light operating model, clean capitalization structure and continued effective and efficient use of cash will position ENDRA to commercialize our TAEUS liver product in the European Union as scheduled. I will now turn the call back over to Francois.

Francois?.

Thanks, David. In summary, here are the six key points I’d like our listeners to take away from today’s call. First, we’re still waiting for approval of our human study, but based on recent communications from Health Canada and our device being classified as Class-II for investigational testing authorization pathways.

We remain confident that ENDRA study will be approved shortly. Second, much of the documentation that we’ve prepared for the Canadian study application will directly support our planned European CE mark application.

Third, our commercial activities are ramping up with new marketing materials, a growing list of target clinicians in Europe and a formal ENDRA presence at key global clinical conferences in the second half of 2018.

Fourth, continued actively manage our cash burn, leveraging partnerships minimizing overhead as we shift gradually from R&D to commercial activities. Fifth, we remain committed to growing and protecting our IP and of secured four issued patents in recent months.

And finally sixth, ENDRA team remains committed as ever to realizing the potential of the TAEUS platform, to change the game in the epidemic of nonalcoholic fatty liver disease. At this time, I’d like to open up the call to questions from our listeners.

Operator?.

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Brooks O’Neil, Lake Street Capital Markets. Please proceed with your question..

Hi, Brooks..

Hi, Francois.

How is everything?.

Great. Thank you for joining our call and your continued interest..

Sure. I’m curious if you could talk a little bit about the pending spin-off of the GE Healthcare business and whether you see that as a positive or negative for your business..

That’s great. Great question and I wish I knew obviously I can’t speculate on GE’s behalf. But my perception of what’s happening at GE is a clear – centralizing of common businesses, industrial businesses in particular, as you can see from the recent quarterly announcements GE Healthcare has been doing very, very well.

So I don’t believe that the potential spinoff of GE Healthcare is any relationship to its performance. I think it’s probably just getting back to basics and keeping like businesses like aircraft engines and energy and power supply into a common pot.

My sense from what I’ve known at the GE Healthcare having worked there almost eight years and being obscene close contact with them regularly is the culture of GE Healthcare is phenomenal, it’s very execution oriented, they’re market leader. Certainly the ultrasound business is dominated by GE.

And I believe that whatever happens to GE Healthcare be it a standalone spinoff an acquisition that they will likely benefit from the greater independence and collaboration in the healthcare space in terms of nimbleness versus continually being associated with a more industrial businesses. So that’s really my view on it.

I can say that I’ve sensed no distraction in our relationship with GE and it remains quite strong. In fact, we just took possession of two more ultrasounds from them last week. So a great business, we’re thrilled to be associated with them. And whatever happens to GE Healthcare, I believe will be a good thing for it.

And I don’t believe they’ll have any effect on ENDRA’s relationship. I hope that helps answer the question..

That’s perfect. I really appreciate it. Thank you very much..

Thank you..

[Operator Instructions] Our next question comes from Michael [indiscernible] Private Investor..

Hi, good afternoon. Does the market size of 13 point something billion.

Does that include the software and accessories?.

Yes. So great question, Michael, and thanks for joining our call. $13 billion as you have in our investor presentation really includes the potential of the five clinical applications that we’ve demonstrated so far with our TAEUS platform.

They extend beyond just the liver and composition of fatty also include tissue temperature and some vascular applications.

And in terms of deployment to answer your question, if they include the hardware and software elements, they do not include the licensing opportunity, which we view as upside nor does it even include the potential disposables of some applications that we’ve started working on.

So my takeaway because I’m also very sensitive to not overstating these enormous numbers, is when we did our assessment of an addressable market, we said look, there are about 1 million ultrasounds in the world today, which ones of those do we realistically think we could sell an accessory with some hardware to in the future.

And we carved out the mobile ultrasounds because although technically it works with our product. Customers buy mobile ultrasound for mobility. And we thought it would be disingenuous to keep them as a viable target. So we carve them out of the million.

We also carved out the prenatal ultrasound users, because although we don’t have any current applications or we may have some applications in the future, we don’t currently have any prenatal applications and we thought again let’s not fool ourselves into thinking that an OB-GYN is going to buy something from TAEUS as we know it today.

So that left us with the roughly 300,000 card based non-prenatal ultrasound in global use today, Michael, that we think we’re a very reasonable target for both the liver applications both hardware and software, as well as some of the future TAEUS applications.

I want to also make it very clear that the accessory that we are bringing to market next year is really just a vehicle for the software.

Long-term there’s an opportunity of course in the installed base of ultrasound users, but long-term I don’t want to be in the hardware business, I want to be in the software and licensing and service and disposables business.

And so as a first step to get into this market, we’re going to put a small box that plugs seamlessly into a GE ultrasound, it’ll have the software. And then a year or two later, we aspire to selling another software that would go on that same box, but charge some money for that. So that’s what gets me so excited Michael is, the liver space is huge.

There’s a large unmet need. The ultrasound space is growing and there’s a great opportunity. And we’re just starting with this TAEUS platform. So I’m very eager for that. I hope that’s an energetic and positive and convincing answer to your question..

I want to understand, what’s the size for the disposables portion of the market and the licensing portion relative to the device and the software….

Right. So we have not even communicated the potential of the licensing, which would be including our TAEUS technology into new ultrasound systems from GE and potentially other software our ultrasound manufacturers.

So I don’t want to step beyond what we’ve carved out and identified, but I view it as substantial and incremental to that large addressable market that we’ve discussed just on the ultrasound hardware and software basis alone. I hope that’s helpful..

This concludes our question-and-answer session. I’d now like to turn the call back over to Mr. Francois Michelon for closing remarks..

Great. Well, thanks everyone for joining our call today. As always, sincerely I’d like to thank our hardworking team of ENDRA engineers, scientists and patent specialists who keep our technology evolving, couldn’t do it without you.

And lastly, if we weren’t able to address any of your or all your questions on today’s call, please feel free to contact our investor relations firm MZ Group, we’ll be happy to answer them. We look forward to speaking with you on our upcoming Q3 call. Appreciate, everyone’s time today. Good bye..