UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2023

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

For the transition period from _______ to _______.

Commission File Number: 000-55453

ENDONOVO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

6320 Canoga Avenue, 15th Floor, Woodland Hills, CA91367

(Address of principal executive offices, zip code)

(800)489-4774

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of May 19, 2023, there were 281,635,405 shares of common stock, $0.0001 par value issued and outstanding.

ENDONOVO THERAPEUTICS, INC.

TABLE OF CONTENTS

FORM 10-Q REPORT

March 31, 2023

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Endonovo Therapeutics, Inc.

Condensed Consolidated Balance Sheets

See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.

Endonovo Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.

Endonovo Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.

Endonovo Therapeutics, Inc.

Condensed Consolidated Statement of Shareholders’ Deficit

(Unaudited)

For three months ended March 31, 2023

For three months ended March 31, 2022

See accompanying summary of accounting policies and notes to unaudited condensed consolidated financial statements.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1 - Organization and Nature of Business

Endonovo Therapeutics, Inc. (Endonovo or the “Company”) is an innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine. Endonovo is a growth stage company whose stock is publicly traded (OTCQB: ENDV).

The Company develops, manufactures, and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of pain, edema, and inflammation in the human body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and central nervous system disorders (“CNS” disorders).

The Company’s non-invasive Electroceutical® therapeutics device, SofPulse®, using pulsed short-wave radiofrequency at 27.12 MHz has been FDA-Cleared and CE Marked for the palliative treatment of soft tissue injuries and post-operative plain and edema, and has CMS National Coverage for the treatment of chronic wounds. The Company’s current portfolio of pre-clinical stage Electroceutical® therapeutics devices address chronic kidney disease, liver disease non-alcoholic steatohepatitis (NASH), cardiovascular and peripheral artery disease (PAD) and ischemic stroke.

Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive bioelectric medical devices that deliver the Company’s Electroceutical^® Therapy. Endonovo’s bioelectric Electroceutical^® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in the body necessary for healing to rapidly occur.

Note 2 – Summary of significant accounting policies.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying consolidated condensed balance sheet as of March 31, 2023, the consolidated statements of operations for the three months ended March 31, 2023 and 2022, the consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, and the consolidated statements of shareholders’ deficit for the three months ended March 31, 2023 and 2022 are unaudited; however, in the opinion of management such interim consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The accompanying financial information should be read in conjunction with the financial statements and the notes thereto in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2023. The results of operations for the period presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year.

Liquidity and Going Concern

The Company’s unaudited condensed consolidated financial statements are prepared using 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 not yet established an ongoing source of revenues sufficient to cover its operating costs and to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain adequate capital to fund operating losses until it becomes profitable.

As of March 31, 2023, the Company had cash of approximately $11,000 and a working capital deficiency of approximately $25.4 million. During the three months ended March 31, 2023, the Company used approximately $0.2 million of cash in its operation. The Company has incurred recurring losses resulting in an accumulated deficit of approximately $68 million as of March 31, 2023. These conditions raise substantial doubt as to its ability to continue as going concern within one year from issuance date of these unaudited consolidated financial statements.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

During the three months ended March 31, 2023, the Company has raised $0.2 million in equity financing through the issuance of common shares under a private offering. The Company continues to raise additional capital through either debt or equity financing to fund its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern.

On September 26, 2022, the Company entered into an asset purchase agreement with a Company, which is engaged in the business of providing and laying of concrete primarily for residential tract developers, pursuant to which the Company will acquire all of the assets and liabilities for approximately $25.2 million. The Company intends to raise the consideration through debt and equity financing. Such transaction has not yet closed at the report date.

No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty. To reduce the risk of not being able to continue as a going concern, management is commercializing its FDA cleared and CE marked products and has commenced implementing its business plan to materialize revenues from potential future license agreements, and or diversifying its business activities with the potential acquisition of specialty construction company. The Company will continue to raise additional capital through the issuance of fixed-rate conversion feature promissory notes.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Critical estimates include the assessment of impairment of finite lived intangibles, the valuation of the derivative liability, the valuation of warrants and stock options, and the valuation of deferred income tax assets. Management uses its historical records and knowledge of its business in making these estimates. Actual results could differ from these estimates.

Earnings (Loss) Per Share

The Company utilizes Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings per Share.” Basic earnings (loss) per share is computed based on the earnings (loss) attributable to common shareholders divided by the weighted average number of shares outstanding for the period excluding any dilutive effects of options, warrants, unvested share awards and convertible securities. Diluted earnings (loss) per common share is calculated similar to basic earnings (loss) per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock option, warrants, common shares issuable under convertible debt and restricted stock using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been antidilutive for the three months ended March 31, 2023, include stock options, warrants, and notes payable.

The Company has 3,011,750 options to purchase common stock and no warrants outstanding at March 31, 2023. The Company has 513,730 options and 9,770 warrants to purchase common stock outstanding at March 31, 2022.

The components of basic and diluted income (loss) per share for the three months ended March 31, 2023 and 2022 were as follows:

Schedule of Earnings Per Share Basic and Diluted

Accounts Receivable

The Company uses the specific identification method for recording the provision for doubtful accounts, which was $0 as of March 31, 2023 and December 31, 2022. Account receivables are written off when all collection attempts have failed.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Newly Adopted Accounting Principles

The Company has evaluated all the recent accounting pronouncements and determined that there are no other accounting pronouncements that will have a material effect on the Company’s financial statements.

Note 3 - Revenue Recognition

Contracts with Customers

The Company adopted ASC 606, Revenue from Contracts with Customers effective January 1, 2019, using the modified retrospective method applied to those contracts which were not substantially completed as of January 1, 2019. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company routinely plans on entering into contracts with customers that include general commercial terms and conditions, notification requirements for price increases, shipping terms and in most cases prices for the products and services that we offer. The Company’s performance obligations are established when a customer submits a purchase order notification (in writing, electronically or verbally) for goods and services, and we accept the order. The Company identified performance obligations as the delivery of the requested product or service in appropriate quantities and to the location specified in the customer’s contract and/or purchase order. The Company generally recognize revenue upon the satisfaction of these criteria when control of the product or service has been transferred to the customer at which time, the Company has an unconditional right to receive payment. The Company’s sales and sale prices are final, and our prices are not affected by contingent events that could impact the transaction price.

Revenues for our SofPulse® product is typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Royalty/licensing revenue is also recognized at one point in time, when the units are shipped.

In connection with offering products and services provided to the end user by third-party vendors, the Company reviews the relationship between us, the vendor, and the end user to assess whether revenue should be reported on a gross or net basis. In asserting whether revenue should be reported on a gross or net basis, the Company considers whether the Company acts as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Sources of Revenue

The Company has identified the following revenues by revenue source:

For the three months ended March 31, 2023 and 2022, the sources of revenue were as follows:

Schedule of Source of Revenue

The royalty/licensing revenue recognized in the three months ended March 31, 2023, resulted from specific transactions. No general patent rights were assigned to the distributor. The royalty / licensing revenue is recorded on a net basis as the Company was not considered a principal for accounting purposes. The royalty / licensing revenue, net includes an ongoing contract with a customer that has a total gross sales value of $300,000, for which the Company recognized net revenue of $67,800 based on the number of units delivered during the period ended March 31, 2023.

Warranty

Our general product warranties do not extend beyond an assurance that the product delivered will be consistent with stated specifications and do not include separate performance obligations.

Significant Judgments in the Application of the Guidance in ASC 606

There are no significant judgments associated with the satisfaction of our performance obligations. We generally satisfy performance obligations upon shipment of the product to the customer. This is consistent with the time in which the customer obtains control of the products. Performance obligations are also generally settled quickly after the purchase order acceptance, therefore the value of unsatisfied performance obligations at the end of any reporting period is generally immaterial.

We consider variable consideration in establishing the transaction price. Forms of variable consideration applicable to our arrangements include sales returns, rebates, volume-based bonuses, and prompt pay discounts. We use historical information along with an analysis of the expected value to properly calculate and to consider the need to constrain estimates of variable consideration. Such amounts are included as a reduction to revenue from the sale of products in the periods in which the related revenue is recognized and adjusted in future periods as necessary.

Practical Expedients

Our payment terms for sales direct to distributors are substantially less than the one-year collection period that falls within the practical expedient in determination of whether a significant financing component exists.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Note 4 – Patents.

In December 2017, we acquired from Rio Grande Neurosciences, Inc. (RGN) a patent portfolio for $4,500,000. The earliest patents expire in 2024. The following is a summary of patents less accumulated amortization at March 31, 2023 and December 31, 2022:

Schedule of Patents

Amortization expense associated with patents was $161,728 for the three months ended March 31, 2023 and 2022.

The estimated future amortization expense related to patents as of March 31, 2023, is as follows:

Schedule of Estimated Future Amortization Expense

Note 5- Notes Payable

As of March 31, 2023 and December 31, 2022, the notes payable activity was as follows:

Schedule of Notes Payable

The maturity dates on the notes-payable are as follows:

Schedule of Maturity Dates of Notes Payable

Activity for the three months ended March 31, 2023

Fixed rate notes

During the three months ended March 31, 2023, the Company converted $100,000 in principal and $9,000 in accrued interest into 10,900,000 shares of common stock.

During the three months ended March 31, 2023, the Company executed a second amendment to a fixed rate note to extend the maturity date in exchange for $20,000 payment to the current balance of the note as of March 31, 2023, and $2,500 in extension fee payable at the revised maturity date.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

As of March 31, 2023, the Company has a total of nineteen (19) fixed-rate notes, of which fourteen (14) have a make good provision for a total principal of $1,295,000 and $284,290 in accrued interest.

Such provision will require the Company to issue additional shares to ensure that the investor can realize a profit of 15% or 18% reselling the conversion shares. The value of the make good provision was approximately $234,000 as of March 31, 2023, and is reported under Accounts payable and accrued liabilities in the consolidated balance sheet as of March 31, 2023. In addition, certain fixed-rate notes include a prepayment provision, which entitles the holder to a 15% cash premium. The Company concluded that such provision was not deemed material and probable as of March 31, 2023.

Variable-rate notes

During the three months ended March 31, 2023, the Company executed a settlement agreement with one investor to extinguish the remaining principal balance of a promissory note into 4,300,590 shares of common stock, which resulted in a gain from debt extinguishment of approximately $77,000.

Fixed Rate note (former related party)

Notes payable to a former related party in the aggregate amount of $109,100 were outstanding at March 31, 2023, which are past maturity date. The notes bear interest between 10% and 12% per annum. During the three months ended March 31, 2023, the Company repaid $3,000 in principal amount to this former related party. Refer to Note 7- Related Party Transactions.

Activity for the three months ended March 31, 2022

Fixed rates notes

During the three months ended March 31, 2022, the Company issued one (1) fixed rate promissory notes totaling $100,000 for funding of $100,000 with original terms of nine months and interest rates of 15%. The holder of the promissory note can convert the outstanding unpaid principal and accrued interest at a fixed conversion rate six months after issuance date, subject to standard anti-dilution features.

As of March 31, 2022, the fixed-rate notes had an outstanding balance of $1,835,000, of which $1,035,000 are past maturity. As of March 31, 2022, the Company has 14 fixed rate promissory notes with unrelated parties for total amount of $1,835,000.

During the three months ended March 31, 2022, the Company converted $74,000 in accrued but unpaid interest into 3,700,000 shares of common stock.

As of March 31, 2022, the Company has a total of fourteen (14) fixed-rate notes, of which ten (10) for total principal amount of $1,100,000 includes a make good shares provision. Such provision will require the Company to issue additional shares to ensure that the investor can realize a profit of 15% reselling the conversion shares. The value of the make good provision was not material as of March 31, 2022. In addition, certain fixed-rate notes include a prepayment provision, which entitles the holder to a 15% cash premium. The Company concluded that such provision was not deemed material as of March 31, 2022

Variable-rate notes

The gross amount of all convertible notes with variable conversion rates outstanding as of March 31, 2022, is $4,770,926, of which $4,770,926 are past maturity. There has been no conversion of notes into the Company’s common stock during the three months ended March 31, 2022.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Note 6 - Shareholders’ Deficit

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock which have been designated as follows:

Schedule of Preferred Stock

Series AA Preferred Shares

On February 22, 2013, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to one million (1,000,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of director established the rights, preferences and limitations thereof.

Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one hundred thousand (100,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. The Series AA Super Voting Preferred Stockholders will receive no dividends nor any value on liquidation. There was no activity during the three months ended March 31, 2023. There were 25,000 shares of Series AA Preferred stock outstanding as of March 31, 2023 and December 31, 2022.

Series B Convertible Preferred Stock

On February 7, 2017, the Company filed a certificate of designation for 50,000 shares of Series B Convertible Preferred Stock designated as Series B (“Series B”) which are authorized and convertible, at the option of the holder, commencing six months from the date of issuance into common shares and warrants. For each share of Series B, the holder, on conversion, shall receive the stated value divided by 75% of the market price on the date of purchase of Series B and a three-year warrant exercisable into up to a like amount of common shares with an exercise price of 150% of the market price as defined in the Certificate of Designation. Dividends shall be paid only if dividends on the Company’s issued and outstanding Common Stock are paid, and the amount paid to the Series B holder will be as though the conversion shares had been issued. Series B holders have no voting rights. Upon liquidation, the holder of Series B, shall be entitled to receive an amount equal to the stated value, $100 per share, plus any accrued and unpaid dividends thereon before any distribution is made to Series C Secured Redeemable Preferred Stock or common stockholders. There was no activity during the three months ended March 31, 2023. There were 600 shares of Series B outstanding as of March 31, 2023 and December 31, 2022.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Series C Convertible Redeemable Preferred Stock

On December 22, 2017, the Company filed a certificate of designation for 8,000 shares of Series C Secured Redeemable Preferred Stock (“Series C”). Each share of the C Preferred is entitled to receive a $20 quarterly dividend commencing March 31, 2018, and each quarter thereafter and is to be redeemed for the stated value, $1,000 per share, plus accrued dividends in cash (i) at the Company’s option, commencing one year from issuance and (ii) mandatorily as of December 31, 2019. Management determined that the Series C should be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2019. On January 29, 2020, the Company filed the amended and restated certificate of designation fort its Series C Secured Redeemable Preferred Stock. The amendment changed the rights of the Series C by (a) removing the requirement to redeem the Series C, (b) removing the obligation to pay dividends on the Series C, (c) Allowing the holders of shares of Series C to convert the stated value of their shares into common stock of the Company at 75% of the closing price of such common stock on the day prior to the conversion. The C Preferred does not have any rights to vote with the common stock.

Upon liquidation, the holder of Series C, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders but after distributions are made to holders of Series B.

There was no activity during the three months ended March 31, 2023. There were 738 shares of Series C outstanding, as of March 31, 2023 and December 31, 2022

Series D Convertible Preferred Stock

On November 11, 2019, the Company filed a certificate of designation for 20,000 shares of Series D Convertible Preferred Stock designated as Series D (“Series D”), which are authorized and convertible, at the option of the holder, at any time from the date of issuance, into shares of common shares. On or prior to August 1, 2020, for each share of Series D, the holder, on conversion, shall receive a number of common shares equal to 0.01% of the Company’s issued and outstanding shares on conversion date and for conversion on or after August 2, 2020, the holder shall receive conversion shares as though the conversion date was August 1, 2020, with no further adjustments for issuances by the Company of common stock after August 1, 2020, except for stock split or reverse stock splits of the common stock. Management classified the Series D in permanent equity as of March 31, 2023.

The Series D holders have no voting rights. Upon liquidation, the holder of Series D, shall be entitled to receive an amount equal to the stated value, $1,000 per share, plus any accrued and unpaid dividends thereon before any distribution is made to common stockholders.

During the three months ended March 31, 2023, the Company issued 5,000,000 shares of common stock upon conversion of the remaining 50 shares of Series D preferred stock. The Company is also committed to providing additional shares of common stock if the holder of Series D does not realize a 15% profit on the resale of the conversion shares. As of March 31, 2023 and December 31, 2022, there were 0 and 50 shares of Series D outstanding, respectively.

Common Stock

Activity during the three months ended March 31, 2023

During the three ended March 31, 2023, the Company issued 10,900,000 shares of common stock for the conversion of $109,000 of principal accrued interest from one note holder.

During the three ended March 31, 2023, the Company issued 1,507,277 shares of common stock pursuant to a make-good provision, which resulted in a loss on debt extinguishment of $24,870.

During the three ended March 31, 2023, the Company issued 4,300,590 shares of common stock pursuant to a debt settlement of aggregate principal of $113,650, resulting in a gain on debt extinguishment of approximately $77,000.

During the three ended March 31, 2023, the Company issued 12,850,000 shares of common stock for services for a total fair value of $172,950.

During the three ended March 31, 2023, the Company issued 5,000,000 shares of common stock in exchange for 50 shares of Series D Preferred, which resulted in an inducement loss of $39,398 recorded as a deemed dividend in the shareholders’ deficit as of March 31, 2023.

During the three ended March 31, 2023, the Company issued 4 1/2 units or 22,500,000 shares of common stock pursuant to a private placement for total net cash receipt of $207,000.

Activity during the three months ended March 31, 2022

During the three months ended March 31, 2022, the Company issued 3,700,000 shares of common stock for the conversion of $74,000 of principal notes and accrued interest in the amount of $88,800.

During the three months ended March 31, 2022, the Company issued 2,428,777 shares of common stock pursuant to a make-whole provision from an April 2021 debt settlement with one investor.

During the three months ended March 31, 2022, the Company issued 700,000 shares of common stock labelled as commitment shares in connection with the issuance of promissory notes.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Stock Options

The balance of all stock options outstanding as of March 31, 2023, is as follows:

Schedule of Stock Options Outstanding

Share-based compensation expenses for the three months ended March 31, 2023 and 2022, totaled $2,560 and $0, respectively. The remaining stock-based compensation to be recognized approximates $12,800, which will be recognized over 4.7 years.

Warrants

The balance of all warrants outstanding as of March 31, 2023, is as follows:

Schedule of Warrants Outstanding

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Note 7 – Related Party and former related parties Transactions.

One executive officer of the Company has agreed to defer a portion of his compensation until cash flow improves. As of March 31, 2023, the balance of the deferred compensation was $545,068, which reflects $75,000 accrual of deferred compensation and $53,750 of cash repayment of deferred compensation during the three months ended March 31, 2023.

One former executive of the Company has agreed to defer a portion of his compensation until cash flow improves. As of March 31, 2023, the balance of his deferred compensation was $632,257. No activity occurred during the three months ended March 31, 2023.

From time-to-time officer of the Company advance monies to the Company to cover costs. The balance of short-term advances due to one officer of the Company at March 31, 2023, was $375 and is included in the Company’s accounts payable balance as of March 31, 2023. During the three months ended March 31, 2023, the Company’s executive officer advanced an aggregate amount of $250 for corporate expenses, and $2,500 was repaid back as of March 31, 2023.

As of March 31, 2023, notes payable remained outstanding to the former President of the Company, in the amount of $109,100. As of March 31, 2023, accrued interests on these notes payable totaled approximately $80,807, and are included in accrued expenses on the condensed consolidated balance sheet.

Note 8 – Fair Value Measurements

The Company issued Variable Debentures, which contained variable conversion rates based on unknown future prices of the Company’s common stock. This results in a conversion feature. The Company measures the conversion feature using the Black Scholes option pricing model using the following assumptions:

Schedule of Conversion Feature Using Black Scholes Option Pricing Model

The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, managements’ assessment, or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Company’s stock price, which is subject to significant fluctuation and is not under its control. The resulting effect on net income (loss) is therefore subject to significant fluctuation and will continue to be so until the Company’s variable debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

The following table presents changes in the liabilities with significant unobservable inputs (level 3) for the three months ended March 31, 2023:

Schedule of Fair Value of Derivative Liability

Accounting guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system, and defines required disclosures. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business.

The Company’s balance sheet contains derivative liabilities that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:

Level 1: uses quoted market prices in active markets for identical assets or liabilities.

Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: uses unobservable inputs that are not corroborated by market data.

The fair value of the Company’s recorded derivative liability is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Black Scholes option pricing model was used to determine the fair value. The Company records derivative liability on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation.

The following table presents balances in the liabilities with significant unobservable inputs (Level 3) as of March 31, 2023:

Schedule of Liabilities Significant Unobservable Inputs

Endonovo Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (continued)

Note 9 – Commitments and Contingencies

Legal Matters

The Company is subject to certain legal proceedings, which it considers routine to its business activities. As of March 31, 2023, the Company believes, after consultation with legal counsel, that the ultimate outcome of such legal proceedings, whether individually or in the aggregate, is not likely to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Note 10 – Concentrations.

Sales

During the three months ended March 31, 2023, we had one significant customer, which accounted for approximately 100% of sales. In addition, the Company generated all of its royalty/licensing revenue from one former related party.

Supplier

We also have a single source for our bioelectric medical devices, which account for 100% of our sales. The interruption of products provided by this supplier would adversely affect our business and financial condition unless an alternative source of products could be found.

Note 11 – Subsequent Events

Management has evaluated events that have occurred subsequent to the date of these consolidated condensed financial statements and has determined that, other than those listed below, no such reportable subsequent events exist through the date the financial statements were issued in accordance with FASB ASC Topic 855, “Subsequent Events.”

Subsequent to March 31, 2023, the Company issued 350,000 shares of common stock for services.

Subsequent to March 31, 2023, the Company issued 1,000,000 shares of common stock pursuant to an independent consulting agreement.

Subsequent to March 31, 2023, the Company issued 1 unit or 5,000,000 shares of common stock pursuant to a private placement for total net cash receipt of $46,000.

Subsequent to March 31,2023, the Board of director approved the issuance of 39,150,000 shares of common stock for past services.

Subsequent to March 31, 2023, the Company issued 1,667,000 shares of common stock pursuant to a settlement of an account payable.

Subsequent to March 31, 2023, the Company issued 350,000 shares of common stock in conjunction with promissory totaling $50,000.

Subsequent to March 31, 2023, the Company granted 3,000,000 stock options to purchase 3,000,000 shares of common shares vesting over 3 years at an exercise price of $0.012 per share for consulting services.

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

Cautionary Notice Regarding Forward Looking Statements

The information contained in Item 2 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. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” and variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

Endonovo Therapeutics, Inc. (Endonovo or the “Company”) is an innovative biotechnology company that has developed a bio-electronic approach to regenerative medicine. Endonovo is a growth stage company whose stock is publicly traded (OTCQB: ENDV).

The Company develops, manufactures and distributes evolutionary medical devices focused on the rapid healing of wounds and reduction of pain, edema and inflammation in the human body. The Company’s non-invasive bioelectric medical devices are designed to target inflammation, cardiovascular diseases, chronic kidney disease, and central nervous system disorders (“CNS” disorders).

The Company’s non-invasive Electroceutical® therapeutics device, SofPulse®, using pulsed short-wave radiofrequency at 27.12 MHz has been FDA-Cleared and CE Marked for the palliative treatment of soft tissue injuries and post-operative plain and edema, and has CMS National Coverage for the treatment of chronic wounds. The Company’s current portfolio of pre-clinical stage Electroceutical® therapeutics devices address chronic kidney disease, liver disease non-alcoholic steatohepatitis (NASH), cardiovascular and peripheral artery disease (PAD) and ischemic stroke.

Endonovo’s core mission is to transform the field of medicine by developing safe, wearable, non-invasive bioelectric medical devices that deliver the Company’s Electroceutical^® Therapy. Endonovo’s bioelectric Electroceutical^® devices harnesses bioelectricity to restore key electrochemical processes that initiate anti-inflammatory processes and growth factors in the body necessary for healing to rapidly occur.

Going Concern

Our independent registered auditors included an explanatory paragraph in their opinion on our consolidated financial statements as of and for the fiscal year ended December 31, 2022, that states that our ongoing losses and lack of resources causes reasonable doubt about our ability to continue as a going concern.

Critical Accounting Policies

A summary of our significant accounting policies is included in Note 1 of the “Notes to the Consolidated Financial Statements,” contained in our Form 10-K for the year ended December 31, 2022. Management believes that the consistent application of these policies enables us to provide users of the financial statements with useful and reliable information about our operating results and financial condition. The summary condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require us to make estimates and assumptions. We did not experience any significant changes during the three months ended March 31, 2023, in any of our critical accounting policies from those contained in our Form 10-K for the year ended December 31, 2022.

New Accounting Pronouncements

See Note 1 of Notes to Condensed Consolidated Financial Statements for further discussion of new accounting standards that have been adopted or are being evaluated for future adoption.

Results of Operations

Three Months ended March 31, 2023 and 2022:

Revenue

Revenue of the Company’s SofPulse® product during the three months ended March 31, 2023, was $6,220, an increase of $3,938, or approximately 172%, compared to $2,282 for the three months ended March 31, 2022.

We anticipate that revenue will increase in future periods as the roll out of the SofPulse® product continues. The Company is looking to partner with global participants in the medical device market to spur its expansion. The Company expects such investment alternatives to include partnerships, joint ventures, distribution, and licensing agreements for the PEMF medical technology. The Company is also looking to expand on current initiatives with the Department of Defense, the Department of Veterans Affairs, and other surgical and pain management markets.

During the three months ended March 31, 2023, the Company also recognized $81,320 in royalty/licensing revenue from a former related party.

Cost of Revenue

Cost of revenue during the three months ended March 31, 2023, was $3,996, an increase of $3,282 or 460% compared to $714 for the three months ended March 31, 2022. Cost of revenue is recognized on those sales recorded as gross for which we are the principal in the transaction as opposed to net sales which reflect no cost of revenue. It is anticipated that cost of revenue will increase in future quarters as the roll out of the SofPulse® product continues.

Operating Expenses

Operating expenses increased by $125,504 or 26%, to $612,834 for the three months ended March 31, 2023, compared to $487,330 for the three months ended March 31, 2022. This change was due primarily to an increase in non-cash stock-based compensation related to the issuance of common shares for services for approximately $53,000 and an increase in consulting fees by approximately $60,000.

Other Expense/Income

Other income (expense) increased by $9,687,239 or 503% to $7,759,792 for the three months ended March 31, 2023 compared to an expense of $1,927,447 for the three months ended March 31, 2022. This change was due primarily to a decrease in the valuation of our derivative liabilities of approximately $9.5 million, an increase in our gain from debt extinguishment by $0.1 million. We anticipate continued large fluctuations in other income/expense as a result of quarterly re-evaluation of derivative liabilities.

Liquidity and Capital Resources

Since January 1, 2023, and through March 31, 2023, the Company has raised approximately $0.2 million in equity transactions. These funds have been used to fund on-going corporate operations. Our accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed consolidated financial statements. Our cash on hand at March 31, 2023 was approximately $10,900. The Company has incurred substantial losses since inception. Its current liabilities exceed its current assets and available cash is not sufficient to fund expected future operations. The Company is contemplating raising additional capital through debt and equity in order to continue the funding of its operations and to acquire a profitable business. However, there is no assurance that the Company can raise sufficient funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern.

The Company is not aware of any recently issued accounting pronouncements that when adopted will have a material effect on the Company’s financial position or result of its operation.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a Smaller Reporting Company and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Disclosure of controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of March 31, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level:

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ended March 31, 2023. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the authorization of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. The recording of transactions function is maintained by a third-party consulting firm whereas authorization and custody remains under the Company’s Chief Executive Officer’s responsibility. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Changes in internal controls over financial reporting.

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is subject to certain legal proceedings, which it considers routine to its business activities. As of March 31, 2023, the Company believes, after consultation with legal counsel, that the ultimate outcome of such legal proceedings, whether individually or in the aggregate, is not likely to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Item 1A. Risk Factors.

We are a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act) and are not required to provide the information under this item.

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