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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐ 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: 001-41358
ACLARION, INC. |
(Exact name of registrant as specified in its charter) |
Delaware |
|
47-3324725 |
(State or other jurisdiction of incorporation) |
|
(IRS Employer Identification No.) |
8181 Arista Place, Suite 100
Broomfield, Colorado 80021
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including
area code: (833) 275-2266
Not Applicable
(Former name or former address, if changed since
last report)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Common stock, par value $0.00001 per share |
|
ACON |
|
The Nasdaq Stock Market LLC |
Warrants, each exercisable for one share of Common stock |
|
ACONW |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated Filer |
☒ |
Smaller reporting company |
☒ |
|
|
Emerging growth company |
☒ |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 14, 2024, there were 8,610,671
shares of the registrant's common stock, $0.00001 par value per share, outstanding.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on
Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements,
other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy,
future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth,
are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,”
“assume,” “believe,” “contemplate,” “continue,” “could,” “design,”
“due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,”
“plan,” “positioned,” “potential,” “predict,” “seek,” “should,”
“target,” “will,” “would” and other similar expressions that are predictions of or indicate future
events and future trends, or the negative of these terms or other comparable terminology.
Although we believe that
we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that
the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved
or occur at all. Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different
from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to, those described
in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the Form 10-K) dated
March 28, 2024, as filed with the Securities and Exchange Commission on March 28, 2024, under Rule 424(b)(4). Caution should be taken
not to place undue reliance on any such forward-looking statements. Except as required by law, we undertake no obligation to publicly
update any forward-looking statements, whether as a result of new information, future events or otherwise.
You should read this Quarterly
Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits completely and
with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-
looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Aclarion, Inc.
Condensed Balance Sheets
| |
| | | |
| | |
| |
Jun 30, 2024 | | |
Dec 31, 2023 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 1,172,687 | | |
$ | 1,021,069 | |
Restricted cash | |
| 10,000 | | |
| 10,000 | |
Accounts receivable, net | |
| 19,713 | | |
| 13,270 | |
Prepaids and other current assets | |
| 649,357 | | |
| 245,030 | |
Total current assets | |
| 1,851,757 | | |
| 1,289,369 | |
| |
| | | |
| | |
Non-current assets: | |
| | | |
| | |
Property and equipment, net | |
| 1,189 | | |
| 1,782 | |
Intangible assets, net | |
| 1,235,875 | | |
| 1,168,623 | |
Total non-current assets | |
| 1,237,064 | | |
| 1,170,405 | |
| |
| | | |
| | |
Total assets | |
$ | 3,088,821 | | |
$ | 2,459,774 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 179,123 | | |
$ | 760,535 | |
Accrued and other liabilities | |
| 447,972 | | |
| 857,722 | |
Note payable, net of discount | |
| 777,087 | | |
| 1,125,724 | |
Warrant liability | |
| 23,861 | | |
| 289,165 | |
Derivative liability | |
| 18,601 | | |
| 121,326 | |
Liability to issue equity | |
| – | | |
| 33,297 | |
Total current liabilities | |
| 1,446,644 | | |
| 3,187,769 | |
| |
| | | |
| | |
Total liabilities | |
| 1,446,644 | | |
| 3,187,769 | |
| |
| | | |
| | |
Stockholders' equity (deficit) | |
| | | |
| | |
Common stock - $0.00001
par value, 200,000,000
authorized and 8,210,671
and 825,459
shares issued and outstanding (see Note 11) | |
| 82 | | |
| 8 | |
Additional paid-in capital | |
| 49,560,800 | | |
| 43,553,523 | |
Accumulated deficit | |
| (47,918,705 | ) | |
| (44,281,526 | ) |
Total stockholders’ equity (deficit) | |
| 1,642,177 | | |
| (727,995 | ) |
| |
| | | |
| | |
Total liabilities and stockholders’
equity (deficit) | |
$ | 3,088,821 | | |
$ | 2,459,774 | |
See accompanying notes to condensed financial statements.
Aclarion, Inc.
Condensed Statements of Operations
(unaudited)
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | |
Revenue | |
$ | 10,971 | | |
$ | 17,072 | | |
$ | 21,085 | | |
$ | 42,542 | |
Cost of revenue | |
| 23,294 | | |
| 19,301 | | |
| 42,770 | | |
| 36,754 | |
Gross profit (loss) | |
| (12,323 | ) | |
| (2,229 | ) | |
| (21,685 | ) | |
| 5,788 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Sales and marketing | |
| 225,037 | | |
| 207,790 | | |
| 406,094 | | |
| 385,074 | |
Research and development | |
| 202,102 | | |
| 250,006 | | |
| 441,143 | | |
| 454,405 | |
General and administrative | |
| 696,099 | | |
| 946,175 | | |
| 1,541,947 | | |
| 1,753,774 | |
Total operating expenses | |
| 1,123,238 | | |
| 1,403,971 | | |
| 2,389,184 | | |
| 2,593,253 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) from operations | |
| (1,135,561 | ) | |
| (1,406,200 | ) | |
| (2,410,869 | ) | |
| (2,587,465 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (127,848 | ) | |
| (47,139 | ) | |
| (463,672 | ) | |
| (48,519 | ) |
Loss on exchange of debt | |
| – | | |
| – | | |
| (1,066,732 | ) | |
| – | |
Loss on extinguishment of debt | |
| – | | |
| – | | |
| (111,928 | ) | |
| – | |
Changes in fair value of warrant and derivative liabilities | |
| 25,357 | | |
| (11,800 | ) | |
| 323,041 | | |
| (11,800 | ) |
Other, net | |
| (25 | ) | |
| 583 | | |
| 92,980 | | |
| (234 | ) |
Total other income (expense) | |
| (102,516 | ) | |
| (58,356 | ) | |
| (1,226,311 | ) | |
| (60,552 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income tax provision | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
$ | (1,238,077 | ) | |
$ | (1,464,557 | ) | |
$ | (3,637,180 | ) | |
$ | (2,648,017 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) allocable to common stockholders | |
$ | (1,238,077 | ) | |
$ | (1,464,557 | ) | |
$ | (3,637,180 | ) | |
$ | (2,648,017 | ) |
Net income (loss) per share allocable to common shareholders | |
$ | (0.15 | ) | |
$ | (2.83 | ) | |
$ | (0.53 | ) | |
$ | (5.22 | ) |
Weighted average shares of common stock outstanding, basic and diluted | |
| 8,217,024 | | |
| 517,979 | | |
| 6,829,825 | | |
| 507,499 | |
See accompanying notes to condensed financial statements.
Aclarion, Inc.
Condensed Statements of Changes in Stockholders'
Equity (Deficit)
(Unaudited)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Series A | | |
Series A-1, A-2, A-3, A-4 | | |
Series B, B-1 | | |
Series B-2, B-3 | |
| |
Preferred Stock | | |
Preferred Stock | | |
Preferred Stock | | |
Preferred Stock | |
| |
Shares | | |
Value | | |
Shares | | |
Value | | |
Shares | | |
Value | | |
Shares | | |
Value* | |
Balance, December 31, 2022 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
Share-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Proceeds from sale of Series A preferred stock | |
| 1 | | |
| 1,000 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Redemption of Series A Preferred stock | |
| (1 | ) | |
| (1,000 | ) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Balance, March 31, 2023 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Commitment shares - note financing | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of warrants - note financing | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Balance, June 30, 2023 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2023 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
Share-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares related to restricted stock units | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares - equity line of credit | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of commitment shares - note financing | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Cashless exercise of pre-funded warrants | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common stock and warrants related to public offering, net issuance costs | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Public offering and line of credit issuance costs | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares - debt for equity exchange | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Round up conversion related to reverse stock split | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Balance, March 31, 2024 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares related to restricted stock units | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares - equity line of credit | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
Balance, June 30, 2024 | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
| – | | |
$ | – | |
(continued)
Aclarion, Inc.
Condensed Statements of Changes in Stockholders'
Equity (Deficit)
(Unaudited)
(continued)
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | |
| | |
Additional | | |
| | |
| |
| |
Common Stock | | |
Paid-In | | |
Accumulated | | |
| |
| |
Shares | | |
Value | | |
Capital | | |
Deficit | | |
Total | |
Balance, December 31, 2022 | |
| 491,345 | | |
$ | 5 | | |
$ | 41,596,106 | | |
$ | (39,370,153 | ) | |
$ | 2,225,958 | |
Share-based compensation | |
| – | | |
| – | | |
| 82,531 | | |
| – | | |
| 82,531 | |
Proceeds from sale of Series A preferred stock | |
| – | | |
| – | | |
| – | | |
| – | | |
| 1,000 | |
Redemption of Series A Preferred stock | |
| – | | |
| – | | |
| – | | |
| – | | |
| (1,000 | ) |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| (1,183,460 | ) | |
| (1,183,460 | ) |
Balance, March 31, 2023 | |
| 491,345 | | |
$ | 5 | | |
$ | 41,678,637 | | |
$ | (40,553,613 | ) | |
| 1,125,029 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based compensation | |
| – | | |
| – | | |
| 136,631 | | |
| – | | |
| 136,631 | |
Commitment shares - note financing | |
| 21,210 | | |
| – | | |
| 175,619 | | |
| – | | |
| 175,619 | |
Issuance of warrants - note financing | |
| – | | |
| – | | |
| 37,500 | | |
| – | | |
| 37,500 | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| (1,464,557 | ) | |
| (1,464,557 | ) |
Balance, June 30, 2023 | |
| 512,555 | | |
$ | 5 | | |
$ | 42,028,387 | | |
$ | (42,018,169 | ) | |
| 10,223 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2023 | |
| 825,459 | | |
$ | 8 | | |
$ | 43,553,524 | | |
$ | (44,281,526 | ) | |
$ | (727,995 | ) |
Share-based compensation | |
| – | | |
| – | | |
| 85,827 | | |
| – | | |
| 85,827 | |
Issuance of common shares related to restricted stock units | |
| 4,261 | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares - equity line of credit | |
| 452,343 | | |
| 5 | | |
| 1,449,527 | | |
| – | | |
| 1,449,532 | |
Issuance of commitment shares - note financing | |
| 9,312 | | |
| – | | |
| 33,297 | | |
| – | | |
| 33,297 | |
Cashless exercise of pre-funded warrants | |
| 2,915 | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common stock and warrants related to public offering, net issuance costs | |
| 5,175,000 | | |
| 52 | | |
| 2,691,339 | | |
| – | | |
| 2,691,391 | |
Public offering and line of credit issuance costs | |
| – | | |
| – | | |
| (399,106 | ) | |
| – | | |
| (399,106 | ) |
Issuance of common shares - debt for equity exchange | |
| 644,142 | | |
| 6 | | |
| 1,771,600 | | |
| – | | |
| 1,771,606 | |
Round up conversion related to reverse stock split | |
| 40,068 | | |
| – | | |
| – | | |
| – | | |
| – | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| (2,399,102 | ) | |
| (2,399,102 | ) |
Balance, March 31, 2024 | |
| 7,153,500 | | |
$ | 72 | | |
$ | 49,186,006 | | |
$ | (46,680,628 | ) | |
| 2,505,449 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based compensation | |
| – | | |
| – | | |
| 70,305 | | |
| – | | |
| 70,305 | |
Issuance of common shares related to restricted stock units | |
| 7,171 | | |
| – | | |
| – | | |
| – | | |
| – | |
Issuance of common shares - equity line of credit | |
| 1,050,000 | | |
| 10 | | |
| 304,490 | | |
| – | | |
| 304,500 | |
Net income (loss) | |
| – | | |
| – | | |
| – | | |
| (1,238,077 | ) | |
| (1,238,077 | ) |
Balance, June 30, 2024 | |
| 8,210,671 | | |
$ | 82 | | |
$ | 49,560,800 | | |
$ | (47,918,705 | ) | |
| 1,642,177 | |
See accompanying notes to condensed financial statements.
Aclarion, Inc.
Condensed Statements of Cash Flows
(unaudited)
| |
| | | |
| | |
| |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
Cash flows from operating activities | |
| | | |
| | |
Net income (loss) | |
$ | (3,637,180 | ) | |
$ | (2,648,017 | ) |
| |
| | | |
| | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 90,864 | | |
| 79,809 | |
Share-based compensation | |
| 156,131 | | |
| 219,162 | |
Loss on exchange of debt | |
| 1,066,732 | | |
| – | |
Loss on extinguishment of debt | |
| 111,928 | | |
| – | |
Amortization of deferred issuance costs | |
| 442,289 | | |
| 28,520 | |
Change in fair value related to warrants and derivative | |
| (323,041 | ) | |
| 11,800 | |
Non-cash interest related to bridge funding | |
| 49,116 | | |
| 14,346 | |
Change in assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (5,115 | ) | |
| 1,414 | |
Prepaids and other current assets | |
| (405,657 | ) | |
| 33,287 | |
Accounts payable | |
| (540,710 | ) | |
| 57,914 | |
Accrued and other liabilities | |
| (267,325 | ) | |
| 241,110 | |
Note payable, net of discount | |
| (31,129 | ) | |
| – | |
Net cash (used in) operations | |
| (3,293,096 | ) | |
| (1,960,653 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Intangible assets - Patents | |
| (157,523 | ) | |
| (72,634 | ) |
Net cash (used in) investing activities | |
| (157,523 | ) | |
| (72,634 | ) |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Issuance of common stock and warrants related to public offering, net deductions | |
| 2,691,391 | | |
| – | |
Proceeds from equity line | |
| 1,754,032 | | |
| – | |
Repayment of promissory notes | |
| (300,973 | ) | |
| – | |
Equity line cash issuance costs | |
| (262,744 | ) | |
| – | |
Public offering cash issuance costs | |
| (256,094 | ) | |
| – | |
Bridge fund cash issuance costs | |
| (23,375 | ) | |
| (85,000 | ) |
Proceeds from bridge funding | |
| – | | |
| 1,250,000 | |
Proceeds from sale of Series A preferred stock | |
| – | | |
| 1,000 | |
Redemption of Series A Preferred stock | |
| – | | |
| (1,000 | ) |
Net cash provided by financing activities | |
| 3,602,237 | | |
| 1,165,000 | |
| |
| | | |
| | |
Net increase (decrease) in cash and cash equivalents | |
| 151,618 | | |
| (868,287 | ) |
Cash, cash equivalents and restricted cash, beginning of period | |
| 1,031,069 | | |
| 1,482,806 | |
Cash, cash equivalents and restricted cash, end of period | |
$ | 1,182,687 | | |
$ | 614,518 | |
| |
| | | |
| | |
Non-cash activities | |
| | | |
| | |
Issuance of common shares in exchange for debt | |
| 1,519,779 | | |
| – | |
Issuance of bridge fund commitment shares | |
| 33,297 | | |
| 175,619 | |
Fair value of warrants and derivative related to bridge funding | |
| – | | |
| 742,988 | |
Accrued debt issuance costs related to bridge funding | |
| – | | |
| 118,575 | |
Issuance of warrants related to bridge funding | |
| – | | |
| 37,500 | |
Original issue discount (15%) related to bridge funding | |
| – | | |
| 187,500 | |
See accompanying notes to condensed financial statements.
Aclarion, Inc.
Notes to Condensed Financial Statements
(unaudited)
NOTE 1. THE COMPANY AND BASIS
OF PRESENTATION
The Company
Aclarion, Inc., formerly Nocimed, Inc., (the “Company”
or “Aclarion”) is a healthcare technology company that leverages magnetic resonance spectroscopy (“MRS”), and
a proprietary biomarker to optimize clinical treatments. The Company was formed in February 2015, is incorporated in Delaware, and has
its principal place of business in Broomfield, Colorado.
Basis of Presentation
The accompanying condensed financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and
pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.
Accordingly, they do not include all of the information required by U.S. GAAP for complete financial statements. The interim condensed
financial statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair representation
of the results for the periods presented and should be read in conjunction with the audited financial statements and notes thereto for
the year ended December 31, 2023, which include a complete set of footnote disclosures, including our significant accounting policies.
The December 31, 2023, condensed balance sheet was derived from the December 31, 2023, audited financial statements. They should be read
in conjunction with the financial statements and notes thereto included in our Annual report on Form 10-K, filed with the SEC on March
28, 2024. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or
for any other future period.
Risks and Uncertainties
The Company is subject to various risks and uncertainties
frequently encountered by companies in the early stages of development. Such risks and uncertainties include, but are not limited to,
its limited operating history, competition from other companies, limited access to additional funds, dependence on key personnel, and
management of potential rapid growth. To address these risks, the Company must, among other things, develop its customer base; implement
and successfully execute its business and marketing strategy; develop follow-on products; provide superior customer service;
and attract, retain, and motivate qualified personnel. There can be no guarantee that the Company will be successful in addressing these
or other such risks.
2024 Reverse Stock Split
In March 2023 the Company’s stockholders
approved a reverse stock split proposal at a ratio in the range of one-for-five to one-for-fifty, with the final ratio to be determined
by the Company's board in its discretion without further approval from the Company's stockholders. In January 2024, the Company's board
subsequently approved the final reverse stock split ratio of one-for-sixteen (the “2024 Stock Split”), which resulted in a
reduction in the number of outstanding shares of common stock, warrants, stock options and restricted share units and a proportionate
increase in the value of each share or strike price of the warrants and stock options. The common stock began trading on a reverse split-adjusted
basis on the NASDAQ on January 4, 2024.
As a result of the 2024 Stock Split, unless described
otherwise, all references to common stock, share data, per share data and related information contained in these financial statements
have been retrospectively adjusted to reflect the effect of the stock splits for all periods presented. In addition, any fractional shares
that would otherwise be issued as a result of the stock splits were rounded up to the nearest whole share. Further, the number of shares
issuable and exercise prices of stock options and warrants have been retrospectively adjusted in these financial statements for all periods
presented to reflect the 2024 Stock Split.
The following tables present selected share information
reflecting on a retroactive basis the reverse stock splits as of and for the year ended December 31, 2023:
Schedule of equity statement information | |
| |
| |
December 31, | |
| |
2023 | |
Common shares issued and outstanding - pre-2024 split, 13,206,229 shares | |
$ | 132 | |
Common shares issued and outstanding - post-2024 split, 825,459 shares | |
$ | 8 | |
Additional paid-in capital - pre-2024 split | |
$ | 43,553,399 | |
Additional paid-in capital - post-2024 split | |
$ | 43,553,523 | |
Schedule of share information reflecting on a retroactive basis the reverse stock splits | |
| |
| |
Year ended December 31, | |
| |
2023 | |
Weighted average shares outstanding, basic and diluted - pre-2024 split | |
| 8,908,934 | |
Weighted average shares outstanding, basic and diluted - post-2024 split | |
| 556,808 | |
Basic and diluted net loss per shares attributable to common stockholders - pre-2024 split | |
$ | (0.55 | ) |
Basic and diluted net loss per shares attributable to common stockholders - post-2024 split | |
$ | (8.82 | ) |
Nasdaq notice regarding compliance
with the $1.00 Minimum Bid Price requirement
On April 8, 2024, Aclarion, Inc. (the “Company”) received a written
notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating
that the Company is not in compliance with the $1.00 Minimum Bid Price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued
listing on The Nasdaq Capital Market (the “Bid Price Requirement”).
The Notice does not result in the immediate delisting
of the Company’s common stock from The Nasdaq Capital Market.
The Nasdaq Listing Rules require listed securities to maintain
a minimum bid price of $1.00 per share and, based upon the closing bid price of the Company’s common stock for the 30 consecutive
business days for the period ending April 5, 2024, the Company no longer meets this requirement.
The Notice indicated that the
Company will be provided 180 calendar days (or until October 7, 2024) in which to regain compliance. If at any time during this 180 calendar
day period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of ten consecutive business
days, the Nasdaq staff (the “Staff”) will provide the Company with a written confirmation of compliance and the matter will
be closed.
Alternatively, if the Company fails to regain compliance with Rule 5550(a)(2) prior to the expiration of the initial
180 calendar day period, the Company may be eligible for an additional 180 calendar day compliance period, provided (i) it meets the
continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The
Nasdaq Capital Market (except for the Bid Price Requirement) and (ii) it provides written notice to Nasdaq of its intention to cure this
deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the Company does not regain
compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, and if it appears to the Staff that the
Company will not be able to cure the deficiency, or if the Company is not otherwise eligible, the Staff will provide the Company with
written notification that its securities are subject to delisting from The Nasdaq Capital Market. At that time, the Company may appeal
the delisting determination to a Hearings Panel.
The Company intends to monitor the closing bid price of its common stock and
is considering its options to regain compliance with the Bid Price Requirement. The Company’s receipt of the Notice does not affect
the Company’s business, operations or reporting requirements with the Securities and Exchange Commission.
Nasdaq Stockholder Equity Notice
On March 3, 2023, the Company received a written notice (the “Stockholder Equity Notice”) from Nasdaq indicating that it
is not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Stock Market to maintain a minimum
of $2,500,000 in stockholders’ equity for continued listing. In its annual report on Form 10-K filed on February 27, 2023 for the
period ended December 31, 2022, the Company reported stockholders’ equity of $1,787,751, and, as a result, does not currently satisfy
Listing Rule 5550(b)(1).
The Stockholder Equity Notice also indicated that the Company had a period of 45 calendar days
from the date of the Stockholder Equity Notice, or until April 17, 2023, to submit a plan to regain compliance with the stockholders’
equity requirement under Nasdaq Listing Rule 5550(b)(1). The Company submitted such a plan to Nasdaq on April 12, 2023.
On April
20, 2023, the Company received a letter (the “Extension Notice”) from Nasdaq notifying the Company that it has been granted
an additional 180-day period, or until August 30, 2023, to regain compliance with Nasdaq Listing Rule 5550(b)(1).
On August 31,
2023, the Nasdaq staff notified the Company that it had not met the terms of the Extension Notice. Accordingly, the Nasdaq staff had
determined to delist the Company’s common stock from Nasdaq, unless the Company timely requests an appeal of the staff’s
determination to a hearings panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.
The Company requested a hearing before a hearings panel (the “Panel”) to appeal the delisting notice from the staff.
The Company's hearing with the Panel occurred on October 19, 2023.
On November 7, 2023, we were notified by the Panel that the
Company’s request for continued listing on Nasdaq was granted, subject to the Company demonstrating compliance with the stockholders’
equity requirement and bid price requirement on or before January 31, 2024. The Panel subsequently extended this compliance date to February
27, 2024. On February 27, 2024, the Company completed a public offering of 5,175,000 units (“Units”) at a price of $0.58
per Unit, for gross proceeds of approximately $3.0 million, before deducting offering expenses. Each Unit was comprised of (i) one share
of common stock or, in lieu of common stock, one prefunded warrant to purchase a share of common stock, and (ii) two common warrants,
each common warrant to purchase a share of common stock.
On May 15, 2024, the Company filed a Quarterly Report on Form 10-Q for
the three months ending March 31, 2024, and reported stockholders’ equity of $2,505,450.
As of June 30, 2024, the Company had Stockholders’
Equity of $1,642,177.
NOTE 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
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 reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The financial statements include some amounts
that are based on management's best estimates and judgments. The most significant estimates relate to depreciation, amortization, and
valuation of warrants, warrant and derivative liabilities, and options to purchase shares of the Company's common stock. These estimates
may be adjusted as more current information becomes available, and any adjustment could be significant.
Valuation of Derivative Instruments
Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging: Contracts on an Entity’s Own Equity,
addresses whether an equity-linked contract qualifies as equity in the entity’s financial statements. Agreements where an entity
has insufficient authorized and unissued shares to settle the contract generally are accounted for as a liability and marked to fair value
through earnings each reporting period. The Company evaluates its financial instruments to determine if such instruments are liabilities
or contain features that qualify as embedded derivatives. For financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported
as charges or credits to income.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, provides guidance
on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price,
representing the amount 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. As such, fair value is a market-based measurement that should be determined based on assumptions
that market participants would use in pricing an asset or a liability.
The accounting guidance classifies fair value
measurements in one of the following three categories for disclosure purposes:
Level 1 - Unadjusted quoted prices
in active markets for identical instruments that are accessible by the Company on the measurement date.
Level 2 - Quoted prices in markets
that are not active or inputs which are either directly or indirectly observable.
Level 3 - Unobservable inputs
for the instrument requiring the development of assumptions by the Company.
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard
for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
The carrying values of the Company’s financial
instruments including cash equivalents, restricted cash, accounts receivable, and accounts payable are approximately equal to their respective
fair values due to the relatively short-term nature of these instruments. The Company’s warrant liabilities and derivative liabilities
are estimated using level 3 inputs (see Note 3).
Derivative Financial Instruments
The Company has derivative financial instruments
that are not hedges and do not qualify for hedge accounting. Changes in the fair value of these instruments are recorded in other income
(expenses), on a net basis in the Consolidated Statements of Operations.
Cash and Cash Equivalents
The Company considers all highly liquid
instruments purchased with an original maturity of three months or less to be cash equivalents. The Company had no
cash equivalents at June 30, 2024 and December 31, 2023. The Company maintains cash deposits at several financial institutions,
which are insured by the FDIC up to $250,000. The Company’s cash balance may at times exceed these limits. On June 30, 2024,
and December 31, 2023, the Company had $818,591 and
$761,800,
respectively, in excess of federally insured limits. The Company continually monitors its positions with, and the credit quality of,
the financial institutions with which it invests. The Company maintains no international bank accounts. As of June 30, 2024, $10,000
of the Company’s cash was restricted as collateral related to the credit card program offered by our bank.
Accounts Receivable, Less Allowance for Doubtful
Accounts
The Company estimates an allowance for doubtful
accounts based upon an evaluation of the current status of receivables, historical experience, and other factors as necessary. It is reasonably
possible that the Company’s estimate of the allowance for doubtful accounts will change. The allowance for doubtful accounts was
$0 on June 30, 2024, and December 31, 2023.
Revenue Recognition
Revenues are recognized when a contract with a
customer exists, and at that point in time when we have delivered a Nociscan report to our customer. Revenue is recognized in the amount
that reflects the negotiated consideration expected to be received in exchange for those reports. Following the delivery of the report,
the company has no ongoing obligations or services to provide to the customer. Customers pay no other upfront, licensing, or other fees.
To date, our reports are not reimbursable under any third-party payment arrangements, The Company invoices its customers based on the
billing schedules in its sales arrangements. Payment terms range generally from 30 to 90 days from the date of invoice.
Liquidity, Capital Resources and Going Concern
The Company believes that the net proceeds from
the February 2024 initial public offering, and subsequent funding from the April 2024 equity line agreement described in Note 11, will
be sufficient to fund current operating plans into the third quarter of 2024, approaching our final maturity repayment of our unsecured
non-convertible note, which is due in September 2024. The Company has based these estimates, however, on assumptions that may prove to
be wrong, and could spend available financial resources much faster than we currently expect. The Company will need to raise additional
funds to continue funding our technology development. Management plans to secure such additional funding.
As a result of the Company’s recurring
losses from operations and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding
the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to
the Company’s ability to continue as a going concern.
Share-Based Compensation
The Company accounts for stock-based awards in
accordance with provisions of ASC Topic 718, Compensation—Stock Compensation, under which the Company recognizes the grant-date
fair value of stock-based awards issued to employees and nonemployee board members as compensation expense on a straight-line basis over
the vesting period of the award, while awards containing a performance condition are recognized as expense when the achievement of the
performance criteria is achieved. The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock
options. The Company records expense for forfeitures in the periods they occur.
The exercise or strike price of each option is
not less than 100% of the fair market value of the Common Stock subject to the option on the date the option is granted.
The Company issues restricted stock unit awards
to non-employee consultants who are providing various services. The awards are valued at the market price on the date of the grant. The
awards vest over the contract life and based on achievement of targeted performance milestones.
On occasion, the Company grants common stock to
compensate vendors for services rendered.
Deferred Financing Costs
The Company capitalizes certain legal, accounting,
and other fees and costs that are directly attributable to in-process equity financings as deferred offering costs until such financings
are completed. Upon the completion of an equity financing, these costs are recorded as a reduction of additional paid-in capital of the
related offering. Upon the completion of the public offering in February 2024, approximately $566,200 of offering costs related to the
public offering were reclassified to additional paid-in capital ($310,105 deducted from proceeds, and $256,094 paid or accrued). Upon
the completion of the issuance of shares pursuant to the equity line in the first quarter of 2024, $133,000 of offering costs were reclassified
to additional paid-in capital.
Emerging Growth Company Status
The Company is an emerging growth company, as
defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies
can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those
standards apply to private companies. The Company has elected to use this extended transition period to comply with certain new or revised
accounting standards that have different effective dates for public and private companies.
NOTE 3: FAIR VALUE MEASUREMENTS
In accordance with ASC 820 (Fair Value Measurements
and Disclosures), the Company uses various inputs to measure the outstanding warrants, certain embedded redemption features associated
with the senior note to Aclarion, Inc. on a recurring basis to determine the fair value of the liability.
Schedule of recurring basis to determine the fair value of the liability | |
| | |
| | |
| | |
| |
| |
Fair value measured as of June 30, 2024 | |
| |
Fair value on June 30, 2024 | | |
Quoted prices in active markets (Level 1) | | |
Significant other observable inputs (Level 2) | | |
Significant unobservable inputs (Level 3) | |
Warrant liability | |
$ | 23,861 | | |
$ | – | | |
$ | – | | |
$ | 23,861 | |
Derivative Liability | |
| 18,601 | | |
| – | | |
| – | | |
| 18,601 | |
Total Fair value | |
$ | 42,462 | | |
$ | – | | |
$ | – | | |
$ | 42,462 | |
There were no transfers between Level 1, 2, and
3 during the six months ended June 30, 2024.
The following table presents changes in Level
3 liabilities measures at fair value for the six months ended June 30, 2024. Both observable and unobservable inputs were used to determine
the fair value positions that the Company has classified within the Level 3 category.
Schedule of liabilities measures at fair value | |
| | |
| | |
| |
| |
Warrant Liability | | |
Derivative Liability | | |
Total | |
Balance – December 31, 2023 | |
$ | 289,165 | | |
$ | 121,326 | | |
$ | 410,491 | |
Exchange and Payoff of Notes Payable | |
| – | | |
| (44,988 | ) | |
| (44,988 | ) |
Change in fair value | |
| (265,304 | ) | |
| (57,737 | ) | |
| (323,041 | ) |
Balance – June 30, 2024 | |
$ | 23,861 | | |
$ | 18,601 | | |
$ | 42,462 | |
The fair value of the embedded derivative liabilities
associated with the Senior Notes Payable was estimated using a probability weighted discounted cash flow model to measure the fair value.
This involves significant Level 3 inputs and assumptions including an (i) estimated probability and timing of certain financing events
and event of default, and (ii) the Company’s risk-adjusted discount rate.
The fair value of the warrants to purchase shares
of common stock was estimated using a Monte Carlo simulation using the following assumptions.
Schedule of assumptions | |
| | | |
| | |
| |
As of
Dec 31, 2023 | | |
As of
June 30, 2024 | |
| |
Warrant Liability | | |
Warrant Liability | |
Strike Price | |
$ | 4.32 | | |
$ | 0.29 | |
Contractual term (years) | |
| 5.0 | | |
| 5.0 | |
Volatility (annual) | |
| 80.0% | | |
| 80.0% | |
Risk-free rate | |
| 3.89% | | |
| 4.39-4.44% | |
Floor Financing price | |
$ | 2.24 | | |
$ | 0.14 | |
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
To date, there have been no recent accounting
pronouncements not yet effective that have significance, or potential significance, to our Consolidated Financial Statements.
NOTE 5. REVENUE
Contract Balances
The timing of revenue recognition, billings, and
cash collections may result in trade, unbilled receivables, and deferred revenues on the balance sheets. At times, revenue recognition
may occur before the billing, resulting in an unbilled receivable, which would represent a contract asset. The contract asset would be
a component of accounts receivable and other assets for the current and non-current portions, respectively. In the event the Company receives
advances or deposits from customers before revenue is recognized, this would result in a contract liability.
NOTE 6. SUPPLEMENTAL FINANCIAL INFORMATION
Balance Sheets
Prepaids and other current assets:
Schedule of prepaid and other current assets | |
| | |
| |
| |
June 30, 2024 | | |
December 31, 2023 | |
Short term deposits | |
$ | 50,000 | | |
$ | 50,000 | |
Deferred offering costs | |
| 74,648 | | |
| 100,588 | |
Prepaid insurance D&O | |
| 241,445 | | |
| 34,769 | |
Prepaid insurance, other | |
| 5,010 | | |
| 17,884 | |
Prepaid clinical costs | |
| 165,417 | | |
| – | |
Prepaid exchange fees | |
| 53,720 | | |
| – | |
Prepaid other | |
| 59,117 | | |
| 41,635 | |
Other receivables | |
| – | | |
| 154 | |
| |
$ | 649,357 | | |
$ | 245,030 | |
Accounts payable
Schedule of accounts payable | |
| | | |
| | |
| |
June 30, 2024 | | |
December 31, 2023 | |
Accounts payable | |
$ | 177,610 | | |
$ | 758,821 | |
Credit cards payable | |
| 1,513 | | |
| 1,714 | |
| |
$ | 179,123 | | |
$ | 760,535 | |
Accrued and other liabilities:
Schedule of accrued and other liabilities | |
| | |
| |
| |
June 30, 2024 | | |
December 31, 2023 | |
Accrued payroll | |
$ | – | | |
$ | 162,887 | |
Accrued bonus | |
| 127,875 | | |
| 262,580 | |
D&O financing | |
| 126,605 | | |
| – | |
Accrued audit and legal expenses | |
| 40,226 | | |
| 89,082 | |
Accrued interest | |
| 58,666 | | |
| 98,685 | |
Accrued board compensation | |
| 46,250 | | |
| 92,500 | |
Other accrued liabilities | |
| 48,350 | | |
| 151,988 | |
| |
$ | 447,972 | | |
$ | 857,722 | |
NOTE 7. LEASES
The Company had no office lease for the quarter
ended June 30, 2024, and the year ended December 31, 2023.
NOTE 8. INTANGIBLE ASSETS
The Company’s intangible assets are as follows:
Schedule of intangible assets | |
| | |
| |
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
| | |
| |
Patents and licenses | |
$ | 2,424,773 | | |
$ | 2,267,251 | |
Other | |
| 5,017 | | |
| 5,017 | |
| |
| 2,429,790 | | |
| 2,272,268 | |
Less: accumulated amortization | |
| (1,193,915 | ) | |
| (1,103,645 | ) |
Intangible assets, net | |
$ | 1,235,875 | | |
$ | 1,168,623 | |
Patents and licenses costs are accounted for as
intangible assets and amortized over the life of the patent or license agreement and charged to research and development.
Amortization expense related to purchased intangible
assets was $45,458 and $39,940 for the three months ended June 30, 2024, and 2023, respectively. Amortization expense related to purchased
intangible assets was $90,270 and $78,805 for the six months ended June 30, 2024, and 2023, respectively.
Patents and trademarks are reviewed at least annually
for impairment. No impairment was recorded through June 30, 2024, and December 31, 2023, respectively.
Future amortization of intangible assets is as
follows:
Schedule of future amortization of intangible assets | |
| |
2024 | |
$ | 96,015 | |
2025 | |
| 192,030 | |
2026 | |
| 192,030 | |
2027 | |
| 192,030 | |
2028 and beyond | |
| 563,770 | |
Total | |
$ | 1,235,875 | |
NOTE 9. SHORT TERM NOTES AND CONVERTIBLE
DEBT
Convertible Notes:
As of December 31, 2023, there were no Convertible
Notes payable and outstanding. There was no convertible note activity in the three months ended June 30, 2024.
Senior Notes Payable
In May 2023, the Company issued $1,437,500
unsecured senior notes with a maturity date of May
16, 2024 (“the Senior Notes Payable”), for cash proceeds of $1,250,000.
The Senior Notes Payable contained an original issue discount of 15.0%
and accrue interest at an annual rate of 8.0%.
In September 2023, as agreed to during the
issuance of the Senior Notes Payable, the Company exercised their right to an additional financing, issuing $862,500
unsecured senior notes that mature on September
1, 2024 ("the Series B Notes Payable) for cash proceeds of $750,000.
The Series B Notes Payable contained an original issue discount of 15.0%
and accrue interest at an annual rate of 8.0%.
In November 2023, the Company issued $294,118
unsecured senior notes with a maturity date of April
19, 2024 (“the Series C Notes Payable”), for cash proceeds of $250,000.
The Senior Notes Payable contained an original issue discount of 15.0%
and accrue interest at an annual rate of 8.0%.
The Company incurred issuance costs, recorded
as deferred financing costs, of $296,313 relating to due diligence and legal costs associated with the issuance of the notes.
The Company evaluated the embedded redemption
and contingent interest features in the notes to determine if such features were required to be bifurcated as an embedded derivative liability.
In accordance with ASC 815-40, Derivatives and Hedging Activities, the embedded redemption features and contingent interest feature were
accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value at each reporting date. The Company
fair valued such derivative liabilities and recorded a debt discount at issuance of the notes of $320,561.
The Company issued warrants to purchase 77,010
and 46,556 shares of common stock (1,232,156 and 744,890 shares before giving effect to the 2024 Stock Split) to the holders of the Senior
Notes Payable and Series C Notes Payable (collectively the “Senior Notes Warrants”) with an exercise price of $10.02 and $4.58
per share ($0.6262 and $0.2856 pre-2024 split), respectively. The Company accounted for the warrants in accordance with the guidance contained
in ASC 815 “Derivatives and Hedging” whereby under that provision these warrants did not meet the criteria for equity treatment
and were recorded as a liability. As such, these warrants are recorded at fair value as of each reporting date with the change in fair
value reported within other income in the accompanying consolidated statements of operations as “Change in fair value of warrant
liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified
to stockholders’ equity. The fair value of the Senior Notes Warrants at issuance was $736,249 and was recorded as a debt discount.
The Company incurred issuance costs of $72,862 relating to the Senior Notes Warrants which was recorded as a day 1 expense due to the
liability classification of such warrants.
In connection with the issuance of the Senior
Notes Payable and Series C Notes Payable, the Company paid a commitment fee in the form of 21,210 and 9,311 shares (339,360 and 148,978
shares before giving effect to the 2024 Stock Split) of unregistered common stock to the holders, respectively. The aggregate commitment
fees had a fair value at issuance of $208,916 and are recorded as a deferred financing cost.
The resulting debt discounts from the derivative
liabilities, warrant liabilities and deferred financing costs were presented as a direct deduction from the carrying amount of that debt
liability and amortized to interest expense using the effective interest rate method. For the three months ended June 30, 2024, the Company
recognized $106,937 in amortization of debt discounts and deferred financing costs which is recorded in interest expense.
Between January 22 and January 29, 2024, the Company
entered into a series of exchange agreements (the “Exchange Agreements”) with the accredited investors to exchange principal
and accrued interest on these notes for shares of common stock. Pursuant to the Exchange Agreements, the Company issued an aggregate of
644,142 post-split shares of common stock in exchange for $1,519,779 principal and accrued interest on the notes. Following these exchanges,
the remaining outstanding balance of principal and interest on the notes was $1,145,037. This transaction accelerated the recognition
of the related note discounts and resulted in a $1,066,732 charge.
On March 6, 2024, the Company paid $300,974 of
principal and accrued interest on certain unsecured non-convertible notes. Following this payment, the remaining outstanding balance of
principal and interest on the notes was $898,380. This transaction accelerated the recognition of the related note discounts and resulted
in a $111,928 charge.
The following table reconciles the aggregate amount
for the Senior Notes Payable, Series B Notes Payable, and Series C Notes Payable as well as the unamortized deferred financing costs and
debt discounts relating to the derivative liabilities and warrant liabilities.
Schedule of derivative liabilities and warrant liabilities | |
| | |
| |
| |
June 30, 2024 | | |
December 31, 2023 | |
Note Payable | |
$ | 862,500 | | |
$ | 2,594,118 | |
Less: Unamortized Discounts and Deferred Financing Costs | |
| | | |
| | |
Warrants | |
| – | | |
| (557,582 | ) |
Derivative | |
| (34,475 | ) | |
| (235,628 | ) |
Deferred financing costs | |
| (50,938 | ) | |
| (675,184 | ) |
| |
| (85,413 | ) | |
| (1,468,394 | ) |
| |
$ | 777,087 | | |
$ | 1,125,724 | |
NOTE 10. COMMITMENTS AND CONTINGENCIES
Royalty Agreement
The Company has an exclusive license agreement
with the Regents of the University of California to make, use, sell and otherwise distribute products under certain of the Regents of
the University of California’s patents anywhere in the world. The Company is obligated to pay a minimum annual royalty of $50,000,
and an earned royalty of 4% of net sales. The minimum annual royalty will be applied against the earned royalty due for the calendar year
in which the minimum payment was made. The license agreements expire upon expiration of the patents and may be terminated earlier if the
Company so elects. The U.S. licensed patents that are currently issued expire between 2026 and 2029, without considering any possible
patent term adjustment or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees.
The Company recorded royalty costs of $12,500 for the three months ended June 30, 2024, and 2023, respectively, and $25,000 for the six
months ended June 30, 2024, and 2023, respectively, as Cost of Revenue.
Litigation
To date, the Company has not been involved in
legal proceedings arising in the ordinary course of its business. If any legal proceeding occurs, the Company will record a provision
for a loss when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated, although
litigation is inherently unpredictable and is subject to significant uncertainties, some of which are beyond the Company’s control.
Should any of these estimates and assumptions change or prove to have been incorrect, the Company could incur significant charges related
to legal matters that could have a material impact on its results of operations, financial position and cash flows.
NOTE 11. STOCKHOLDERS’ EQUITY
The Company filed an Amended and Restated Certificate
of Incorporation on April 21, 2022, as part of the Company’s initial public offering. The Company was authorized to issue two classes
of stock to be designated, respectively, “common stock” and “preferred stock.” The total number of shares which
the Company was authorized to issue was two hundred twenty million (220,000,000) shares. Two hundred million (200,000,000) shares were authorized
to be common stock, having a par value per share of $0.00001. Twenty million (20,000,000) shares were authorized to be preferred stock,
having a par value per share of $0.00001. As of June 30, 2024, the Company had 8,210,671 common shares outstanding.
Stockholders’ Vote – Reverse stock
split
The Company held a special meeting of stockholders
on March 24, 2023. At the special meeting, our stockholders approved one proposal, which was to grant discretionary authority to our board
of directors to (i) amend our certificate of incorporation to combine outstanding shares of our common stock into a lesser number of outstanding
shares, or a “reverse stock split,” at a specific ratio within a range of one-for-five (1-for-5) to a maximum of a one-for-fifty
(1-for-50) split, with the exact ratio to be determined by our board of directors in its sole discretion; and (ii) effect the reverse
stock split, if at all, within one year of the date the proposal was approved by stockholders.
In January 2024, the Company's board subsequently
approved the final reverse stock split ratio of one-for-sixteen (the “2024 Stock Split”), which resulted in a reduction in
the number of outstanding shares of common stock, warrants, stock options and restricted share units and a proportionate increase in the
value of each share or strike price of the warrants and stock options. The common stock began trading on a reverse split-adjusted basis
on the NASDAQ on January 4, 2024.
Series A Preferred Stock
In February 2023 the Company sold one (1) share
of the Company’s newly designated Series A preferred stock to Jeffrey Thramann, the Company’s Executive Chairman, for a purchase
price of $1,000. The share of Series A preferred stock had proportional voting rights that were limited to the proposal to approve a reverse
stock split of the Company’s common stock. Following the March 24, 2023, special meeting, the Company redeemed the one outstanding
share of Series A preferred stock on March 28, 2023, in accordance with its terms. The redemption price was $1,000. No Series A preferred
stock remains outstanding.
Public Offering
On February 27, 2024, the Company completed a
public offering of 5,175,000 units (“Units”) at a price of $0.58 per Unit, for gross proceeds of approximately $3.0 million,
before deducting offering expenses. Each Unit was comprised of (i) one share of common stock or, in lieu of common stock, one prefunded
warrant to purchase a share of common stock, and (ii) two common warrants, each common warrant to purchase a share of common stock. The
prefunded warrants were immediately exercisable at a price of $0.00001 per share of common stock and only expire when such prefunded warrants
are fully exercised. The common warrants were immediately exercisable at a price of $0.58 per share of common stock and will expire five
years from the date of issuance.
White Lion Equity Line Agreement
On October 9, 2023, the Company entered into an
equity line common stock purchase agreement (the “Equity Line Purchase Agreement”) and a related registration rights agreement
with White Lion Capital, LLC (“White Lion”). Pursuant to the Equity Line Agreement, the Company has the right, but not the
obligation to require White Lion to purchase, from time to time, up to $10,000,000 in aggregate gross purchase price of newly issued shares
of the Company’s common stock, subject to certain limitations and conditions set forth in the Equity Line Purchase Agreement.
Pursuant to the Equity Line Purchase Agreement,
the Company issued to White Lion 1,050,000 newly issued common shares for proceeds of $304,500 on April 26, 2024. Through June 30, 2024,
the Company has issued 1,800,000 shares to White Lion for total proceeds of $3,216,981.
Warrants
The following table summarizes the
Company’s outstanding warrants as of June 30, 2024. The warrants and related strike prices have been adjusted to reflect
the 2024 Stock Split.
Schedule of warrants and related strike prices |
|
|
|
Issue Date |
Strike price |
Number outstanding |
Expiration |
April 21, 2022 (1) |
$69.60 |
155,610 |
April 21, 2027 |
April 21, 2022 |
$87.04 |
10,825 |
April 21, 2027 |
April 21, 2022 |
$69.60 |
26,673 |
April 21, 2027 |
May 16, 2023 (2) |
$0.29 |
77,010 |
May 16, 2028 |
November 21, 2023 (2) |
$0.29 |
46,556 |
November 21, 2028 |
November 21, 2023 |
$0.00001 |
1,576 |
November 21, 2028 |
February 27, 2024 |
$0.58 |
10,350,000 |
February 27, 2029 |
NOTE 12. NET LOSS PER SHARE OF COMMON STOCK
Basic and diluted net loss per share is computed
by dividing net loss attributable to stockholders by the weighted average number shares of common stock outstanding during the period
and shares issuable for vested restricted stock units. Potentially dilutive outstanding shares of common stock equivalents were excluded
from the computation of diluted net loss per share for loss periods presented because including them would have been antidilutive.
A reconciliation of the numerator and denominator
used in the calculation of basic and diluted net loss per share attributable to stockholders follows:
Schedule of reconciliation of basic and diluted net loss per share | |
| | |
| |
| |
Three Months Ended June 30, | |
| |
2024 | | |
2023 | |
Numerator: | |
| | |
| |
Net (loss) allocable to common stockholders used to compute basic and diluted loss per common share | |
$ | (1,238,077 | ) | |
$ | (1,464,557 | ) |
Denominator: | |
| | | |
| | |
Weighted average shares outstanding used to compute basic and dilutive loss per share | |
| 8,208,281 | | |
| 505,485 | |
Weighted average shares issuable for vested restricted stock units | |
| 8,743 | | |
| 12,494 | |
| |
$ | 8,217,024 | | |
$ | 517,979 | |
| |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
Numerator: | |
| | |
| |
Net (loss) allocable to common stockholders used to compute basic and diluted loss per common share | |
$ | (3,637,180 | ) | |
$ | (2,648,017 | ) |
Denominator: | |
| | | |
| | |
Weighted average shares outstanding used to compute basic and dilutive loss per share | |
| 6,817,419 | | |
| 498,415 | |
Weighted average shares issuable for vested restricted stock units | |
| 12,406 | | |
| 9,084 | |
| |
$ | 6,829,825 | | |
$ | 507,499 | |
The following outstanding potentially dilutive
securities were excluded from the weighted average calculation of dilutive loss per share attributable to common stockholders because
their impact would have been antidilutive for the period presented:
Schedule of anti-dilutive securities excluded from computation of earnings per share | |
June 30, 2024 | | |
June 30, 2023 | |
| |
| | |
| |
Warrants | |
| 10,666,674 | | |
| 219,910 | |
Restricted stock units | |
| 4,853 | | |
| 43,276 | |
Stock options | |
| 169,458 | | |
| 171,176 | |
| |
| 10,840,985 | | |
| 434,362 | |
NOTE 13. STOCK BASED COMPENSATION
2022 Aclarion Equity Incentive Plan
On April 21, 2022, in connection with the IPO,
the Company’s 2022 Aclarion Equity Incentive Plan, or “2022 Plan”, went into effect. Our board of directors has appointed
the compensation committee of our board of directors as the committee under the 2022 Plan with the authority to administer the 2022 Plan.
The aggregate number of our shares of common stock that may be issued or used for reference purposes under the 2022 Plan is 125,000 shares
(2,000,000 prior to the 2024 Stock Split), with an automatic increase on January 1st of each year, for a period of not more than ten years,
commencing on January 1st of the year following the year in which the initial public offering date (April 2022) occurs and ending on (and
including) January 1, 2032, in an amount equal to 5% of the total number of shares of Capital Stock outstanding on December 31st of the
preceding calendar year. Notwithstanding the foregoing, the Board may act prior to January 1st of a given year to provide that there will
be no January 1st increase in shares for such year or that the increase in shares for such year will be a lesser number of shares of Common
Stock than would otherwise occur pursuant to the preceding sentence.
As of the year ended December 31, 2023, the aggregate
number of our shares of common stock that may be issued or used for reference purposes under the 2022 Plan was 154,426 (2,470,814 pre-split).
On January 1, 2024, the 2022 Plan had an automatic increase of 41,270 (660,311 pre-split) shares which was 5% of the total number of shares
of Capital Stock outstanding on December 31, 2023.
Options granted under the 2022 Plan may be incentive
stock options or non-statutory stock options, as determined by the administrator at the time of grant of an option. Restricted stock may
also be granted under the 2022 Plan. The options vest in accordance with the grant terms and are exercisable for a period of up to 10
years from grant date.
No options were granted in the six months ended
June 30, 2024.
Nocimed, Inc. 2015 Stock Plan
The Company maintains the Nocimed, Inc. 2015 Stock
Plan, or the “Existing Plan”, under which the Company could grant 152,558 shares (after giving effect to the 2024 Stock Split)
or options of the Company to our employees, consultants, and other service providers. The Company suspended the Existing Plan in connection
with the April 2022, initial public offering. The Company did not grant any stock options under the Existing Plan for the twelve months
ended December 31, 2022, and thereafter. No further awards will be granted under the Existing Plan, but awards granted prior to the suspension date will
continue in accordance with their terms and the terms of the Existing Plan.
Determining Fair Value of Stock Options
The fair value of each grant of stock options
was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires
significant judgment to determine.
Valuation and Amortization Method —The
Company estimates the fair value of its stock options using the Black-Scholes-Merton option-pricing model. This fair value is then amortized
over the requisite service periods of the awards.
Expected Term—The Company estimates
the expected term of stock option by taking the average of the vesting term and the contractual term of the option, as illustrated by
the simplified method.
Expected Volatility—The expected
volatility is derived from the Company’s expectations of future market volatility over the expected term of the options.
Risk-Free Interest Rate—The risk-free
interest rate is based on the 10-year U.S. Treasury yield curve on the date of grant.
Dividend Yield—The dividend yield
assumption is based on the Company’s history and expectation of no dividend payouts.
Stock Award Activity
A summary of option activity under the Company’s
incentive plans is as follows:
Schedule of option activity | |
| | |
| | |
| |
| |
Options Outstanding | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (In Years) | |
Balance at December 31, 2023 | |
| 169,456 | | |
$ | 31.15 | | |
| 7.5 | |
Options granted | |
| – | | |
| – | | |
| – | |
Options exercised | |
| – | | |
| – | | |
| – | |
Options forfeited/expired | |
| – | | |
| – | | |
| – | |
Balance at June 30, 2024 | |
| 169,456 | | |
$ | 31.15 | | |
| 7.0 | |
| |
| | | |
| | | |
| | |
Exercisable at December 31, 2023 | |
| 147,977 | | |
$ | 30.57 | | |
| 7.4 | |
Exercisable at June 30, 2024 | |
| 154,971 | | |
$ | 30.80 | | |
| 6.9 | |
The aggregate intrinsic value of options outstanding
at June 30, 2024 is $0. The aggregate intrinsic value of vested and exercisable options at June 30, 2024 is $0.
As of June 30, 2024, there was approximately $212,454
of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the next 15 months.
Restricted Stock Units
In the six months ended June 30, 2024, the Company
had no new grants of RSUs under the 2022 Plan.
Post-split RSU activity under the 2022 Plan was
as follows for the six months ended June 30, 2024:
Schedule of RSU activity |
|
|
|
|
|
|
|
|
|
|
RSU’s
Outstanding |
|
|
Weighted-Average Grant-Date Fair value per Unit |
|
Nonvested as of December 31, 2023 |
|
|
15,749 |
|
|
$ |
10.72 |
|
Granted |
|
|
– |
|
|
|
– |
|
Vested |
|
|
(3,953 |
) |
|
|
10.30 |
|
Forfeited |
|
|
(6,942 |
) |
|
|
13.42 |
|
Nonvested as of June 30, 2024 |
|
|
4,854 |
|
|
$ |
7.20 |
|
The grant date fair value for a RSU is the market
price of the common stock on the date of grant. The total share-based compensation expense related to RSUs recognized during the six months
ended June 30, 2024, was $40,733.
As of June 30, 2024, there was approximately $2,735
total unrecognized compensation cost related to non-vested RSUs which is expected to be recognized over the next three months.
As of June 30, 2024, the Company is obligated
to issue 7,539 post-split shares of common stock associated with vested Restricted Stock Units.
Stock-based Compensation Expense
The following table summarizes the total stock-based
compensation expense included in the Company’s statements of operations for the periods presented:
Schedule of stock-based compensation expense | |
| | |
| | |
| | |
| |
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Sales and marketing | |
$ | 12,605 | | |
$ | 78,688 | | |
$ | 40,733 | | |
$ | 106,997 | |
Research and development | |
| 2,055 | | |
| 2,055 | | |
| 4,110 | | |
| 5,615 | |
General and administrative | |
| 55,644 | | |
| 55,888 | | |
| 111,288 | | |
| 106,551 | |
Total share based compensation | |
$ | 70,305 | | |
$ | 136,631 | | |
$ | 156,131 | | |
$ | 219,162 | |
NOTE 14. SUBSEQUENT EVENTS
Common Stock Subscription Agreement
On August 12, 2024, we entered into a subscription
agreement with an institutional investor, pursuant to which the Company agreed to issue and sell to the investor 400,000 shares of Common
Stock of the Company at a price of $0.29 per share for gross proceeds to the Company of $116,000.
The shares were issued pursuant to the Company’s
Form 1-A Offering Statement initially filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933,
as amended on June 11, 2024 and qualified on June 24, 2024.
Exchange Agreements
In May, September and November 2023 the Company
issued $2,594,118 aggregate principal amount of unsecured non-convertible notes to certain accredited investors.
Between January 22 and January 29, 2024, the Company
entered into a series of exchange agreements (the “Exchange Agreements”) with the accredited investors to exchange principal
and accrued interest on these notes for shares of common stock. Pursuant to the Exchange Agreements, the Company issued an aggregate of
644,142 post-split shares of common stock in exchange for $1,519,779 principal and accrued interest on the notes. Following these exchanges,
the remaining outstanding balance of principal and interest on the notes was $1,145,037.
On March 6, 2024, the
Company paid $300,973 of principal and accrued interest on certain unsecured non-convertible notes. Following this payment, the remaining
outstanding balance of principal and interest on the notes was $898,380.
On August 14, 2024, the Company entered into an
additional exchange agreement with the accredited investors to exchange $930,052 principal and accrued interest on these notes for newly
issued shares of Series B convertible preferred stock. Following this exchange, there was no remaining outstanding balance of principal
and interest on the notes.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following discussion and analysis should
be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report
and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023,
which was filed with the SEC on March 28, 2024. This discussion and analysis and other parts of this Quarterly Report contain forward-looking
statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding
our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially
from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part II, Item
1A, “Risk Factors” and elsewhere in this Quarterly Report. You should carefully read the “Risk Factors” section
of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2023, which was as filed with the SEC on
March 28, 2024, to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking
statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
Overview
Corporate Information
The Company currently operates as a Delaware corporation,
under the name Aclarion, Inc.
Results of operations
For the Three Months Ended June 30, 2024,
and 2023:
The following table summarizes our results of
operations for the three months ended June 30, 2024, and 2023.
| |
Three Months Ended June 30, | | |
| |
| |
2024 | | |
2023 | | |
$ Change | |
Revenue | |
| | |
| | |
| |
Revenue | |
$ | 10,971 | | |
| 17,072 | | |
| (6,101 | ) |
Cost of revenue | |
| 23,294 | | |
| 19,301 | | |
| 3,993 | |
Gross profit (loss) | |
| (12,323 | ) | |
| (2,229 | ) | |
| (10,094 | ) |
| |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | |
Sales and marketing | |
| 225,037 | | |
| 207,790 | | |
| 17,247 | |
Research and development | |
| 202,102 | | |
| 250,006 | | |
| (47,904 | ) |
General and administrative | |
| 696,099 | | |
| 946,175 | | |
| (250,076 | ) |
Total operating expenses | |
| 1,123,238 | | |
| 1,403,971 | | |
| (280,733 | ) |
| |
| | | |
| | | |
| | |
(Loss) from operations | |
| (1,135,561 | ) | |
| (1,406,200 | ) | |
| 270,639 | |
| |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | |
Loss on exchange of debt | |
| – | | |
| – | | |
| – | |
Loss on extinguishment of debt | |
| – | | |
| – | | |
| – | |
Interest expense | |
| (127,848 | ) | |
| (47,139 | ) | |
| (80,709 | ) |
Changes in fair value of warrant and derivative liabilities | |
| 25,357 | | |
| (11,800 | ) | |
| 37,157 | |
Other, net | |
| (25 | ) | |
| 583 | | |
| (608 | ) |
Total other (expense) | |
| (102,516 | ) | |
| (58,356 | ) | |
| (44,160 | ) |
| |
| | | |
| | | |
| | |
(Loss) before income taxes | |
| (1,238,077 | ) | |
| (1,464,557 | ) | |
| 226,480 | |
Income tax provision | |
| – | | |
| – | | |
| | |
Net income (loss) | |
$ | (1,238,077 | ) | |
| (1,464,557 | ) | |
| 226,480 | |
| |
| | | |
| | | |
| | |
Net (loss) allocable to common stockholders | |
$ | (1,238,077 | ) | |
| (1,464,557 | ) | |
| 226,480 | |
Net (loss) per share allocable to common stockholders | |
$ | (0.15 | ) | |
| (2.83 | ) | |
| 2.68 | |
Weighted average shares of common stock outstanding, basic and diluted | |
| 8,217,024 | | |
| 517,979 | | |
| 7,699,045 | |
Total revenues. Total revenues for
the quarter ended June 30, 2024 were $10,971, which was a decrease of $6,101, or 36%, from $17,072 for the quarter ended June 30, 2023.
The decrease in revenues was driven primarily by the conclusion of certain clinical activity at customer sites utilizing NOCISCAN ®
reports.
Cost of Revenue. Direct cost of
revenue is comprised of hosting and software costs, field support, UCSF royalty cost, partner fees (Radnet), and credit card fees. Total
cost of revenue was $23,294 for the quarter ended June 30, 2024, compared to $19,301 for the quarter ended June 30, 2023, an increase
of 21%. This increase was primarily due to a change in revenue mix that increased partner fees.
Sales and Marketing. Marketing expenses
include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and shared-based
compensation for Key Opinion Leaders. Sales and marketing expenses were $225,037 for the quarter ended June 30, 2024, compared to $207,790
for the quarter ended June 30, 2023, an increase of $17,247, or 8%. Post-market clinical expenses increased as the Company focused on
the initiation of the Clarity trial. Marketing expenses also increased with the number of press releases year-over-year.
Research and Development. Research
and development expenses were $202,102 for the quarter ended June 30, 2024, compared to $250,006 for the quarter ended June 30, 2023,
a decrease of $47,904, or 19%. There was no accrued bonus expense in the quarter ended June 30, 2024, along with a general decrease in
required regulatory and quality system work.
General and Administrative. General
and administrative expenses were $696,099 for the quarter ended June 30, 2024, a decrease of $250,076 or 26%, from $946,175 for the quarter
ended June 30, 2023. For the quarter ended June 30, 2024, there was no accrued bonus expense, D&O insurance premiums were reduced,
and legal fees were less compared to the quarter ended June 30, 2023, when the Company issued debt. These reductions in expense were somewhat
offset by increased investment in investor relations during the quarter ended June 30, 2024.
Other Income (Expense).
Interest expense was $127,848 for the quarter
ended June 30, 2024, an increase of $80,709 from the $47,139 incurred during the quarter ended June 30, 2023. This increase in interest
expense was due to the increase in debt taken on by the Company in 2023. In May, September and November 2023 the Company issued $2,594,118
aggregate principal amount of unsecured non-convertible notes to certain accredited investors. (see Note 9 to the condensed financial
statements).
The Company’s warrant and derivative liabilities
are recorded at fair value as of each reporting date (see Note 3 to the condensed financial statements). For the quarter ended June 30,
2024, the Company recorded a favorable adjustment in fair value of $25,357.
For the Six Months Ended June 30, 2024,
and 2023:
The following table summarizes our results of
operations for the six months ended June 30, 2024, and 2023.
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
Revenue |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
21,085 |
|
|
|
42,542 |
|
|
|
(21,457 |
) |
Cost of revenue |
|
|
42,770 |
|
|
|
36,754 |
|
|
|
6,016 |
|
Gross profit (loss) |
|
|
(21,685 |
) |
|
|
5,788 |
|
|
|
(27,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
406,094 |
|
|
|
385,074 |
|
|
|
21,020 |
|
Research and development |
|
|
441,143 |
|
|
|
454,405 |
|
|
|
(13,262 |
) |
General and administrative |
|
|
1,541,947 |
|
|
|
1,753,774 |
|
|
|
(211,827 |
) |
Total operating expenses |
|
|
2,389,184 |
|
|
|
2,593,253 |
|
|
|
(204,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from operations |
|
|
(2,410,869 |
) |
|
|
(2,587,464 |
) |
|
|
176,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on exchange of debt |
|
|
(1,066,732 |
) |
|
|
– |
|
|
|
(1,066,732 |
) |
Loss on extinguishment of debt |
|
|
(111,928 |
) |
|
|
– |
|
|
|
(111,928 |
) |
Interest expense |
|
|
(463,672 |
) |
|
|
(48,519 |
) |
|
|
(415,153 |
) |
Changes in fair value of warrant and derivative liabilities |
|
|
323,041 |
|
|
|
(11,800 |
) |
|
|
334,841 |
|
Other, net |
|
|
92,980 |
|
|
|
(234 |
) |
|
|
93,213 |
|
Total other (expense) |
|
|
(1,226,311 |
) |
|
|
(60,552 |
) |
|
|
(1,165,759 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) before income taxes |
|
|
(3,637,180 |
) |
|
|
(2,648,017 |
) |
|
|
(989,163 |
) |
Income tax provision |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Net income (loss) |
|
$ |
(3,637,180 |
) |
|
|
(2,648,017 |
) |
|
|
(989,163 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) allocable to common stockholders |
|
$ |
(3,637,180 |
) |
|
|
(2,648,017 |
) |
|
|
(989,163 |
) |
Net (loss) per share allocable to common stockholders |
|
$ |
(0.53 |
) |
|
|
(5.22 |
) |
|
|
4.69 |
|
Weighted average shares of common stock outstanding, basic and diluted |
|
|
6,829,825 |
|
|
|
507,499 |
|
|
|
6,322,326 |
|
Total revenues. Total revenues for
the six months ended June 30, 2024 were $21,085, which was a decrease of $21,457, or 50%, from $42,542 for the six months ended June 30,
2023. The decrease in revenues was driven primarily by the conclusion of certain clinical activity at customer sites utilizing NOCISCAN
® reports.
Cost of Revenue. Direct cost of
revenue is comprised of hosting and software costs, field support, UCSF royalty cost, partner fees (Radnet), and credit card fees. Total
cost of revenue was $42,770 for the six months ended June 30, 2024, compared to $36,754 for the six months ended June 30, 2023, an increase
of 16%, was driven by a price increase related to hosting costs and a change in revenue mix that increased partner fees.
Sales and Marketing. Marketing expenses
include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and shared-based
compensation for Key Opinion Leaders. Sales and marketing expenses were $406,093 for the six months ended June 30, 2024, compared to $385,074
for the six months ended June 30, 2023, an increase of $21,020, or 6%. Increased post-market clinical expense related to the Clarity trial,
greater marketing expense, and increased benefits costs were offset in part by a reduction in restricted stock vesting expense related
to the Company’s engagement of Key Opinion Leaders.
Research and Development. Research
and development expenses were $441,143 for the six months ended June 30, 2024, compared to $454,405 for the six months ended June 30,
2023, a decrease of $13,262, or 3%. There was no accrued bonus expense in the six month period ended June 30, 2024, along with a general
decrease in required regulatory and quality system work.
General and Administrative. General
and administrative expenses were $1,541,947 for the six months ended June 30, 2024, a decrease of $211,827 or 12%, from $1,753,774 for
the six months ended June 30, 2023. The decrease was driven by reduced bonus accruals, lower personnel expense, and decreased D&O
insurance premiums, offset in part by higher legal and audit costs related to the February 2024 public offering and increased investment
in investor relations.
Other Income (Expense).
Interest expense was $463,672 for the six months
ended June 30, 2024, an increase of $415,153 from the $48,519 incurred during the six months ended June 30, 2023. This increase in interest
expense was due to the increase in debt taken on by the Company in 2023. In May, September and November 2023 the Company issued $2,594,118
aggregate principal amount of unsecured non-convertible notes to certain accredited investors. (see Note 9 to the condensed financial
statements).
The Company incurred losses for the six months
ended June 30, 2024, on two transactions to reduce debt. The first transaction took place between January 22 and January 29, 2024, whereby
the Company entered into a series of exchange agreements with investors to issue an aggregate of 644,142 post-split shares of common stock
in exchange for $1,519,779 principal and accrued interest on the notes. This transaction accelerated the recognition of the related note
discounts and resulted in a $1,066,732 charge. The second transaction was on March 6, 2024, whereby the Company paid $300,974 of principal
and accrued interest on the notes. This transaction accelerated the recognition of the related note discounts and resulted in a $111,928
charge.
The Company’s warrant and derivative liabilities
are recorded at fair value as of each reporting date (see Note 3 to the condensed financial statements). For the six months ended June
30, 2024, the Company recorded a favorable adjustment in fair value of $323,041.
Other net income of $92,980 for the six months
ended June 30, 2024, included a favorable discount to accounts payable of $117,985, offset in part by a $25,000 penalty paid to investors
related to a failure to timely register certain commitment shares.
Critical accounting policies and use of estimates
Our Management’s Discussion and Analysis
of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in accordance with generally
accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to
make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent
assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various
other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions
on an ongoing basis. Our actual results may differ from these estimates.
While our significant accounting policies are
described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical
to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
The Company derives its revenues from one source,
the delivery of Nociscan reports to medical professionals. Revenues are recognized when a contract with a customer exists, and the control
of the promised services are transferred to our customers. The amount of revenue recognized reflects the consideration the Company expects
to receive in exchange for those services. Substantially all of our revenues are generated from contracts with customers in the United
States.
Equity-Based Compensation
Certain of our employees and consultants have
received grants of common stock options and RSUs in our company. These awards are accounted for in accordance with guidance prescribed
for accounting for equity-based compensation. Based on this guidance and the terms of the awards, the awards are equity classified.
Until our April 2022 initial public offering,
we were a private company with no active public market for our common equity. Therefore, we had periodically determined the overall value
of our company and the estimated per share fair value of our common equity at their various dates using contemporaneous valuations performed
in accordance with the guidance outlined in the American Institute of CPA’s Practice Aid. Since a public trading market for our
common stock has been established in connection with the completion of our initial public offering, it will no longer be necessary for
us to estimate the fair value of our common stock in connection with our accounting for equity awards we may grant, as the fair value
of our common stock will be its public market trading price.
For financial reporting purposes, we performed
common stock valuations as a private company with the assistance of a third-party specialist. Subsequent to the initial public offering,
the fair value of the Company’s common stock underlying its equity awards is based on the quoted market price of the Company’s
common stock on the grant date.
Going Concern
The Company believes that the net proceeds from
the February 2024 initial public offering, and subsequent funding from the April 2024 equity line agreement described in Note 11, will
be sufficient to fund current operating plans into the third quarter of 2024, approaching our final maturity repayment of our unsecured
non-convertible note, which is due in September 2024. The Company has based these estimates, however, on assumptions that may prove to
be wrong, and could spend available financial resources much faster than we currently expect. The Company will need to raise additional
funds to continue funding our technology development. Management plans to secure such additional funding.
As a result of the Company’s recurring losses
from operations and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the
Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the
Company’s ability to continue as a going concern.
Liquidity and capital resources
Sources of liquidity
To date, the Company has financed operations primarily
through private placements of preferred shares and debt financing, PPP loans that were forgiven, an equity line, an initial public offering
on April 21, 2022, and a secondary public offering on February 27, 2024.
During the six months ended June 30, 2024, the
Company completed a public offering of 5,175,000 units (“Units”) at a price of $0.58 per Unit, for gross proceeds of approximately
$3.0 million, before deducting offering expenses. Additionally, the Company raised approximately $1.4M of net proceeds from an equity
line in January 2024 and $0.3M in April 2024.
As of June 30, 2024, the Company had cash, including
$10,000 of restricted cash, of $1,182,687. The Company believes that this cash will be sufficient to fund current operating plans into
the third quarter of 2024, approaching the maturity repayment of our unsecured non-convertible note, which is due in September 2024. The
Company has based these estimates, however, on assumptions that may prove to be wrong, and could spend available financial resources much
faster than we currently expect. The Company will need to raise additional funds to continue funding our technology development. Management
plans to secure such additional funding.
Cash flows
The following table summarizes our sources and
uses of cash for each of the periods presented:
|
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
Cash used in operating activities |
|
$ |
(3,293,096 |
) |
|
$ |
(1,960,653 |
) |
Cash used in investing activities |
|
|
(157,523 |
) |
|
|
(72,634 |
) |
Cash provided by financing activities |
|
|
3,602,237 |
|
|
|
1,165,000 |
|
Net increase (decrease) in cash |
|
$ |
151,618 |
|
|
$ |
(868,287 |
) |
Operating activities
During the six months ended June 30, 2024, operating
activities used $3,293,096 of cash. The Company significantly reduced accounts payable, primarily legal expenses that had accrued over
time, and significantly reduced accrued expenses including payroll, bonuses, board compensation, and audit fees. During the six months
ended June 30, 2023, operating activities used $1,960,653 of cash. This use of cash consisted primarily of employee compensation and benefit
expense, general liability insurance, contractor compensation, and audit and legal fees.
Investing activities
During the six months ended June 30, 2024, and
2023, investing activities used $157,523 and $72,634 of cash, respectively. These investing activities consisted almost entirely of patent
and license maintenance.
Financing activities
During the six months ended June 30, 2024, the
Company completed a public offering of 5,175,000 units (“Units”) at a price of $0.58 per Unit, for gross proceeds of approximately
$3.0 million, before deducting offering expenses. Each Unit was comprised of (i) one share of common stock or, in lieu of common stock,
one prefunded warrant to purchase a share of common stock, and (ii) two common warrants, each common warrant to purchase a share of common
stock. The prefunded warrants are immediately exercisable at a price of $0.00001 per share of common stock and only expire when such prefunded
warrants are fully exercised. The common warrants are immediately exercisable at a price of $0.58 per share of common stock and will expire
five years from the date of issuance.
During the six months ended June 30, 2024, and
pursuant to the Equity Line Purchase Agreement, the Company issued to White Lion 452,343 newly issued common shares for proceeds of $1,449,532
between January 4 and January 8, 2024, and 1,050,000 newly issued common shares for proceeds of $304,500 on April 26, 2024. Equity line
issuance costs were $262,744.
During the six months ended June 30, 2024, the
Company paid $300,973 of principal and accrued interest on certain unsecured non-convertible notes. Following this payment, the remaining
outstanding balance of principal and interest on the notes was $898,380.
During the six months ended June 30, 2024, the
Company entered into a series of exchange agreements (the “Exchange Agreements”) with accredited investors to exchange principal
and accrued interest on these notes for shares of common stock. Pursuant to the Exchange Agreements, the Company issued an aggregate of
644,142 post-split shares of common stock in exchange for $1,519,779 principal and accrued interest on the notes. Following these exchanges,
the remaining outstanding balance of principal and interest on the notes was $1,145,037.
During the six months ended June 30, 2023, the
Company sold one (1) share of the Company’s newly designated Series A preferred stock to Jeffrey Thramann, the Company’s Executive
Chairman, for a purchase price of $1,000. The share of Series A preferred stock had proportional voting rights that were limited to the
proposal to approve a reverse stock split of the Company’s common stock. Following the March 24, 2023, special meeting, the Company
redeemed the one outstanding share of Series A preferred stock on March 28, 2023, in accordance with its terms. The redemption price was
$1,000. No Series A preferred stock remains outstanding.
During the six months ended June 30, 2023, the
Company issued an unsecured promissory note in the amount $1,250,000, net of $203,576 of issuance costs.
Funding requirements
Developing medical technology products is a time-consuming,
expensive and uncertain process that takes years to complete, and the Company may never generate meaningful revenues. Accordingly, we
may need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available
to us on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity securities, the ownership
interest of existing stockholders may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include
restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which
could potentially dilute existing stockholders’ ownership interests.
If we raise additional funds through licensing
agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue
streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise
additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization
efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
The Company does not have any contractual obligations
not otherwise on our balance sheet as of June 30, 2024.
Off-balance sheet arrangements
The Company did not have, during the periods presented,
and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
Recently issued accounting pronouncements
The Company reviewed all recently issued standards
and has determined that, as disclosed in Note 4 to our condensed financial statements appearing in this quarterly report, there have been
no recent accounting pronouncements not yet effective that have significance, or potential significance, to our Consolidated Financial
Statements.
Emerging growth company and smaller reporting
company status
The JOBS Act permits an emerging growth company
such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public
companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of this extended
transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such
standards is required for public entities. Accordingly, our financial statements may not be comparable to other public companies that
do not elect the extended transition period.
We are also a “smaller reporting company”
meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100
million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value
of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently
completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting
company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements
that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two
most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies,
smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.
We are a smaller reporting company as defined
by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have adopted and maintain disclosure controls
and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act), that are designed to ensure
that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within
the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management,
including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow
for timely decisions regarding required disclosure.
As required by Exchange Act Rule 13a-15, our Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based on the foregoing
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to our limited resources our disclosure controls
and procedures are not effective in providing material information required to be included in our periodic SEC filings on a timely basis
and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure about our internal
control over financial reporting discussed below.
During the six months ended June 30, 2024, the
Company worked with an outside firm to establish best practices to improve our required disclosure about our internal control over financial
reporting.
Changes in Internal Control over Financial
Reporting
Our Chief Executive Officer and Chief Financial
Officer concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to material weaknesses
related to (1) a limited segregation of duties due to our lack of formal control documentation, limited resources, and the small number
of employees, and (2) a lack of adequate accounting resources to properly account for complex accounting transactions. Management determined
that these control deficiencies constitute material weaknesses, which could result in material misstatements of significant accounts and
disclosures that could result in a material misstatement to our interim or annual financial statements that would not be prevented or
detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.
The Company did engage an outside firm in the
third quarter of 2023 to provide accounting support and increased segregation of duties. During the six months ended June 30, 2024, the
Company continued to work with the outside firm to establish best practices over time that enhance internal control over financial reporting.
Other than the applicable remediation efforts
described above, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, the Company may be involved in litigation
relating to claims arising out of our operations in the normal course of business. We are not currently a party to any material legal
proceedings, the adverse outcome of which, in our management’s opinion, individually or in the aggregate, could have a material
adverse effect on the results of our operations or financial position. There are no material proceedings in which any of our directors,
officers or affiliates or any registered or beneficial stockholder of more than 5% of our common stock is an adverse party or has a material
interest adverse to our interest.
Item 1A. Risk Factors.
In addition to the information set forth in this
Form 10-Q, you should carefully consider the risk factors disclosed in the Risk Factors section of our Annual Report on Form 10-K for
the year ended December 31, 2023, which was filed with the SEC on March 28, 2024. There have been no material changes to our risk factors
from those included in such Annual Report except as noted below. Additional risk factors not presently known to us or that we currently
deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional
factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended June 30, 2024, no director
or officer of the Company adopted or terminated or otherwise had in effect a “Rule 10b5-1 trading arrangement” or “non-Rule
10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K
Item 6. Exhibits.
The exhibits required by Item 601 of Regulation
S-K and Item 15(b) of this Quarterly Report are listed in the Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated
by reference herein.
Exhibit
Number |
|
Description of Document |
|
Incorporated by
reference from Form |
|
Filing
Date |
|
Exhibit
Number |
|
Filed
Herewith |
|
|
|
|
|
|
|
|
|
|
|
1.1 |
|
IPO Underwriting Agreement dated April 21, 2022 |
|
8-K |
|
04-27-2022 |
|
1.1 |
|
|
1.2 |
|
Form of 2024 Placement Agent Agreement |
|
S-1/A |
|
03-23-2024 |
|
1.1 |
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of the Company |
|
8-K |
|
04-27-2022 |
|
3.1 |
|
|
3.2 |
|
Certificate of Amendment dated January 3, 2024 to the Amended and Restated Certificate of Incorporation |
|
8-K |
|
01-04-2024 |
|
3.1 |
|
|
3.3 |
|
Bylaws of the Company |
|
8-K |
|
04-27-2022 |
|
3.2 |
|
|
3.4 |
|
Certificate of Designation of Series A Preferred Stock |
|
8-K |
|
02-17-2023 |
|
3.1 |
|
|
3.5 |
|
Amendment to Bylaws dated June 12, 2024 |
|
8-K |
|
06-18-2024 |
|
3.1 |
|
|
4.1 |
|
Form of Common Stock Certificate |
|
10-Q |
|
06-06-2022 |
|
4.1 |
|
|
4.2 |
|
Form of IPO Public Warrant |
|
8-K |
|
04-27-2022 |
|
4.1 |
|
|
4.3 |
|
Form of IPO Representative’s Common Stock Purchase Warrant |
|
8-K |
|
04-27-2022 |
|
4.2 |
|
|
4.4 |
|
Description of Securities |
|
10-Q |
|
06-06-2022 |
|
4.4 |
|
|
4.5 |
|
2024 Form of Common Warrant |
|
S-1/A |
|
02-06-2024 |
|
4.5 |
|
|
4.6 |
|
2024 Form of Prefunded Warrant |
|
S-1/A |
|
02-06-2024 |
|
4.6 |
|
|
4.7 |
|
2024 Form of Warrant Agency Agreement |
|
S-1/A |
|
02-23-2024 |
|
4.7 |
|
|
10.1 |
# |
Employment Agreement of Jeff Thramann |
|
S-1/A |
|
03-23-2022 |
|
10.1 |
|
|
10.2 |
# |
Employment Agreement of Brent Ness |
|
S-1/A |
|
03-23-2022 |
|
10.2 |
|
|
10.3 |
# |
Employment Agreement of John Lorbiecki |
|
S-1/A |
|
03-23-2022 |
|
10.3 |
|
|
10.4 |
# |
Form of Aclarion, Inc. 2022 Equity Incentive Plan |
|
S-1 |
|
01-06-2022 |
|
10.4 |
|
|
10.5 |
|
Senior Secured Bridge Note |
|
S-1/A |
|
03-04-2022 |
|
10.5 |
|
|
10.6 |
|
License Agreement with UCSF the Regents of the University of California |
|
S-1 |
|
01-06-2022 |
|
10.6 |
|
|
10.7 |
|
Amendment to UC License Agreement |
|
S-1/A |
|
03-04-2022 |
|
10.7 |
|
|
10.8 |
** |
NuVasive Amended and Restated Commission Agreement dated February 28, 2020 |
|
S-1/A |
|
03-23-2022 |
|
10.8 |
|
|
10.9 |
|
Amended and Restated Investor Rights Agreement dated July 27, 2017 |
|
S-1/A |
|
03-23-2022 |
|
10.9 |
|
|
10.10 |
|
First Amendment to Amended and Restated Investor Rights Agreement dated February 20, 2020 |
|
S-1/A |
|
03-23-2022 |
|
10.10 |
|
|
10.11 |
|
NuVasive SAFE (Simple Agreement for Future Equity) dated February 28, 2020 |
|
S-1/A |
|
03-23-2022 |
|
10.11 |
|
|
10.12 |
** |
Right of First Offer Agreement |
|
S-1/A |
|
03-23-2022 |
|
10.12 |
|
|
10.13 |
|
First Amendment to Right of First Offer Agreement |
|
S-1/A |
|
03-23-2022 |
|
10.13 |
|
|
10.14 |
|
Second Amendment to Right of First Offer Agreement |
|
S-1/A |
|
03-23-2022 |
|
10.14 |
|
|
10.15 |
|
Convertible Note and Warrant Purchase Agreement |
|
S-1/A |
|
03-23-2022 |
|
10.16 |
|
|
10.16 |
|
Warrant Agent Agreement dated April 21, 2022 |
|
8-K |
|
04-27-2022 |
|
10.1 |
|
|
10.17 |
|
Siemens Strategic Collaboration Agreement |
|
S-1 |
|
01-06-2022 |
|
10.17 |
|
|
10.18 |
# |
Aclarion, Inc. 2022 Equity Incentive Plan – Form of Option Grant Notice and Stock Option Agreement |
|
S-1 |
|
01-06-2022 |
|
10.20 |
|
|
10.19 |
# |
Aclarion, Inc. 2022 Equity Incentive Plan – Form of RSU Grant Notice and RSU Agreement |
|
S-1 |
|
01-06-2022 |
|
10.21 |
|
|
10.20 |
# |
Nocimed, Inc. 2015 Stock Plan |
|
S-8 |
|
05-26-2022 |
|
99.4 |
|
|
10.21 |
# |
Nocimed, Inc. 2015 Stock Plan – Form of Option Grant Notice and Stock Option Agreement |
|
S-8 |
|
05-26-2022 |
|
99.5 |
|
|
10.22 |
|
Securities Purchase Agreement dated February 16, 2023 between Aclarion, Inc. and Jeffrey Thramann |
|
8-K |
|
02-17-2023 |
|
10.1 |
|
|
10.23 |
|
Form of Securities Purchase Agreement |
|
8-K |
|
05-17-2023 |
|
10.1 |
|
|
10.24 |
|
Form of Unsecured Non-Convertible Note |
|
8-K |
|
05-17-2023 |
|
10.2 |
|
|
10.25 |
|
Form of Common Stock Warrant |
|
8-K |
|
05-17-2023 |
|
10.3 |
|
|
___________________________
# |
Indicates management contract or compensatory plan. |
** |
Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. |
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.
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ACLARION, INC. |
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By: |
/s/ John Lorbiecki |
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John Lorbiecki |
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Chief Financial Officer
(Principal Financial and Accounting Officer) |
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Date: August 14, 2024 |
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) OR 15D-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Brent Ness, certify that:
1. |
I have reviewed this
Quarterly Report on Form 10-Q for the period ended June 30, 2024, of Aclarion, Inc. |
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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; |
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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; |
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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: |
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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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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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; |
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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 |
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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. |
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): |
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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 |
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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. |
August 14, 2024 |
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/s/ Brent Ness |
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Brent Ness |
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Chief Executive Officer
(Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) OR 15D-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John Lorbiecki, certify that:
1. |
I have reviewed this
Quarterly Report on Form 10-Q for the period ended June 30, 2024, of Aclarion, Inc. |
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|
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; |
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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; |
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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: |
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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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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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; |
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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 |
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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. |
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): |
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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 |
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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. |
August 14, 2024 |
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/s/ John Lorbiecki |
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John Lorbiecki |
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Chief Financial Officer
(Principal Financial and Accounting Officer) |
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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 Quarterly
Report of Aclarion, Inc. (the “Company”) on Form 10-Q, for the period ended June 30, 2024, as filed with the Securities and
Exchange Commission, I, Brent Ness, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
August 14, 2024 |
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/s/ Brent Ness |
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Brent Ness |
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Chief Executive Officer
(Principal Executive Officer) |
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EXHIBIT 32.2
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 Quarterly
Report of Aclarion, Inc. (the “Company”) on Form 10-Q, for the period ended June 30, 2024, as filed with the Securities and
Exchange Commission, I, John Lorbiecki, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
August 14, 2024 |
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/s/ John Lorbiecki |
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John Lorbiecki |
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Chief Financial Officer
(Principal Financial and Accounting Officer) |
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v3.24.2.u1
Cover - shares
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6 Months Ended |
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Jun. 30, 2024 |
Aug. 14, 2024 |
Document Type |
10-Q
|
|
Amendment Flag |
false
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Document Quarterly Report |
true
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|
Document Transition Report |
false
|
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Document Period End Date |
Jun. 30, 2024
|
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Document Fiscal Period Focus |
Q2
|
|
Document Fiscal Year Focus |
2024
|
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Current Fiscal Year End Date |
--12-31
|
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Entity File Number |
001-41358
|
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Entity Registrant Name |
ACLARION, INC.
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Entity Central Index Key |
0001635077
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Entity Tax Identification Number |
47-3324725
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Entity Incorporation, State or Country Code |
DE
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Entity Address, Address Line One |
8181 Arista Place
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Entity Address, Address Line Two |
Suite 100
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Entity Address, City or Town |
Broomfield
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Entity Address, State or Province |
CO
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Entity Address, Postal Zip Code |
80021
|
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City Area Code |
833
|
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Local Phone Number |
275-2266
|
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Entity Current Reporting Status |
Yes
|
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Entity Interactive Data Current |
Yes
|
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Entity Filer Category |
Non-accelerated Filer
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Entity Small Business |
true
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Entity Emerging Growth Company |
true
|
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Elected Not To Use the Extended Transition Period |
false
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Entity Shell Company |
false
|
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Entity Common Stock, Shares Outstanding |
|
8,610,671
|
Common stock, par value $0.00001 per share |
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Title of 12(b) Security |
Common stock, par value $0.00001 per share
|
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Trading Symbol |
ACON
|
|
Security Exchange Name |
NASDAQ
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|
Warrants, each exercisable for one share of Common stock |
|
|
Title of 12(b) Security |
Warrants, each exercisable for one share of Common stock
|
|
Trading Symbol |
ACONW
|
|
Security Exchange Name |
NASDAQ
|
|
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