UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

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

For the transition period from __________ to __________

Commission File Number: 001-41358

ACLARION, INC.

(Exact name of registrant as specified in its charter)

Delaware		47-3324725
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

8181 Arista Place, Suite 100

Broomfield, Colorado 80021

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (833) 275-2266

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.00001 per share	ACON	The Nasdaq Stock Market LLC
Warrants, each exercisable for one share of Common stock	ACONW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 14, 2023, there were 8,793,010 shares of the registrant's common stock, $0.00001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to, those described in the Risk Factors section of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2022 (the Form 10-K/A) dated June 12, 2023, as filed with the Securities and Exchange Commission on June 12, 2023, under Rule 424(b)(4). Caution should be taken not to place undue reliance on any such forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward- looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations	5
	Condensed Statements of Changes in Stockholders' Equity (Deficit)	6
	Condensed Statements of Cash Flows	8
	Notes to Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	38

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Aclarion, Inc.

Condensed Balance Sheets



	Sept 30, 2023			Dec 31, 2022
	(Unaudited)			(restated)
ASSETS
Current assets:
Cash	$	161,450		$	1,472,806
Restricted cash		10,000			10,000
Accounts receivable		21,189			18,569
Prepaids and other current assets		172,309			199,701
Total current assets		364,948			1,701,076

Non-current assets:
Property and equipment, net		2,063			3,346
Intangible assets, net		1,176,208			1,210,207
Total non-current assets		1,178,271			1,213,553

Total assets	$	1,543,219		$	2,914,629

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	686,198		$	462,202
Accrued and other liabilities		379,119			226,469
Note payable, net of discount		727,536			–
Warrant liability		210,910			–
Derivative liability		367,436			–
Total current liabilities		2,371,199			688,671

Stockholders' equity
Common stock - $0.00001 par value, 200,000,000 authorized and 8,230,510 and 7,861,515 shares issued and outstanding (see Note 12)		82			79
Additional paid-in capital		42,188,117			41,596,032
Accumulated deficit		(43,016,179	)		(39,370,153	)
Total stockholders’ equity (deficit)		(827,980	)		2,225,958

Total liabilities and stockholders’ equity (deficit)	$	1,543,219		$	2,914,629

See accompanying notes to condensed financial statements.

Aclarion, Inc.

Condensed Statements of Operations

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
				(restated)						(restated)
Revenue
Revenue	$	19,065		$	18,222		$	61,607		$	37,924
Cost of revenue		19,558			17,028			56,312			48,009
Gross profit (loss)		(493	)		1,194			5,295			(10,085	)


Operating expenses:
Sales and marketing		192,896			159,388			577,969			353,456
Research and development		198,252			290,966			652,657			848,995
General and administrative		770,534			1,184,100			2,524,308			3,406,572
Total operating expenses		1,161,682			1,634,454			3,754,934			4,609,023

(Loss) from operations		(1,162,175	)		(1,633,260	)		(3,749,640	)		(4,619,108	)

Other income (expense):
Interest expense		(166,332	)		(2,070	)		(214,850	)		(1,505,477	)
Change in value of warrant and derivative liabilities		330,252			–			318,452			–
Other, net		245			2,297			11			602
Total other income (expense)		164,165			227			103,613			(1,504,875	)

(Loss) before income taxes		(998,010	)		(1,633,033	)		(3,646,027	)		(6,123,983	)
Income tax provision		–			–			–			–
Net (loss)	$	(998,010	)	$	(1,633,033	)	$	(3,646,027	)	$	(6,123,983	)

Dividends accrued for preferred stockholders		–			–			–			(415,523	)
Net (loss) allocable to common stockholders	$	(998,010	)	$	(1,633,033	)	$	(3,646,027	)	$	(6,539,506	)
Net (loss) per share allocable to common shareholders	$	(0.12	)	$	(0.20	)	$	(0.44	)	$	(1.17	)
Weighted average shares of common stock outstanding, basic and diluted		8,526,854			7,821,515			8,255,606			5,522,950

See accompanying notes to condensed financial statements.

Aclarion, Inc.

Condensed Statements of Changes in Stockholders' Equity (Deficit)

(unaudited)

Series A

Series A-1, A-2, A-3, A-4

Series B, B-1

Series B-2, B-3

Preferred Stock

Value

Value*

Balance, December 31, 2021

–

6,247,695

12,434,500

124

5,812,809

–

Preferred stock dividend payable

–

Share-based compensation

–

Net income (loss)

–

Balance, March 31, 2022

–

6,247,695

12,434,500

124

5,812,809

–

Issuance of warrants

–

Exercise of convertible note warrants

–

Preferred stock dividend payable

–

Conversion of preferred dividends payable to common stock

–

Conversion of preferred stock to common stock

–

(6,247,695

)

(62

)

(12,434,500

)

(124

)

(5,812,809

)

–

Conversion of accrued interest on promissory notes

–

Issuance of common stock and warrants related to IPO, net issuance costs

–

IPO issuance costs

–

Share-based compensation

–

Net income (loss)

–

Balance, June 30, 2022

–

Share-based compensation

–

Net income (loss)

–

Balance, Sept 30, 2022

–

Balance, December 31, 2022

–

Share-based compensation

–

Proceeds from sale of Series A preferred stock

1,000

–

Redemption of Series A Preferred stock

)

(1,000

)

–

Net income (loss)

–

Balance, March 31, 2023

–

Share-based compensation

–

Issuance of common shares

–

Issuance of warrants

–

Net income (loss)

–

Balance, June 30, 2023

–

Share-based compensation

–

Issuance of common shares

–

Issuance of warrants

–

Net income (loss)

–

Balance, Sept 30, 2023

–

Series B2 and B3 Preferred Stock amounts reflected in mezzanine equity in the relevant reporting periods.

(continued)

Aclarion, Inc.

Condensed Statements of Changes in Stockholders' Equity (Deficit)

(unaudited)

(continued)


	Common Stock			Additional			Accumulated
	Shares	Value		Paid-In Capital			Deficit			Total

Balance, December 31, 2021	905,685	$	9	$	19,054,234		$	(31,886,036	)	$	(12,831,606	)
Preferred stock dividend payable	–		–		–			(287,315	)		(287,315	)
Share-based compensation	–		–		23,122			–			23,122
Net income (loss)	–		–		–			(936,088	)		(936,088	)
Balance, March 31, 2022	905,685	$	9	$	19,077,356		$	(33,109,439	)	$	(14,031,887	)

Issuance of warrants	–		–		1,280			–			1,280
Exercise of convertible note warrants	60,408		1		(1	)		–			–
Preferred stock dividend payable	–		–		–			(128,208	)		(128,208	)
Conversion of preferred dividends payable to common stock	984,537		10		4,272,411			–			4,272,420
Conversion of preferred stock to common stock	3,279,117

SEC Form 10-Q filed by Aclarion Inc.