Aclarion(ACON) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements, including balance sheets, statements of operations, and cash flows, highlighting the impact of the April 2022 IPO and recurring net losses Item 1. Financial Statements This section presents unaudited condensed financial statements, including balance sheets, statements of operations, and cash flows, highlighting the impact of the April 2022 IPO and recurring net losses Condensed Balance Sheet Data (Unaudited) | Account | June 30, 2022 (in dollars) | Dec 31, 2021 (in dollars) | | :--- | :--- | :--- | | Total Assets | $5,620,989 | $1,889,465 | | Cash | $3,792,880 | $432,530 | | Total Liabilities | $1,381,419 | $7,618,784 | | Total deficiency in stockholders' equity | $4,239,570 | ($12,831,606) | Condensed Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2022 (in dollars) | Three Months Ended June 30, 2021 (in dollars) | Six Months Ended June 30, 2022 (in dollars) | Six Months Ended June 30, 2021 (in dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $10,676 | $25,620 | $19,702 | $37,450 | | Gross Margin | ($3,573) | $5,316 | ($11,279) | $581 | | Net Loss | ($3,707,515) | ($465,844) | ($4,643,603) | ($983,703) | | Net Loss Per Share (basic and diluted) | ($0.49) | ($0.75) | ($1.16) | ($1.56) | - On April 26, 2022, the company completed its IPO of 2,165,000 units at $4.35 per unit, receiving net proceeds of approximately $8.6 million[16] - The company's recurring losses from operations and need for additional financing raise substantial doubt about its ability to continue as a going concern; management believes existing cash will be sufficient to fund operations into the second quarter of 2023[25][24] Condensed Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 (in dollars) | Six Months Ended June 30, 2021 (in dollars) | | :--- | :--- | :--- | | Net cash used in operations | ($3,081,011) | ($738,669) | | Net cash used in investing activities | ($120,957) | ($74,824) | | Net cash provided by financing activities | $6,552,318 | $2,889,500 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a significant year-over-year revenue decline and substantial increase in operating expenses, reiterating the "going concern" risk due to limited cash runway into Q2 2023 Results of Operations This section details financial performance, showing a 58.3% Q2 2022 revenue decline to $10,676 and a 365.9% surge in G&A expenses, alongside a $1.3 million increase in interest expense - Total revenues for Q2 2022 decreased by $14,944 (58.3%) compared to Q2 2021, resulting from a decrease in the number of medical professionals ordering Nociscan reports[54] - General and administrative expenses for Q2 2022 increased by $1,479,578 (365.9%) YoY, primarily driven by increased compensation expense from the vesting of the Executive Chairman's stock options upon IPO, management bonuses, and higher D&O liability insurance[54] - Research and development expenses for Q2 2022 increased by $190,512 (117.1%) YoY, with approximately $123,000 of the increase related to a milestone payment to UCSF[54] - Interest expense for the six months ended June 30, 2022, increased by $1,363,364 YoY, mainly due to a $1.3 million beneficial conversion rate charged to interest expense upon the conversion of secured promissory notes in connection with the IPO[55] Liquidity and Capital Resources The company's liquidity, bolstered by $8.5 million IPO proceeds, shows $3.8 million cash as of June 30, 2022, but recurring losses raise substantial doubt about its going concern beyond Q2 2023 - As of June 30, 2022, the company had cash of $3,802,880, primarily from its IPO in April 2022 which raised net proceeds of $8,527,318[61] - Management believes that existing cash will be sufficient to fund current operating plans into the second quarter of 2023, but recurring losses raise substantial doubt about the company's ability to continue as a going concern[60] Cash Flow Summary (Six Months Ended June 30) | Description | 2022 (in dollars) | 2021 (in dollars) | | :--- | :--- | :--- | | Cash used in operating activities | $(3,081,011) | $(738,669) | | Cash used in investing activities | $(120,957) | $(74,824) | | Cash provided by financing activities | $6,552,318 | $2,889,500 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Aclarion is not required to provide quantitative and qualitative disclosures about market risk[65] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls during the quarter - Based on an evaluation as of June 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[66] - There were no changes in the company's internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[67] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, other disclosures, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings that would adversely affect its operations or financial position - The company is not currently a party to any material legal proceedings[68] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Prospectus dated April 21, 2022 - There have been no material changes to the risk factors disclosed in the Company's Prospectus dated April 21, 2022[69] Items 2, 3, 4, and 5: Other Information This section confirms no unregistered equity sales, no defaults on senior securities, and no other material disclosures, with mine safety disclosures being inapplicable - The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no other information to disclose; mine safety disclosures are not applicable[69] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements, corporate documents, and required CEO and CFO certifications - The report includes a list of filed exhibits, such as the Underwriting Agreement, corporate governance documents, forms of securities, and key contracts like the License Agreement with UCSF[70] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[71]