Aclarion, Inc.

For the Year Ended December 31, 2024

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.

On April 26, 2022, the Company completed an initial public offering (the “IPO”) of units comprised of one share of common stock and one redeemable warrant entitling the holder to purchase one share of common stock. The IPO generated net proceeds of approximately $8.6 million, after underwriting discounts and expenses. The Company’s common stock and warrants started on the NASDAQ under the ticker symbols “ACON” and “ACONW”, respectively.

2024 Reverse Stock Split

On January 4, 2024, the Company effected a 1:16 reverse stock split of the Company’s common stock (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.

2025 Reverse Stock Splits

The Company effected (i) a 1:335 reverse stock split of the Company’s common stock on January 30, 2025, and (ii) a 1:27 reverse stock split of the Company’s common stock on March 28, 2025 (together, the “2025 Stock Splits”). The 2025 Stock Splits 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.

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 2025 Stock Splits.

The following tables present selected share information reflecting on a retroactive basis the 2024 and 2025 reverse stock splits as of and for the years ended December 31, 2024 and 2023:

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.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

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, valuation of capital stock, and valuation of warrants and options to purchase shares of the Company's preferred and 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 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 hadno cash equivalents for all periods presented. The Company maintains cash deposits at several financial institutions, which are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance may at times exceed these limits. On December 31, 2024, and 2023, the Company had approximately $167,899 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 December 31, 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 December 31, 2024, and 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.

Geographic Locations & Segments

Approximately 35% and 13% of the Company’s revenues were generated from contracts with customers outside the United States in the years ended December 31, 2024, and 2023, respectively. All invoices are billed in the currency of the customers and are recorded in US Dollars at the then spot rate, which automatically is converted to dollars upon receipt and deposited in the Company’s bank. Differences between the amounts received and the amounts initially recorded are reflected in Other Income (Expense).

Segment Disclosure

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly, by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By the definition, the Company has identified Brent Ness, Chief Executive Officer, as the CODM.

The Company operates and reports in one segment (“Nociscan segment”) related to the delivery of Nociscan reports. The Company generates revenues, earnings, net income, and cash flows through the single segment by collecting fees from our clients for providing Nociscan reports.

The Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial responsibility.

The results of the reportable segment is derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of the segment on several metrics, including contribution income (loss). Segment contribution income (loss) includes all product line segment revenue less the related costs of sales, research and development and sales and marketing costs. Contribution income (loss) is used, in part, to evaluate the performance of, and allocate resources to, the segment.

Financial information and annual operating plans and forecasts are prepared and reviewed by the CODM at a segment level. The CODM assesses performance for the Nociscan segment and decides how to better allocate resources based on the segment strategy and net income (losses) that are reported on the Statements of Operations. The Company's objective in making resource allocation decisions is to optimize the financial results. The accounting policies of our Nociscan segment are the same as those described in the summary of significant accounting policies herein.

For single reportable segment-level financial information, total assets, and significant non-cash transactions, see Financial Statements.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets. Furniture and fixtures are depreciated over seven years. Computer and office equipment and computer software are depreciated over five years. Repairs and maintenance costs, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including intangible assets, property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable using pre-tax undiscounted cash flows. Impairment, if any, is measured as the amount by which the carrying value of a long-lived asset exceeds its fair value.

Sales and Marketing Expenses

The Company expenses the costs of sales and marketing its products and services as incurred. The primary drivers of cost have been employee payroll, the Clarity clinical study, website and branding development, press releases, attendance at various industry conferences, Key Opinion Leader consulting fees in the form of restricted stock grants, and travel expenses.

Research and Development Costs

Costs related to research, design and development of products are charged to research and development expense as incurred. These costs include direct compensation, benefits, and other headcount related costs for research and development personnel, regulatory consulting, our quality system, and costs for materials used in research and development activities.

General & Administrative

General and administrative expenses primarily consist of personnel and related costs, including stock-based compensation, legal fees relating to both intellectual property and corporate matters, accounting and audit related costs, insurance, corporate communications and public company expenses, information technology, depreciation, amortization and maintenance, and fees for consulting, business development and other professional services.

Liquidity and Capital Resources

As of December 31, 2024, we had cash of approximately $0.46 million. Subsequent to December 31, 2024, the Company raised capital through two registered direct offerings and on an underwritten public offering (refer to Note 17 – Subsequent Events to our financial statements). We believe our current cash will fund our operating expenses and capital expenditure requirements into the third quarter of 2026. 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 and commercialization efforts.

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.

In the year ended December 31, 2024, the Company raised an aggregate of$6.6 million of gross proceeds through a combination of an equity line, at-the-market offerings, Regulation A+ offerings, and a follow-on public offering. $1,091,959 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 for complying with certain new or revised accounting standards that have different effective dates for public and private companies.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of December 31, 2024, the Company had deferred tax assets related to certain net operating losses. A valuation allowance was established against these deferred tax assets at their full amount, resulting in a zero balance of deferred tax assets on the balance sheets as of December 31, 2024 and 2023.

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.

There were no transfers between Level 1, 2, and 3 during the years ended December 31, 2024 and 2023.

The following tables present changes in Level 3 liabilities measures at fair value for the years ended December 31, 2024 and 2023. Both observable and unobservable inputs were used to determine the fair value positions that the Company has classified within the Level 3 category.

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.

NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Recently Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company for the year ended December 31, 2024 and early adoption is permitted. The company adopted the new standard effective December 31, 2024 on a retrospective basis. The adoption did not have any impact on the Company’s financial position, results of operations or cash flows. Refer to Note 11,Segment Information, for details.

Accounting Pronouncements Not Yet Effective

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 is effective for the Company for the year ending December 31, 2025 and early adoption is permitted. The guidance allows for adoption using either prospective or retrospective transition method. The company is evaluating the impact that the updated standard will have on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which expands the disclosure requirements for specific costs and expenses. ASU 2024-03 is effective for the Company for the year ending December 31, 2027 and early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The company does not expect that the guidance will have material impacts on its financial position, results of operations or cash flows. The company is evaluating the impact that the updated standard will have on its financial statement disclosures.

With the exception of the new standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows.

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. In the years ending December 31, 2024, and 2023, the Company had a contract liability of $0 and $3,628, respectively.

NOTE 6. SUPPLEMENTAL FINANCIAL INFORMATION

Balance Sheets

Accounts receivable, net

Accounts receivable, net consisted of the following:

Prepaids and other current assets

Accounts payable

Accrued and other liabilities

Statements of Operations

Other expense, net consisted of the following:

NOTE 7. LEASES

There wasno rent expense for the year ended December 31, 2024, and 2023. Our prior office lease and sublease expired on June 30, 2022.

NOTE 8. PROPERTY, PLANT, AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets. Furniture and fixtures are depreciated over seven years. Computer and office equipment and computer software are depreciated over five years. Repairs and maintenance costs, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

The Company’s property and equipment are as follows:

Depreciation expense related to property and equipment were $1,399 and $1,564 for the years ended December 31, 2024, and 2023, respectively.

Future depreciation and amortization of property, equipment, and software is as follows:

NOTE 9. INTANGIBLE ASSETS

The Company’s intangible assets are as follows:

Amortization expense related to purchased intangible assets was $191,739 and $161,107 for the years ended December 31, 2024, and 2023, respectively.

UC royalties are paid annually, amortized over twelve months, and charged to cost of revenue.

Patents and trademarks are reviewed at least annually for impairment. No impairment was recorded through December 31, 2024, and 2023, respectively.

Future amortization of intangible assets is as follows:

NOTE 10. SHORT TERM NOTES, CONVERTIBLE DEBT, AND DERIVATIVE LIABILITIES

Convertible Notes

There wasno convertible note activity in the years ended December 31, 2024 and 2023.

Senior Notes Payable

In May 2023, the Company issued $1,437,500 unsecured senior notes that mature on 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 accrued 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 accrued interest at an annual rate of 8.0%.

In November 2023, the Company issued $294,118 unsecured senior notes that mature on 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 accrued 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 (9 and 5 shares, respectively, after giving effect to the 2025 Stock Splits) 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 ($90,624 and $41,462 post-2025 Stock Splits), 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 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 (2 and 1 shares after giving effect to the 2025 Stock Splits) 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.

Between January 22 and January 29, 2024, the Company entered into a series of exchange agreements to exchange principal and accrued interest on the Senior Notes Payable for shares of common stock. Pursuant to the Exchange Agreements, the Company issued an aggregate of 644,142 shares (71 after giving effect to the 2025 Stock Splits) 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 retired the Series C Notes Payable with a cash payoff of the principal and accrued interest of $300,974.

On August 14, 2024, the Company entered into an exchange agreement with the Series B Notes Payable holders to exchange $930,052 of principal and accrued interest on the notes for 930 shares of newly issued Series B convertible preferred stock (“Series B Preferred Stock”) at a purchase price of $1,000 per share of Series B Preferred Stock. The Series B Preferred Stock is convertible into Common Stock at an initial conversion price (“Conversion Price”) of $0.234 ($2,116.53 post-2025 Stock Splits) per share of Common Stock. (See Note 12).

Following the retirement of the Senior Notes Payable, the Series B Notes Payable, and Series C Notes Payable, all described above, the remaining outstanding balance of principal and interest on the notes was $0 for the year ended December 31, 2024.

For the years ended December 31, 2024 and 2023, the Company recognized $64,084 and $110,525, respectively, in stated interest expense.

For the years ended December 31, 2024 and 2023, the Company recognized $471,387 and $497,763, respectively, in amortization of debt discounts and deferred financing costs which is recorded in interest expense.

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.

Secured Promissory Notes Payable

In June 2021, the Company issued $2.0 million of promissory notes that matured at the earlier of the consummation of a Qualified Financing or May 31, 2022. The promissory notes incorporated the following major attributes: secured by a lien and security interest on substantially all of the Company’s assets; interest accrues at 33%; holder option to convert the accrued interest into the Company securities being offered in a Qualified Financing at 30% (i.e. 70% discount) of the price being paid by other investors in the Qualified Financing; and automatic conversion in the case of a Qualifying IPO of the accrued interest into the Company securities being offered in the Qualifying IPO at 30% (70% discount) of the price being paid by other investors in the Qualifying IPO.

On April 21, 2022, the registration statement for our IPO was declared effective. In connection with the effectiveness of the IPO registration statement, all accrued interest on the Company's outstanding secured promissory notes were converted into (i) 26,673 (3 after giving effect to the 2025 Stock Splits) common shares and (ii) warrants to purchase 26,673 shares of common stock (3 common shares after giving effect to the 2025 Stock Splits) with a $1,299,507 beneficial conversion rate charged to interest expense.

On April 27, 2022, the Company used $2 million of the IPO proceeds to retire all outstanding secured promissory notes.

NOTE 11. 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 $50,000 for each of the years ended December 31, 2024, and 2023.

Additionally, the Company was obligated to make a cash Indexed Milestone Payment to the Regents of the University of California in the event of either a change of control or an IPO. This cash payment was calculated as follows: 1,783 (1 share after giving effect to the 2025 Stock Splits) of Company common stock times the IPO price of $69.44 ($628,085 post-2025 Stock Splits). On May 2, 2022, in connection with the IPO, the Company paid the University of California - San Francisco the amount of $123,828 to satisfy the Indexed Milestone Payment obligation included within the exclusive license agreement.

Litigation

From time to time, we are involved in various disputes, claims, suits, investigations, and legal proceedings arising in the ordinary course of business. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows. If any legal proceeding occurs, the Company would 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.

NOTE 12. STOCKHOLDERS’ EQUITY

The Company filed an Amended and Restated Certificate of Incorporation on April 21, 2022, as part of the IPO. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is two hundred twenty million (220,000,000) shares. Two hundred million (200,000,000) shares are authorized to be Common Stock, having a par value per share of $0.00001. Twenty million (20,000,000) shares are authorized to be Preferred Stock, having a par value per share of $0.00001.

2024 Public Offering

On February 27, 2024, the Company completed a public offering of 5,175,000 units (“Units”; equivalent to 572 units following the 2025 Stock Splits) at a price of $0.58 per Unit (adjusted to $5,246.10 following the 2025 Stock Splits), 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 pre-funded warrant to purchase one share of common stock, and (ii) two common warrants, each common warrant to purchase a share of common stock. The pre-funded warrants were immediately exercisable at a price of $0.00001 (adjusted to $0.09 following the 2025 Stock Splits) per share of common stock and only expire when such pre-funded warrants are fully exercised. The common warrants were immediately exercisable at a price of $0.58 (adjusted to $5,246.10 following the 2025 Stock Splits) per share of common stock and will expire five years from the date of issuance.

Subscription Agreements

On August 12, 2024, Aclarion, Inc. (the “Company”), 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 (the “Shares”; equivalent to 44 shares following the 2025 Stock Splits) of common stock of the Company at a price of $0.29 per share (equivalent to $2,623.05 following the 2025 Stock Splits) for gross proceeds to the Company of $116,000. The Shares were not placed through the efforts of a placement agent and no fees or commissions were paid on the transaction.

The Shares issued in the offering were offered at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A (the “Offering Statement”), initially filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), on June 11, 2024 and qualified on June 24, 2024.

On August 15, 2024, Aclarion, Inc. (the “Company”), entered into a subscription agreement with an institutional investor, pursuant to which the Company agreed to issue and sell to the investor 425,000 shares (the “Shares”; equivalent to 47 shares following the 2025 Stock Splits) of common stock of the Company at a price of $0.29 per share (equivalent to $2,623.05 following the 2025 Stock Splits) for gross proceeds to the Company of $116,000. The Shares were not placed through the efforts of a placement agent and no fees or commissions were paid on the transaction.

The Shares issued in the offering were offered at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A (the “Offering Statement”), initially filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), on June 11, 2024 and qualified on June 24, 2024.

On August 27, 2024, the Company entered into a subscription agreement (the “Subscription Agreement”) with certain accredited investors to which the Company agreed to issue and sell to the investors 1,000,000 shares of common stock (the “Shares”; equivalent to 111 shares following the 2025 Stock Splits) of the Company, par value $0.00001 per share, at a price of $0.29 per share (equivalent to $2,623.05 following the 2025 Stock Splits) for gross proceeds of $290,000. The Shares were offered at-the-market under NASDAQ rules and pursuant to the Company’s Form 1-A initially filed on June 11, 2024 and qualified on June 24, 2024.

In connection with the Subscription Agreement, on August 27, 2024, the Company also entered into a warrant purchase agreement (the “Warrant Purchase Agreement”) with the accredited investors pursuant to which the Company issued warrants (the “Warrants”) to purchase up to 400,000 Common Stock (44 shares following the 2025 Stock Splits) exercisable on or after February 27, 2025 with a five year term and an initial exercise price of $0.29 per share (adjusted to $2,623.05 following the 2025 Stock Splits). The exercise price of the Warrants may be adjusted if and whenever prior to the expiration Date, the Company grants, issues, or sells (or enters into any agreement to grant, issue or sell), or in accordance with Section 2 of the Warrant Agreement is deemed to have granted, issued or sold, any shares of Common Stock for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale, then immediately after such Dilutive Issuance, the Exercise Price then In effect shall be reduced to an amount equal to the New Issuance Price.

On September 30, 2024, as a result of the securities purchase agreement for the Company’s Series C Preferred Stock noted below, the exercise price for the Warrants was adjusted to $0.1759 per share (adjusted to $1,591.02 following the 2025 Stock Splits).

White Lion Equity Line Agreement

The Company has had an equity line common stock purchase agreement (the “Equity Line Purchase Agreement”) with White Lion Capital, LLC (“White Lion”) since 2023. Pursuant to the Equity Line Purchase Agreement, during the year ended December 31, 2024, the Company issued to White Lion 1,502,343 common shares (166 shares post-2025 Stock Splits) for total proceeds of $1,754,032. Since the initiation of the Equity Line Purchase Agreement and through December 31, 2024, the Company has issued 1,800,000 shares (199 shares post-2025 Stock Splits) to White Lion for total proceeds of $3,216,981.

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

Ascendiant Capital Markets, LLC Sales Agreement

On September 24, 2024, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, (“Ascendiant”) as sales agent, to sell shares of its common stock, par value $0.00001 per share, having an aggregate offering price of up to $10 million from time to time, through an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. The aggregate market value of shares of the Company’s common stock eligible for sale under the Sales Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such restriction. The Company is not obligated to make any sales of shares of common stock under the Sales Agreement. The Company and Ascendiant each have the right, in its sole discretion, to terminate the Sales Agreement pursuant to the terms and subject to the conditions set forth in the Sales Agreement.

On September 24, 2024, in conjunction with the Sales Agreement, the Company filed a prospectus supplement relating to the offer and sale of up to $1,075,000 of shares of common stock.

The Company is required to pay Ascendiant a commission of up to 3.0% of the gross proceeds from the sales of its common stock sold through Ascendiant under the Sales Agreement. The Company will also reimburse Ascendiant for certain expenses incurred in connection with the Sales Agreement.

During the year ended December 31, 2024, the Company sold 1,606,211 shares (178 shares post-2025 Stock Splits) of its common stock under the Sales Agreement for net proceeds of $288,294.

On January 3, 2025, the Company gave notice to terminate the Sales Agreement, effective immediately. See Note 17 – Subsequent Events.

Issuances of Preferred Stock

Series A Preferred Stock

In February 2023 the Company soldone 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 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 at December 31, 2024 and 2023.

Series B Preferred Stock

On August 14, 2024, the Company entered into an exchange agreement (the “Exchange Agreement”) with accredited investors to exchange $930,052 of principal and accrued interest on the September 2023 Notes for 930 shares of newly issued Series B convertible preferred stock (the “Series B Preferred Stock”) at a purchase price of $1,000 per share. The Series B Preferred Stock is convertible into common stock at an initial conversion price of $0.234 per share ($2,116.53 post-2025 Stock Splits).

Holders of the Series B Preferred Stock are entitled to dividends in the amount of 10% per annum, payable quarterly.

The Company also has the option to cumulate or “capitalize” the dividends, in which case the accrued dividend amount shall be added to the stated value of each share of Series B Preferred Stock.

The Company has the option to pay dividends on the Series B Preferred Stock in additional shares of common stock, provided that no equity conditions failure (as defined in the Certificate of Designations) then exists. If the Company elects to pay in the form of common stock, the number of dividend shares to be issued shall be calculated by using a “Dividend Conversion Price” equal to the lower of (i) the then applicable Series B Conversion Price as in effect on the applicable dividend date, or (ii) 90% of the lowest volume weighted average price of the common stock during the five (5) consecutive trading day period ending and including the trading day immediately preceding the applicable dividend date.

The stated value of each share of Series B Preferred Stock (including all the unpaid dividends and other amounts payable on the Series B Preferred Stock) will be convertible into common stock at an initial fixed Conversion Price of $0.234 per share ($2,116.53 post-2025 Stock Splits) of common stock. The Series B Preferred Stock may be converted into shares of common stock at any time at the option of the holder. The Series B Preferred Stock may also be converted into shares of common stock at the option of the Company if the closing price of the common stock equals at least 300% of the Conversion Price for 20 consecutive trading days, provided that no equity conditions failure (as defined in the Certificate of Designations) then exists.

The Conversion Price of the Series B Preferred Stock is subject to certain anti-dilution adjustments, including in the event of any stock splits or combinations, certain dividends and distributions, reclassification, exchange or substitution of the Company’s common stock or in the event that the Company grants, issues or sells (or enters into any agreement to grant, issue or sell), or is deemed to have granted, issued or sold, any shares of common stock for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (the foregoing a “Dilutive Issuance”). Immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price.

Series C Preferred Stock Financing

On September 30, 2024, the Company entered into a securities purchase agreement with accredited investors for a convertible preferred stock and warrants financing. The Company received $1,000,000 of gross proceeds in connection with the closing of this financing. The Company issued 1,000 shares of Series C convertible preferred stock (the “Series C Preferred Stock”) at a purchase price of $1,000 per share of Series C Preferred Stock. The Series C Preferred Stock is convertible into common stock at an initial conversion price of $0.1759 per share ($1,591.02 post-2025 Stock Splits) of common stock. The Company also issued warrants exercisable for 5,685,049 shares of common stock (equivalent to 629 following the 2025 Stock Splits) with a 5.5 year term and an initial exercise price of $0.1759 (adjusted to$1,591.02 following the 2025 Stock Splits).

The Preferred Stock key terms are summarized as follows:

Warrants

The following table summarizes the Company’s outstanding warrants as of December 31, 2024. The warrants and related strike prices have been adjusted to reflect the 2025 Stock Splits:

NOTE 14. NET LOSS PER SHARE OF COMMON STOCK

On January 3, 2024, the Company effected a 1:16 reverse stock split of the Company’s common stock (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.

On January 29, 2025, the Company effected areverse stock split at a ratio of 1:335 (See Note 17 – Subsequent Events) 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.

On March 27, 2025, the Company effected areverse stock split at a ratio of 1:27 (See Note 17 – Subsequent Events) 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 retrospective effect of the reverse stock splits has been incorporated on a retrospective basis in the tabular disclosures of loss per share and weighted average outstanding shares for the fiscal years 2024 and 2023 herein.

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, vested restricted stock units, and pre-funded warrants during the year. 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 post-2025 Stock Splits reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share attributable to stockholders follows:

The following outstanding potentially dilutive securities were excluded from the calculation of dilutive loss per share attributable to common stockholders because their impact would have been antidilutive for the period presented:

NOTE 15. 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 appointed the compensation committee of our board of directors as the committee under the 2022 Plan with the authority to administer the 2022 Plan. At the initiation of the 2022 Plan, the aggregate number of our shares of common stock were available to be issued or used for reference purposes was 125,000 shares (14 shares post-2025 Stock Splits), 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 IPO Date 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.

At the Annual Meeting of Stockholders held December 31, 2024, stockholders approved an amendment to the 2022 Plan to increase the number of shares reserved for issuance by 1,500,000 (166 post-2025 Stock Splits), thereby increasing the number of shares issuable under the 2022 Plan from 195,695 (22 post-2025 Stock Splits) to 1,695,695 (188 post-2025 Stock Splits).

As of the years ended December 31, 2024 and 2023, the aggregate number of our shares of common stock that may be issued or used for reference purposes under the 2022 Plan was 1,695,695 (188 post-2025 Stock Splits) and 154,426 (17 post-2025 Stock Split), respectively. On January 1, 2025, the 2022 Plan had an automatic increase of 619,499 (68 post-2025 Stock Split) shares which was 5% of the total number of shares of Capital Stock outstanding on December 31, 2024.

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.

The Company didnot grant any stock options for the twelve months ended December 31, 2024 or 2023.

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 (17 after giving effect to the 2025 Stock Splits) 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 didnot grant any stock options under the Existing Plan for the twelve months ended December 31, 2024 and 2023. 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 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 post-split summary of option activity under the Company’s equity incentive plans is as follows:

The aggregate intrinsic value in the table above of the unexercised options reflects the total pre-tax intrinsic value (the difference between the Nasdaq closing price on December 30, 2024, and the exercise price of the options that would have been received by option holders if all options exercisable had been exercised.

The aggregate intrinsic value of options outstanding at December 31, 2024 is $0. The aggregate intrinsic value of vested and exercisable options at December 31, 2024 is $0.

As of December 31, 2024, there was approximately $99,980 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the next 9 months.

The Company adjusts expense for actual forfeitures in the periods they occur.

Restricted Stock Units

During the twelve month periods ending December 31, 2022, and December 31, 2023, the Company granted RSUs under the 2022 Plan that had a combination of time-based and performance-based vesting, contingent upon continued service with the Company. The Company granted certain consultants an aggregate of RSUs for 56,626 common shares (6 shares after giving effect to the 2025 Stock Splits).

No RSUs were granted during the year ended December 31, 2024.

Post-split RSU activity under the 2022 Plan was as follows for the years ended December 31, 2024 and 2023:

The grant date fair value for a RSU is the market price of the common stock on the date of grant. The total fair value of RSUs vested during 2024 and 2023 was $57,824 and $226,918, respectively.

As of December 31, 2024, there is $0 total unrecognized compensation cost related to non-vested RSU’s expected to be recognized in the future.

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:

NOTE 16. INCOME TAXES

The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

A reconciliation of the federal income tax rates to the Company’s effective tax rates for the years ended December 31, 2024 and 2023 consist of the following:

Significant components of the Company’s deferred tax assets as of December 31, 2024 and 2023 are summarized below.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance of $10,967,000 required as of December 31, 2024, as the Company determined it is more likely than not the deferred tax assets will not be realized. Our net deferred tax asset and valuation allowance increased by $1,253,000 for the year ended December 31, 2024. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.

The Company files income tax returns in the U.S., Colorado, and California jurisdictions and is subject to examination by the various taxing authorities.

NOTE 17. SUBSEQUENT EVENTS

Termination of a Material Definitive Agreement

On January 3, 2025, the Company gave notice to terminate the At-The-Market Issuance Sales Agreement entered into with Ascendiant Capital Markets, LLC on September 24, 2024, effective immediately. See Note 13 – Stockholders’ Equity for details of and shares issued under the agreement.

Registered Direct Public Offerings

January 3, 2025

On January 3, 2025, the Company sold in a registered direct offering an aggregate of 3,380,276 shares (374 shares post-2025 Stock Splits) of its common stock at a price of $0.142 per share ($1,284.39 post-2025 Stock Splits). The net proceeds to the Company of this offering were $0.45 million.

January 30, 2025

On January 30, 2025, the Company sold in a registered direct offering an aggregate of 506,803 shares (18,770 shares post-Second 2025 Stock Split) of its common stock at a price of $9.25 per share ($249.75 post-March 2025 stock split). The net proceeds to the Company of this offering were $4.4 million.

Units Offering of Common Shares and Warrants

On January 15, 2025, the Company sold, in an underwritten public offering, an aggregate of (i) 100,000 shares (11 shares post-2025 Stock Splits) of the Company’s common stock, (ii) 143,900,000 pre-funded warrants (the “Pre-Funded Warrants) (15,909 pre-funded warrants post-2025 Stock Splits) to purchase up to an aggregate of 143,900,000 common shares (15,909 shares post-2025 Stock Splits), (iii) 144,000,000 Series A Common Warrants (the “Series A Common Warrants”) (15,920 warrants post-2025 Stock Splits), and (iv) 144,000,000 Series B Common Warrants (the “Series B Common Warrants” and, together with the Series A Common Warrants, the “Common Warrants”) Each share or Pre-Funded Warrant, as applicable, was sold together with one Series A Common Warrant to purchase one share of Common Stock and one Series B Common Warrant to purchase one share of Common Stock.

The public offering price for each Unit (consisting of a common share (or Pre-Funded Warrant in lieu thereof) and accompanying Common Warrants was $0.10 ($904.50 post-2025 Stock Splits). In addition, the Company granted Dawson James an option to purchase up to an additional 21,000,000 shares (2,322 shares post-2025 Stock Splits) of our common stock (or Pre-Funded Warrants in lieu of shares of Common Stock), at the public offering price, less underwriting discounts and commissions, and up to an additional 21,000,000 (2,322 shares post-2025 Stock Splits) Series A Common Warrants and up to an additional 21,000,000 (2,322 post-2025 Stock Splits) Series B Common Warrants at a nominal price within 45 days from January 15, 2025, to cover over-allotment sales. Dawson James exercised its option to purchase 21,000,000 (2,322 post-2025 Stock Splits) Series A Common Warrants and 21,000,000 (2,322 post-2025 Stock Splits) Series B Common Warrants.

Warrants

The Pre-Funded Warrants have an exercise price of $0.00001 ($.09 post-2025 Stock Splits) per share, are immediately exercisable and expire when exercised in full. Each Series A Common Warrant will have an exercise price per share of $0.20 ($1,809.00 post-2025 Stock Splits) and will be exercisable beginning on the first trading day following the date on which Stockholder Approval is received and deemed effective (the “Initial Exercise Date” or the “Stockholder Approval Date”). The Series A Common Warrants will expire on the five-year anniversary of the Initial Exercise Date. The Series B Common Warrants will have an exercise price per share of $0.20 ($1,809.00 post-2025 Stock Splits) and will be exercisable beginning on the Initial Exercise Date. The Series B Common Warrants will expire on the two and one-half anniversary of the Initial Exercise Date.

Use of Proceeds

The net proceeds of this offering were approximately $13.3 million. The Company intends to use the net proceeds from the Offering to redeem all outstanding shares of the Company’s Series B Preferred Stock at a redemption price per share equal to $1,000 plus all accrued but unpaid dividends, with the remaining net proceeds to be used to build out the product platform, expand the Company’s sales and marketing efforts, and for general and administration expenses and other general corporate purposes.

Approval of A and B Warrants Shares

On March 5, 2025, the Company convened its Special Meeting of Stockholders. Stockholders approved the full issuance of shares of common stock issuable by the Company upon exercise of the Series A Common Warrants and the Series B Common Warrants. Following March 5, 2025, holders of Series B warrants have exercised substantially all of our outstanding Series B warrants using the alternative cashless exercise ("ACE") feature included in those warrants. The Company has issued approximately 14.7 million common shares (544 thousand shares adjusted for the Second 2025 Stock Split) in such Series B warrant exercises. No Series A warrants have been exercised as of March 31, 2025.

Redemption of Series B Preferred Stock

On January 22, 2025, the Company redeemed all Series B Preferred Stock and related accrued dividends with a cash payment of $1,213,590.

2025 Reverse Stock Splits

On January 29, 2025, the Company effected a reverse stock split at a ratio of 1:335. As a result of the reverse stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 170.5 million pre-split shares to approximately 509,000 post-split shares. The reverse stock split did not change the number of authorized shares of the Company’s common stock. The reverse stock split will apply to the Company’s outstanding warrants, stock options and restricted stock units.

On March 27, 2025, the Company effected a reverse stock split at a ratio of 1:27. As a result of the reverse stock split, the Company’s issued and outstanding shares of common stock decreased from approximately 15.7 million pre-split shares to approximately 582,000 post-split shares. The reverse stock split did not change the number of authorized shares of the Company’s common stock. The reverse stock split will apply to the Company’s outstanding warrants, stock options and restricted stock units.

Nasdaq Compliance

During 2024, the Company received notices from Nasdaq indicating that the Company was not in compliance with (i) 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 or (ii) Nasdaq Listing Rule 5550(a)(2) which requires companies listed on The Nasdaq Stock Market to maintain a minimum of a $1.00 bid price for continued listing. The Company regained compliance with the bid price requirement after the completion of its January 2025 reverse stock split. The Company regained compliance with the stockholders’ equity requirement after the completion of the Company’s January 2025 public offering.