Aclarion, Inc.

(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, 2024, which include a complete set of footnote disclosures, including our significant accounting policies. The December 31, 2024, condensed balance sheet was derived from the December 31, 2024, 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 April 9, 2025. 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.

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 reverse stock splits as of and for the year ended December 31, 2024:

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.

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 $1,394,506 cash deposits and $13,365,766 of cash equivalents at March 31, 2025. The Company had $463,661 of cash deposits at December 31, 2024.

The Company maintains cash deposits and cash equivalents at two financial institutions, which are insured by the FDIC up to $250,000. The Company’s cash balance may at times exceed these limits. On March 31, 2025, and December 31, 2024, the Company had $13,975,570 and $167,899, 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 March 31, 2025, $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 March 31, 2025, and December 31, 2024.

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 with the exception of three private health insurance providers in the United Kingdom. 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.

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.

Liquidity and Capital Resources

As of March 31, 2025, we had cash of $14,760,272. During the quarter ending March 31, 2025, the Company raised capital through two registered direct offerings and on an underwritten public offering (refer to Note 11 – Stockholders’ Equity). 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. Upon the completion of the two registered direct offerings and a public offering during the three months ended March 31, 2025, approximately $2.1 million of offering costs were reclassified to additional paid-in capital ($1.6 million deducted from proceeds, and $0.5 million paid or accrued).

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.

The derivative liability was retired in 2024 along with the retirement of all unsecured non-convertible notes.

There were no transfers between Level 1, 2, and 3 during the three months ended March 31, 2025.

The following table presents changes in Level 3 liabilities measures at fair value for the three months ended March 31, 2025. 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 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 2,Segment Disclosure, 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.

NOTE 6. SUPPLEMENTAL FINANCIAL INFORMATION

Balance Sheets

Prepaids and other current assets:

Accounts payable:

Accrued and other liabilities:

NOTE 7. LEASES

The Company hadno office lease for the quarter ended March 31, 2025, and the year ended December 31, 2024.

NOTE 8. INTANGIBLE ASSETS

The Company’s intangible assets are as follows:

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 $54,762 and $44,812 for the three months ended March 31, 2025, and 2024, respectively.

Patents and trademarks are reviewed at least annually for impairment. No impairment was recorded through March 31, 2025, and December 31, 2024, respectively.

Future amortization of intangible assets is as follows:

NOTE 9. SHORT TERM NOTES AND CONVERTIBLE DEBT

As of December 31, 2024, there wereno short term notes or convertible notes payable and outstanding. There wasno short term note or convertible note activity in the three months ended March 31, 2025.

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 March 31, 2025, and 2024, respectively, as Cost of Revenue.

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.

In March 2025 we paid $687,500 to settle a dispute under the "fee tail" provision of an investment banking agreement that the Company had previously entered into.

NOTE 11. 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, 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 (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.

On August 15, 2024, we 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 (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.

On August 27, 2024, we entered into a 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 (equivalent to 111 shares following the 2025 Stock Splits) 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.

All of the foregoing shares were offered at-the-market under NASDAQ rules and pursuant to the Company’s Form 1-A initially filed with the SEC on June 11, 2024 and qualified on June 24, 2024.

In connection with the August 27, 2024, subscription agreement, the Company also entered into a warrant purchase agreement with the accredited investors pursuant to which the Company issued 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 will be adjusted if the Company sells any shares of Common Stock for a consideration per share less than a price equal to the warrant exercise price in effect immediately prior to such sale.

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 March 31, 2025, 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.

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 terminated the Sales Agreement.

Issuances of Preferred Stock

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.

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

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).

During the fourth quarter of 2024, certain holders converted 126 shares of C Preferred Stock and related accrued dividends into 739,050 shares of common stock (equivalent to 82 common shares following the 2025 Stock Splits). There were 874 C Preferred shares remaining at December 31, 2024.

During the three months ended March 31, 2025, certain holders converted the remaining 874 shares of C Preferred Stock and related accrued dividends into 6,211,618 shares of common stock (equivalent to 687 common shares following the 2025 Stock Splits).

During the three months ended March 31, 2025, holders of the Series C warrants exercised 5,685,049 warrants (629 post-2025 Stock Splits).4,548,039 (503 post-2025 Stock Splits) warrants were exercised at $0.03 per share ($271.35 post-2025 Stock Splits), and 1,137,010 (126 post-2025 Stock Splits) warrants were exercised at $0.1759 per share ($1,591.02 post-2025 Stock Splits). The Company received payments of $336,411 as part of the warrant exercises.

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. The net proceeds to the Company of this offering were $13.4 million.

Warrants

The Pre-Funded Warrants had an exercise price of $0.00001 ($.09 post-2025 Stock Splits) per share, were immediately exercisable and expired when exercised in full. All Pre-Funded Warrants have been exercised as of March 31, 2025. 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.

Approval of A and B Warrant Shares

On March 5, 2025, the Company convened a 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.

Warrants

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

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 (adjusted for 2025 Stock Splits):

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:

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 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 three months ended March 31, 2025 and twelve months ended December 31, 2024.

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:

The aggregate intrinsic value of options outstanding at March 31, 2025 is $0. The aggregate intrinsic value of vested and exercisable options at March 31, 2025 is $0.

As of March 31, 2025, there was approximately $44,083 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the next 7 months.

Restricted Stock Units

No RSUs were granted during the year ended December 31, 2024, and the three months ended March 31, 2025.

No RSUs were outstanding at December 31, 2024, and March 31, 2025.

As of March 31, 2025, there wasno unrecognized compensation cost related to non-vested RSUs.

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 14. SUBSEQUENT EVENTS

None.