Aclarion(ACON) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Q1 2022 unaudited financial statements show a worsening position with increased net loss and negative operating cash flow, partially offset by a post-quarter $8.6 million IPO Condensed Balance Sheets As of March 31, 2022, total assets decreased to $1.81 million, liabilities rose to $8.74 million, and stockholders' equity deficiency worsened to $14.03 million Condensed Balance Sheet Summary (unaudited) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,807,990 | $1,889,465 | | Cash | $50,449 | $432,530 | | Total current assets | $565,480 | $732,204 | | Intangible assets, net | $1,231,591 | $1,144,625 | | Total Liabilities | $8,737,590 | $7,618,784 | | Total deficiency in stockholders' equity | $(14,031,887) | $(12,831,606) | Condensed Statements of Operations Q1 2022 net loss increased 80.8% to $936,088, driven by a 23.7% revenue decrease and a 67.9% surge in operating expenses Statement of Operations Highlights (Three Months Ended March 31) | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | $9,026 | $11,830 | -23.7% | | Loss from operations | $(773,100) | $(460,542) | +67.9% | | Net loss | $(936,088) | $(517,860) | +80.8% | | Net loss per share (basic and diluted) | $(1.35) | $(0.81) | +66.7% | Condensed Statements of Cash Flows Q1 2022 saw $259,427 used in operating cash and $132,654 in investing cash, decreasing total cash to $60,449 Cash Flow Summary (Three Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operations | $(259,427) | $(246,468) | | Net cash used in investing activities | $(132,654) | $(23,626) | | Net cash provided by financing activities | $0 | $319,000 | | Net (decrease) increase in cash | $(392,081) | $48,906 | | Cash and restricted cash, end of period | $60,449 | $63,890 | Notes to Condensed Financial Statements Notes detail a 1-for-7.47 reverse stock split, management's going concern doubt from recurring losses, and a post-quarter IPO raising $8.6 million net proceeds - The company is an early-stage healthcare technology firm subject to risks including a limited operating history and the impact of the COVID-19 pandemic[26][28][29] - A 1-for-7.47 reverse stock split of common stock was effected on April 21, 2022, with all share and per-share data retrospectively adjusted[30] - Management concluded there is substantial doubt about the company's ability to continue as a going concern due to recurring losses and the need for additional financing[39][104] - On April 26, 2022, the company completed its IPO, selling 2,165,000 units at $4.35 per unit and receiving net proceeds of approximately $8.6 million[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2022's 23.7% revenue decrease to fewer Nociscan reports and significant operating expense increases, reiterating going concern doubt despite a post-quarter IPO Key Operational Changes (Q1 2022 vs Q1 2021) | Expense Category | Q1 2022 | Q1 2021 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Revenue | $9,026 | $11,830 | -23.7% | Decrease in number of Nociscan reports ordered | | Research & Development | $204,803 | $167,751 | +22.1% | Additional personnel and increased quality/regulatory services | | General & Administrative | $491,283 | $222,188 | +121.1% | Higher payroll costs (no reduction program in 2022) and new management | | Interest Expense | $162,740 | $57,214 | +184.4% | Accruing 33% interest on $2.0M promissory notes issued in June 2021 | - The company believes net proceeds from its recent IPO and existing cash will fund operating plans into the second quarter of 2023, but acknowledges these estimates may be wrong and additional capital may be needed sooner[102] - As of March 31, 2022, the company had financed operations primarily through $24.2 million in gross proceeds from private placements of preferred stock and debt financing[105] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing market risk disclosures - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is exempt from this disclosure requirement[118] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2022, with no material changes in internal control over financial reporting - Based on an evaluation as of March 31, 2022, the CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level[120] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[121] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings that could adversely affect its operations or financial position - The company is not currently a party to any material legal proceedings that could have a material adverse effect on its operations or financial position[122] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's April 25, 2022 Prospectus - Investors are directed to the Risk Factors section of the company's Prospectus dated April 21, 2022, as there have been no material changes since its filing[123] Other Items (2, 3, 4, 5) The company reported no unregistered equity sales, no defaults on senior securities, no other material information, and mine safety disclosures are not applicable - Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds): None[123] - Item 3 (Defaults Upon Senior Securities): None[123] - Item 4 (Mine Safety Disclosures): Not applicable[123] - Item 5 (Other Information): None[124] Item 6. Exhibits This section lists and incorporates by reference all exhibits filed with the Form 10-Q, including key corporate and financial agreements - The report lists and incorporates by reference exhibits filed, including the Underwriting Agreement, Certificate of Incorporation, Bylaws, and various employment and strategic agreements[125][127]